Have you ever opened a bill from a doctor or a hospital and tossed it aside thinking, “They just haven’t received the insurance company payment yet.” After the second or third notice, certainly after the notice from the collection agency, you might pay attention.
When health policy experts discuss payment reform, this is not part of the discussion.
But I would like to propose that payment reform include this simple principle – treat me; accept my insurance.
Have you ever called a doctor and asked whether they accept XYZ insurance. “Yes, they politely tell you. We accept all insurances.” What they don’t tell you is that they accept it as partial payment on the total bill.
How do insurance companies determine payment?
When you get an Explanation of Benefits (EOB is the jargon term) it is broken down into the following pieces:
|The provider charge||That’s pretty obvious.|
|The Allowance||This is what the insurance company has either negotiated with the provider or unilaterally determined as their payment level.|
|The Deductible||How much of the Allowance goes toward your annual deductible.|
|The co-payment||What you are expected to pay with each visit to the doctor.|
|The co-insurance||The percentage (if any) of the Allowance that you must pay.|
|Non-covered amount||There are two items that enter into this number. Any allowance for a service not covered by your insurance plan. And, in the case of covered services, the difference between the provider charge and the Allowance.|
|The amount you owe||Is the sum of items 3, 4, 5, and 6.|
|The provider payment||What the insurance company ultimately pays for the service.|
It is the Allowance and the non-covered amount that payment reform needs to focus on.
If a doctor accepts a patient they must also accept that insurance company allowance as payment in full.
No balance billing
That is the jargon for billing the amount that is not allowed by the insurance company. Balance billing is why some people with insurance are forced to declare bankruptcy. Insurance company policies typically have a maximum out of pocket amount. Most of the health reform proposals include a maximum out of pocket amount. The patient’s out of pocket expense is not to exceed that limit. The catch is that most insurance company definitions of “Maximum Out of Pocket” only includes items 3, 4 and 5 on the above list. It typically does not include balance-billed amounts.
Everyone would benefit
Medical service providers might chafe at this idea initially. But one of the things that has doctors up in arms about the current system is the apparent unilateral authority of payers to set reimbursement levels. Under this payment reform proposal, all carriers would pay the same rate for the same service to the same provider. That is the trade off.
In addition, if benefit design was restricted to a handful of approved designs similar to the current regulations limiting Medigap policies, doctors would have a clearer understanding of what services were covered and not covered. If a doctor then wanted to recommend a non-covered service, the doctor would know ahead of time that it is not covered and be able to explain to the patient the cost of the non-covered service.
Patients would benefit because they would understand their financial liability and should not be exposed to the risk of medical bankruptcy.
The economy would benefit. Many have compared efforts at health care cost containment to squeezing a balloon. Squeeze one area and it bulges in another. Limiting balance billing clamps down on a significant bulge outlet.
A very typical example
As a benefit plan administrator one of the most vexing complaints we receive from members is the kind recently experienced by my own son. He was visiting friends out of town. An unfortunate accident landed him in the hospital for two days.
He had good insurance (his own). The hospital luckily was in the insurance company’s network. But one of the service providers was not. He was balance billed $600 for fees above the insurance company allowance. He did not choose that provider. The provider delivered its services within the network facility. Attempts to negotiate the balance were futile and he had to pay the amount himself.
The current process is confusing to patients, a headache for providers, and a huge administrative burden on the system.
Payment reform needs to eliminate balance billing.