Here is how this works. If I have a PPO and see a physician out of plan and she bills me $500, my insurer will check the Ingenix database. It that database suggests an appropriate price of $200 -- my health plan will only reimburse me 70% of $200 - leaving me with an effective bill of $360. (Most out of plan benefits also have hefty deductibles - and if I paid the full $360, only $140 of this would be counted toward meeting the deductible.)
This is good consumer protection - since those with insurance usually thought they were purchasing coverage for 70% of the charge, not less than a third! But how will this impact the cost of medical care? Like many things, it depends.
If providers successfully collected the entire billed fee from patients in this instance, this settlement will have no impact on aggregate cost - but merely shift that cost from out-of-pocket to health plan cost. Health plans would have to raise their rates, but this would be offset by less consumer health spending.
If providers routinely wrote off a portion of the consumer bill, though, this settlement would raise the overall cost of health care. Many providers might add that they need to collect high fees from some payers to subsidize the care they deliver to others who cannot possibly afford to pay full freight. This includes patients without insurance, and patients insured through state Medicaid programs that often use very low fee for service rates.
This highlights an underlying problem. There is a vast difference between billed charge, allowed charge, and actual payment. This difference disadvantages those without insurance coverage, and makes the actual cost of health care very opaque.
