Out of Network Rates – And Health Plan Transparency

Today’s Managing Health Care Costs Indicator is $15,000

Today’s USA Today has an article from the Kaiser Health Network on recent employer and health plan tweaks to evidence of coverage which could mean some patients will face enormous new costs for choosing out of plan physicians.

Here’s how this works.

Traditionally, in an HMO product design, there is no “out of network” benefit except for emergency care.   If you see a provider not in the network,  you pay the entire bill.

In a Preferred Provider Organization (PPO) plan design, there is a modest copayment or coinsurance for seeing providers who are in the network.  If you go out of the network, you will have to pay a deductible – and you’ll have to pay a larger share of the remaining costs.

The health plans usually cap the amount they will reimburse based on “usual and customary” rates – which are substantially higher than the health plan allowable rate.  However, health plans are increasingly capping reimbursement based on 150% of Medicare- which is often much less than the health plan allows for in-network providers.

The example given was a mom who expected 80% reimbursement for her son’s $18,000 out-of-network physician fee, but was shocked when Oxford Health Plan (a division of United Health Care) paid only $2500.  The family is left with a huge unexpected bill.

Capping the amount covered for out-of-plan care is sensible.  Otherwise, providers who have opted out of insurance can charge ridiculous rates and much of the cost  would still be borne by the employer and indirectly by many who are staying in network.  Capping the amount at too low a rate, though, simply shifts unmanageable costs onto patients.

It’s most important that patients as consumers know their total out-of-pocket financial responsibility in advance.  Oxford put the explanation of the new fee schedule on page 108 of a 126-page plan document – so it’s no surprise that the family was unaware of this change.   How can patients act a prudent purchasers if nothing in the medical “store” has a price tag?  Further, how can they know they are expected to shop if the plan description is 126 pages long.  Many of us have other things to do beside reading our plan documents.
There was good news on this front later in the day.  HHS revealed its approach to requiring that health plans divulge their plan design in a standard, readable,  and comparable format.   This is required as part of the Affordable Care Act.    The health plan descriptions aren’t as easy to read as nutrition labels – but they’re a start.

Next – we need to know provider prices!