Health Plans Put Onus on Insured

Health Plans Put Onus on Insured

02/19/2008

By Reed Abelson, New York Times

Let the patient beware. Going outside your insurer’s network of preferred doctors or hospitals could be even more hazardous to your financial health than you suspected.

The broad investigation that New York’s attorney general announced last week, questioning the “reasonable and customary” calculations on which insurers base reimbursements for out-of-network medical services, raised the lid on a particularly confusing part of the nation’s health care system.

For consumers, the issues go beyond whether insurers are underpaying for 15-minute visits to out-of-network doctors. The uncertainties can extend to the vast array of tests, services and even hospitalizations they may encounter on their medical journey — and the puzzle of determining which ones will be considered in network, out of network or paid for at all.

Of the estimated 54 million Americans who are covered by their employers’ health plans, about three of four are in plans that give them the option of going out of network. And while most people covered under such plans probably understand that out-of-network services will cost them more, they may be startled to find out just how much more they may end up spending.

“There’s a lot of confusion,” said Tom Billet, an executive at the benefits consulting firm Watson Wyatt.

For starters, many people may assume that their insurer will reimburse them for a fixed percentage, perhaps 60 or 80 percent, of whatever the medical bills turn out to be. But the calculation is actually much more complicated, experts say.

To determine how much of the medical bill they will pay, insurers calculate the so-called reasonable and customary charge for a given procedure or medical service and then pay a percentage of that amount, which is frequently much less than the doctor’s or hospital’s actual bill.

Through the insurer’s calculations, for example, a $100 charge for a doctor’s office visit may be assigned a “reasonable and customary” value of $60. And so the insurer, paying 80 percent of that amount, reimburses the patient only $48. The remaining $52 comes from the patient’s pocket.

Ingenix, the company that provides the information insurers use to calculate those reimbursements, defends the accuracy of its data. Ingenix, owned by one of the nation’s largest health insurers, UnitedHealth Group, says its data is based on the actual billed charges that it gathers from insurers nationwide.

But some consumers have started questioning those methods — like Errol Reiter, a 59-year-old consultant in a small Oregon city, Medford, who is suing his insurer, Aetna, in small-claims court.

Mr. Reiter has been insured by Aetna for the last 10 years and said he had generally “just grinned and bore it” when his benefit statements showed the insurer was paying only a fraction of his actual out-of-network medical bills. But then he had an opportunity to compare benefits statements for two exams he had — one in network and the other out — to which Aetna assigned the same medical code.

The in-network exam was conducted by a nurse-practitioner in Medford in April 2006. Aetna paid $92.70 for the visit, and Mr. Reiter owed nothing. Last July, he went to a doctor at the Mayo Clinic in Scottsdale, Ariz., who is not under contract with his insurer.

The Mayo doctor charged him $149.80. What surprised Mr. Reiter was that Aetna calculated the prevailing charge for that exam as just $90. He found it odd that Aetna would say that an exam conducted by a well-regarded doctor at the prestigious Mayo Clinic, in a metropolitan market, had a lower prevailing value than the exam conducted at a contracted discount rate by a nurse-practitioner in his small home city.

Under Mr. Reiter’s plan, Aetna was responsible for 80 percent of the $90 value it assigned to the Mayo exam, or $72. In that instance, because Mr. Reiter had not yet met his annual deductible, Aetna paid nothing.

Mr. Reiter, who has for years received his medical care at Mayo when possible, says he believes there has been a longstanding pattern on Aetna’s part to not pay its fair share of his out-of-network care.

Aetna declined to comment on Mr. Reiter’s case.

Mr. Billet, the benefits consultant, said that the employers who subsidize health insurance typically do not pay much attention to out-of-network claims because they are such a small fraction of a company’s overall medical bills — perhaps only 5 to 10 percent of the claims, even among people who have plans giving them the option of going out of network. And so employees themselves must be extra vigilant.

When people do seek out-of-network care, it is typically because their doctors refer them or because the patients themselves want to go to a doctor or hospital they think has special expertise in a particular illness, said Kevin Flynn, the president of Healthcare Advocates, a Philadelphia-based company that works with consumers when they have a billing dispute with their insurance companies.

Someone will go to Memorial Sloan-Kettering Cancer Center for treatment, for example, only to find that what that hospital charges is much higher than the insurer deems is usual. “Then they get sticker shock,” Mr. Flynn said.

In some cases, patients may feel they have no choice but to go outside a network. Last October, Stacey Herzlinger, a 29-year-old police officer in Northern Virginia, was at a conference in Orlando, Fla., when she had severe stomach pain. Ms. Herzlinger called her in-network doctor back home, and was told to go to an Orlando emergency room, where she was examined and received medication — and a bill several weeks later for $3,168. The hospital said her health plan, UnitedHealth, would not pay because she had gone out of network.

“It was excuse after excuse after excuse why they weren’t paying,” said Ms. Herzlinger, who has hired Mr. Flynn to work with her on getting reimbursed.

While not commenting on the specifics of Ms. Herzlinger’s case, UnitedHealth says that emergency-room visits are typically covered under its plans and that it works with customers to resolve any concerns they have with their bills.

Even if someone does go to a doctor or hospital within the plan’s network, not everyone who becomes involved in the case may be in network. The anesthesiologist during an operation, for example, may not be under contract with the insurer. So the bill for anesthesia may be deemed an out-of-network claim, cautioned Mary Beth Senkewicz, a deputy insurance commissioner for Florida. “You really need to check” beforehand, she said, to avoid being hit with a substantial bill.

And there have even been cases in which, because one doctor involved in the care was not under contract with the insurer, other services are labeled as out of network even though the providers are part of the insurer’s network.

UnitedHealth is involved in a lawsuit brought by some New York hospitals, saying it improperly classified claims as out of network. In one example, a doctor not in UnitedHealth’s network sent a patient to Flushing Hospital in Queens for a breast biopsy. Although the hospital and the doctor performing the procedure were both under contract with the insurer, the patient was billed $1,110 as if she had gone out of network.

Although UnitedHealth declined to comment on the litigation, it said its current policy would be to consider care at an in-network hospital as covered, even if the referring doctor was out of network. But Dr. Robert Goldberg, the president of the Medical Society of the State of New York, a professional organization for physicians and a frequent adversary of the insurance companies, said patients needed to be aware that seeing a doctor out of network could create financial havoc, depending on the insurer’s stance.

“Each policy and plan may be different,” he said, “and may vary from admission to admission.”