This Health Insurance Trap Could Cost You Plenty

Health Insurance Alert:
Out-of-Network Rip-Offs


Much has been made in the health insurance debate surrounding Obamacare of the growing reliance by health insurers on “narrow networks” of doctors and hospitals willing to accept their discounted payments as a means of keeping healthcare costs under control.

This trend preceded Obamacare, but has accelerated as insurers struggle to keep premiums low enough to compete in the Obamacare health insurance marketplaces, or exchanges.

One estimate has about 70% of the health plans offered on the Obamacare exchanges offering restrictive narrow networks in which subscribers are penalized for care received outside the health plan’s provider network.

This is an important subject for you to gain command of as it could easily double your healthcare costs if you get it wrong.

It’s important for you to know, therefore, if the plan you choose will pay out-of-network providers’ charges, and at what rate, and whether they’ll at least cover emergencies outside their network.

Most good plans will, since emergencies aren’t elective. The objective with such plans, after all, is to re-educate their subscribers to put more thought into where they go for their healthcare services – something I also encourage in Our Healthcare Sucks – and to take hospital and doctor charges into account.

This only makes sense for elective services where subscribers have time to think about such things. So refusing to cover emergency care should be a red flag that this insurer is looking for ways to penalize its subscribers. In that case, you might want to look elsewhere.

Compare What Different Plans Cover
For Providers Outside Their Network

Some doctors and hospitals, however, deliberately avoid in-network contracts with insurers they believe pay too little for their services.

Since there’s literally no limit on what these providers can charge patients not eligible for discounted care – as are insured patients – this is an area that’s ripe for exploitation and abuse.

The rip-offs here are by those doctors and hospitals – generally specialists like surgeons – who “price-gouge” with exorbitant charges for their services to patients receiving their care outside their insurers’ provider network. To them, you’re essentially uninsured – and will be gouged with exorbitant prices, as are all uninsured patients.

The rip-offs, in this case, aren’t by the insurance companies. They’re disclosing to you what providers are in their networks. It’s up to you to stay within that network for your medical care or be prepared to pay a lot more if you don’t.

And if you decide to use one of them – unknowingly or not – it’s you, not your insurance company, who’ll be stuck holding the bag with much higher medical bills than if you’d used an in-network specialist.

Giving Rip-Offs a Bad Name

A study of how much these out-of-network specialists charge patients whose health plans don’t include them in their networks found bills as high as 40 times and more what Medicare pays for the same services.  Calling that a rip-off gives rip-offs a bad name.

Think about how you’d respond if you found out that you paid 40 times for your cell phone what your friend paid. Think you might be a little upset?

Now multiply that cost several-fold for the much higher costs of healthcare – where you could be stuck with a bill for thousands or tens of thousands of dollars with no limit on your out-of-pocket costs like Obamacare provides for in-network healthcare services.

One of the most valuable things you get with health insurance is access to the steep discounts insurers are able to negotiate for their subscribers due to the market clout their size provides.

By going outside their networks, you forfeit this benefit – essentially making your premiums worth a lot less, at least for the services received outside their network.

So if you resent paying your health insurance premiums, think how much you’ll resent it when you learn you’re getting even less for them than you thought – all because you didn’t pay attention to what they cover, and don’t cover, for out-of-network services.

No Limit on Provider Charges
For Out-of-Network Services

A study of such billing practices in the thirty most populous states in America by America’s Health Insurance Plans (AHIP) found only six states – or 20% of those studied – charged less than 10 times what Medicare pays for the same services. Eighteen, or 60%, charged 10-30 times and 6, or 20%, charged OVER 30 TIMES Medicare rates.[1]

The same study found a physician (radiologist) fee for reading an MRI study of the brain of $2,400 vs. the $126 Medicare pays. That’s in addition to the charges for the MRI exam itself.

In Massachusetts – a good example because it’s the only state with several years’ experience with an Obamacare-like insurance system – an outpatient office visit for an established patient was charged at over $6,200 for an out-of-network patient vs. the $153 Medicare payment for the same visit. Since most insurers won’t pay for this, the patient was on the hook for the $6,000 mark-up – for a single specialist office visit.

There’s no limit on what providers can charge for their services to patients who receive care outside their health plan’s provider network. This is the so-called “free market” that Obamacare opponents favor where patients are so easily victimized by unscrupulous price-gouging doctors and hospitals.

If you hope to avoid such price-gouging, make sure any elective procedures or specialist consultations you receive are within your health plan’s provider network.

Out-of-Pocket Cap Doesn’t Apply
To Out-of-Network Services

In 2011, an estimated 12% of claims were paid to out-of-network providers.

According to the AHIP survey, the worst states with the most charges greater than 30 times Medicare rates were New York, Texas, Florida, and New Jersey – although there were smatterings of such outrageous price-gouging in every state surveyed.

Don’t be one of these 12% if you hope to avoid huge hospital and/or doctor bills – because the cap on your annual out-of-pocket costs doesn’t apply to out-of-network services not covered by your health plan.

[1] Survey of Charges Billed by Out-of-Network Providers: A Hidden Threat to Affordability ahip.org 1/13

This article was excerpted from Obamacare For Smarties.

John Lynch: John Lynch was founder and CEO of Medical Diagnostics, Inc. - twice named to Business Week's "Best Small Companies" in America. He's since founded MedSmart Members to publish consumer health education publications.
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