The dirty underbelly of surprise billing involves three competing forces all trying to maximize their financial gain for their own benefit.
1 Insurance companies shrinking networks and reducing reimbursement to maximize profits.
2 Providers staying out of select networks in order to bill full charges to unwitting patients to maximize profits
3. Institutions categorizing patients as self pay in order to bill full charges to unwitting patients to maximize profits
There is no good guy here. This is capitalism, competition and strategy all of which does not serve the needs of patients and which is opaque to consumers.
Much of the current legislation to eliminate surprise billing for patients is based on the very real concern that patients become the unintended victims of ineffective negotiations between healthcare providers, insurance companies and institutions.
The truth is the situation can be a nefarious plot by some unethical players in the market. JAMA recently reported 20% of patients get surprise bills for elective surgery. (1)
There is a significant group of insurers that reimburse at extremely low rates to limit their network and steer patients to the lowest cost provider. This can lead to non-participation by many providers. This payer strategy does not lead to high quality safe care since much of the reimbursement is below cost needed to stay in business for providers, yet caregivers still accept it.
Some providers suggest that extremely low rates by some insurance companies lead to non-participation. Unfortunately there is a significant use of non-participation by providers to game the system. Many physicians including my own billing group at a previous employer would specifically advise providers to not participate in all plans regardless of whether rates were fair or reasonable because those patients could be billed charges which are inordinately higher than the best rates provided by insurance.
Sometimes the insurance would reimburse the insured for full charges and send them a check which could be forwarded to the providers but unfortunately some patients were unaware of this and we’re left with the impression that this was the normal expense for the services they were provided rather than an exorbitant massively inflated bill typically based on charges sometime ten time higher than prevailing market rates.
Lest we villainize providers for self interested behavior, hospitals use a similar technique to game the system to maximize profits. My own personal experience involved a family member who was hit by a car. I went to my own institution for emergency services and presented my Blue Cross Blue Shield card. The intake personnel at the hospital checked off self-pay because the source of the injury was an auto accident and they would be able to bill full charges to the auto insurance company (often ten times market rates) even though the Blue Cross Blue Shield rates under whom I was insured were highly favorable. When I became aware of this unethical and bordering on fraudelent behavior they subsequently billed my health insurance company.
I have also been billed charges frequently by labs and other ancillary services who claim they erroneously billed the wrong insurance company and I was responsible for the bill at hyperinflated rates.
Patients should be held harmless in this process of non-participation and surprise billing regardless of the cause, low rates by insurance, gaming by providers or gaming by institutions. Truth be told there are no innocent parties in this web of maximizing profit. The only fair solution is to reimburse providers at the rate which they are typically reimbursed for those providers who are similarly situated and with whom they have contracts. Providers, institutions and insurers must all be treated fairly. The current system fails and the patients end up being victimized. Maybe it is just time for some form of single payer option which will dramatically level the playing field and keep patients from bearing the cost of gamesmanship.
Reference
Chhabra KR, Sheetz KH, Nuliyalu U, Dekhne MS, Ryan AM, Dimick JB. Out-of-network bills for privately insured patients undergoing elective surgery with in-network primary surgeons and facilities [published online February 11, 2020]. JAMA.
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