Understanding Out Of Network Health Costs Lawsuits
What Does Out Of Network Mean?
PPO and HMO health insurance plans use a network of medical service providers. These providers agree to abide by network rules, and of course, network price guidelines. So these providers, like doctors, hospitals, and therapists, agree to accept network charges for various medical services. In return, they may get more business from the many insured people who belong to that network health insurance plan. Most of the time, insured people get a book or website where they can look up network providers.
HMO plans usually clearly state that they will not cover medical services by providers who are not in the network (i.e. Out of network providers). Of course, HMO plans will usually authorize out of network charges in the case of an emergency.
PPO plans are different. They usually provide more coverage for services provided by network providers. But a big part of their attraction is the fact that they advertise flexibility. They will cover a larger percentage of the bill when network providers are used. But they also state, in the policy, they will cover non-network providers, but at a lower rate.
These are some examples of a (fictional) PPO Policy:
- Network Doctor’s Office Visits: $30 Copay
- Non-Network Doctor’s Office Visits – Covered at 70%
- Network Emergency Room: $100 Copay After $300 Yearly Deductible
- Non Network Emergency Room: Covers 70% After $300 Deductible
So a network doctor would cost a simple $30 copay. If a doctor’s office visit costs $150 in a certain area, a consumer would have to pay $45. That doesn’t so bad because a covered person has the option to pay a little more to choose any provider, or pay a little less to use a network doctor. But is this how it really works out?
Let’s look at the second case. In theory, a person who has not spent any money towards their deductible, would pay about $400 for a $2,500 visit to a network emergency room. But, in an emergency, who bothers to figure out which emergency room in in their network? The non-network bill should not be that much higher, at about $660. This does not seem so bad, but again, is this how the bill will really be calculated?
Insurers Only Pay Non-Network Costs Based Upon Their Calculations
The problem is that many insurers kept a private database of their estimation of what medical services would cost. These are called usual and customary costs, and insurers kept a database of medical service prices that was based upon a secret formula. Claims that these estimates did not reflect reality made it to court and the US Senate. One US Senator went so far as to call this scheme insurance fraud. But this is insurance fraud of a different kind, one actually committed by an insurance company!
Is Health Insurance Company Pricing Accurate?
One major insurer, in particular, has been accused of setting unrealistic prices for medical service in order to force consumers to pay more of the costs. This insurance company claimed that average medical cost of a doctor’s office visit in NYC was $100. But consumer groups content that $200 would be a more realistic figure. I know that, even in my Texas suburb, a doctor’s office can cost more than $100! Even though I do not claim to have the data, I cannot imagine that New York City would be cheaper.
How Does Pricing Really Work For Covered People?
Look at our examples above. A non-network provider would still cost the copay of $30. For non-network providers, the insurance company would only cover the first $100 at 70%. So the insured person would pay $30 (30% of $100) + $100 (the amount the doctor charged over the amount the insurer said they should charge)! While the insurance company only pays $70, the consumer would be responsible for $130.
When you take our emergency room example, where costs would be much higher, consumers would end up paying lots more. If they underestimate doctor’s office visits by 50%, can we assume that they underestimate all medical services by a similar percentage. Now we are looking at overages of thousands, and not hundreds, of dollars! And we haven’t even looked at actual hospital admission costs where overages could be thousands, or even tens of thousands of dollars.
Major Insurers Agree to Evaluate Health Care Prices
Perhaps understanding that now, when the idea of a US public health insurance plan is gaining momentum, is no time to come under scrutiny for deliberately underestimating costs, some major health insurance companies have agreed to evaluate their pricing systems. They have also agreed to be more transparent about the way they estimate medical service prices.
What Can You Do About Unfair Payments?
If you do not think that your own health insurance claim was settled fairly, you have a right to dispute it. Of course, the size of your complaint will probably determine how far you want to push it.
- Call your insurer or insurance agent – sometimes miscoding or other errors cause underpayments, and those can be resolved quickly.
- Call or write your state insurance department – they exist to protect consumers, and they do look into complaints and inquiries.
- Speak to a lawyer – many lawyers provide free consultations, and many will also represent you for a percentage of the lawsuit if they accept your case.
Look For A Fair Health Insurance Company
If your health insurance company does not satisfy you, you certainly have a right to shop around. We make it easy to compare health insurance with our fast, safe, and free health insurance quotes.