Tuesday, May 15, 2012

Out-of-Network Benefits, the One–Two Punch

Today, most health plans have one level of benefits for care rendered by an in-network provider and a lower benefit for services from an out-of-network provider.  Insurance carriers encourage use of in-network providers because doing so helps control claim costs.

In-network providers have contracted with the insurance companies to provide medical care at reduced prices.  In exchange, the insurance companies direct patients to the in-network providers. The arrangement increases business for the providers and decreases claims cost for the insurance company.

Treatment out-of-network is a different story. Out-of-network providers have no agreement or incentive to reduce prices and control cost.  At times, however, they may provide a level of care or service that a particular patient needs or wants.  Patients seeking care out-of-network need to be aware of the way their benefits will be calculated.

There is more to it than the out-of-network deductible and co-insurance. Insurance policies have clauses and exclusions against treatment that is not medically necessary.  There are also provisions that the carrier only allows the Usual, Customary, and Reasonable (UCR) charge for a service provided.

Over the last few years, many carriers have begun to define their allowable charge or UCR limit as the amount negotiated with in-network providers. The difference can be substantial. For instance, if the retail price of a surgery is $4000, the discounted amount could be $2500, a $1500 discount.  If in-network benefits are paid at 80%, the patient would owe $500 for the surgery (20% of $2500). A patient receiving care out-of-network would not receive the benefit of the discount.

Out-of-network benefits may be paid at 60%. The patient’s responsibility is 40% of the UCR amount of $2500 or $1000, plus the difference between retail and the UCR amount ($4000 - $2500) or another $1500.  The total owed by the patient would be $2500 on a $4000 surgery.

To avoid surprises, it is important that your employees understand how out-of-network benefits are calculated.  Some providers will agree to write off all or part of the balance.  A financial agreement before receiving services is critical.  After services are rendered, many providers are not willing to discuss discounts.

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