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What's Really Usual or Customary?

United Healthcare, Aetna and Health Net have all been on the New York AG's hot seat as of late.  It is about their administration of "usual and customary" fee limits for out-of-network health services.  One of United's subsidiaries, Ingenix, is also in the mix and was accused of manipulating the claims data and/or formula to intentionally cause underpayments to out-of-network providers and plan members who use them.  There was a legal settlement without any admission of guilt and an agreement to set up a new "independent" entity (probably a university) to calculate usual and customary.  Now, providers and plan members are lining up to obtain settlements for past underpayments. Today's Wall Street Journal described the problem from the perspective of the typical plan member: "insurers" reimbursements to out-of-network medical providers at the usual-and-customary rate are often lower than the actual fees providers charge.  Sounds a bit unfair doesn't it?  For some reason, neither the New York Attorney General nor the Wall Street Journal addresses the reasonableness of provider billing amounts. 

Why is it that providers are regularly willing to accept half or less of their billed charge amounts as payment in full for their services?  In our experience, negotiated discounts are sometimes as much as 85% off of billed charges.  Do PPO networks really have so much negotiating clout that physicians are willing to provide their services at half price or less?  Or, is it that physicians have inflated their billed charge levels so much since the advent of PPOs that now there is no realistic relationship between billed and negotiated charge levels?  Isn't this really just a billing war between providers, PPO networks and health plan sponsors - and the plan members who go out of network are subject to collateral damage?  Providers get to say "we gave in to negotiations and deeply discounted our fees." Networks get to say, "We are great negotiators and are delivering discount value to our customers." Employers are able to say, "We are smart buyers and are saving our company and employees lots of money off of provider charges."  In the meantime, employees who venture out-of-network (intentionally or un-intentionally) are often left with big bills to pay.

Unfortunately, unless we want governmental price controls, there isn't a lot we can do about this.  Employers can change the payment level for out-of-network services to a percent of Medicare's fee level (i.e. 120% of Medicare).  This avoids the whole debate about what is usual and customary.  However, this will still leave employees exposed to large balance due amounts for billed charges less the Medicare-pegged allowable amounts.  As always, and easier said than done, consumers need to first ask providers if they will accept the plans eligible charge amount as payment in full.

 

 

Posted by Rick Chelko on February 5, 2009 12:16 PM |

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Comments

So what is the answer? If it is a billing war or standoff, at some point someone has to 'flinch' - don't they?

Posted by: Deb Mills-Scofield | February 10, 2009 03:03 PM

The issue of "flinching" only relates to the potential negotiation between the patient and the physician. I wouldn't really characterize this as who "flinches". It is more an issue of the patient asking the question before the services are provided. "Will you accept my plan's payment as payment in full for your services and agree not to balance bill me?" Asking that question after the services are provided is too late - no negotiating leverage.

Posted by: Rick Chelko | February 10, 2009 05:40 PM

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