In or Out of Network?

This article is reproduced from the HealthAffairs.org blog.  We at Obeo are tackling these very issues – helping consumers understand their medical bills and demystifying the EOB……

As co-workers and first-time moms-to-be, we shared much of the pregnancy journey together — including the same employer-sponsored health insurance plan. We even delivered within weeks of each other at the same hospital. For both of us, the key to managing the pain of labor and delivery was the epidural delivered by our anesthesiologists.

When it came to paying the bill, our hospital experiences diverged in one key way. Layla received an unexpected bill for $1,600 for anesthesiology services and warned Erin to expect the same. Yet Erin’s bill never came. Layla happened to deliver on a day when an out-of-network anesthesiologist was on call, while Erin was seen by an in-network anesthesiologist. Purely by chance, one of us received an expensive physician bill and the other did not have to pay a dime.

In the fog of new motherhood, Layla paid the $1,600 without question. She later received another unexpected piece of mail — a check for $1,040 from the insurance company to partially reimburse her for the anesthesiologist’s charge. The absence of a charge for Erin, and the check for Layla from the insurance company led us to suspect that Layla had seen an out-of-network provider. A call to the insurance company confirmed it.

Neither Layla’s statement of benefits nor the bill from her provider had stated that the $1,600 was an out-of-network charge. And she was still on the hook for the $560 difference, while Erin paid nothing for the same service. How was that possible? The answer, we discovered, was in the way insurance networks are structured and in how hospitals contract with physicians.

When ‘In Network’ Isn’t All-Inclusive

We both intentionally selected obstetricians and a hospital that were “in network,” thinking that we had done all the necessary homework when it came to orchestrating, and paying for, a planned hospital stay. As we would learn, selecting an “in network” hospital is only part of the puzzle for consumers negotiating the health care system.

Since the Affordable Care Act (ACA) was implemented, news stories have often described examples of hospital patients who have been hit with surprising and substantial doctor bills after being discharged. While the ACA includes provisions that limit out-of-pocket costs for patients seeing “in network” providers, the same protections are not extended to care received from out-of-network physicians — even when the patient has no choice in the matter.

Patients often aren’t made aware of this out-of-network policy until after they are discharged. Sometimes the physician in question wasn’t even there, which can be the case with radiologists and pathologists who read test results off-site. An out-of-network physician is allowed to bill patients for the difference between the amount charged for services and what the insurance company is willing to pay. For Layla, the difference was a few hundred dollars, but when surgery or emergency care is involved it can easily soar into the tens of thousands.

When out-of-network physicians treat patients at an in-network hospital and bill the patient for the difference, it’s called “balance billing.” It is illegal in Medicare to balance bill if a physician accepts Medicare patients, but the practice is allowed in other insurance plans, including employer-provided plans and those purchased through ACA marketplaces. It may be impossible in the moment to know whether a physician is in-network or out-of-network.

‘Excuse Me, But Are You Part Of My Network?’

Who would have the presence of mind during labor to ask whether the anesthesiologist on call is part of her insurance network? While providing patients with information regarding which physicians are in network is an important part of health insurance transparency, it is meaningless in situations where the patient has no choice. During labor and delivery, neither of us had any idea if more than one anesthesiologist was available, much less whether they were in-network. The additional out-of-pocket charge on top of the other labor and delivery expenses was left entirely up to chance.

Have You Recovered Enough To Decipher Your Bill Now?

A few months after delivery, Layla called her insurance company and was told that she was required to pay the charge because she “chose” an out-of-network provider. After making it clear that no choice was involved, she learned that the first step to having the service covered would be to request that the service be processed as in-network. She was also told to mark her “choice” of an out-of-network provider as involuntary. When that request was turned down, she filed a formal appeal that eventually went her way. When her baby was almost nine months old, Layla received a $560 check reimbursing her for the out-of-pocket costs. The transaction costs for this months-long back and forth were significant.

Expecting patients to decipher and pay unexpected and non-transparent physician charges in the days and weeks of recovery following a hospital stay places a substantial and unnecessary burden on the patient. When it comes to post-labor and delivery, a patient is also juggling the demands of a newborn and often experiencing increased financial strain due to parental leave from work.

national survey published in 2013 showed that the likelihood of involuntary use of out-of-network providers was higher among those with lower incomes and whose health status is “fair” or “poor.” This suggests that out-of-network charges are disproportionately impacting those who may be least able to dispute them.

Patients who have gone out of their way to ensure they receive care at an in-network facility should not be surprised by bills for involuntary out-of-network services. One solution would be to require that all providers offering care at an in-network facility are included in the plan’s network. Absent that, a few policy changes in the current system could be a step in the right direction.

Make It Transparent

Hospitals could have patients preregister for a planned stay and work with the insurance company to provide each patient with the estimated total expected charges. The estimates should incorporate all hospital and physician services, and account for possible variation due to intensity of services required or out-of-network services.

The key change here is that the estimated charges would include physician services for in- and out-of-network services. This approach would require the hospital to be straightforward with prospective patients regarding the likelihood of care being provided by out-of-network physicians. In turn, this may encourage out-of-network physicians to join the networks in which the hospital participates, since increased cost transparency may lead patients to request that they see only in-network physicians.

Make It Simple

Physician bills and insurance statements need to be simplified. While bills and explanations of benefits usually state the amount the insurance company won’t pay, they often don’t clarify that the charge is the result of out-of-network services.

Clearer explanations of charges, reasons the insurance company did not pay the full amount, and why the patient is being charged would help consumers better understand their bills — and help prepare them to pay them.

Make It Available

Researchers and policymakers have questioned the limited hospital and physician networks in the ACA health insurance marketplaces, as these networks provide access to a smaller set of providers.

Some states, such as Texas, New York, and Louisiana, are tackling out-of-network billing, whilelegislation was recently introduced in Congress that would place limits on the ability to bill patients for out-of-network services provided at in-network hospitals. It is encouraging to see that policymakers are trying to address the potential fallout from out-of-network physicians seeing marketplace enrollees at in-network hospitals.

Clearly spelling out expected health care costs, and the likelihood of out-of-network charges, would go a long way toward reducing the economic uncertainty associated with hospital stays — and help patients understand the billing statements they receive after discharge.

Evaluating health insurance plans can be daunting and confusing, and most people don’t get much guidance, research shows

The following is taken from an article written by Austin Frakt at the New York Times. It highlights the challenges around picking a health plan…….

It’s open enrollment season for almost every kind of health insurance in America. Millions of Americans using Medicare plans, employer-sponsored health insurance or Affordable Care Act marketplaces select health plans each fall. Many consumers face numerous options, and research shows that they make many mistakes, often paying more than they need to.

Some err by selecting deductibles that are too low. Lower deductibles can be a fine choice for some consumers, but trying to save money with a lower deductible can be a poor choice if a person pays even more in premiums. For instance, at one large American company in 2010, employees could reduce their deductible by $250 — to $750 from $1,000 — by paying $500 more in premiums. Trading $500 for $250 is clearly a bad deal for the consumer.

Yet a majority of the firm’s workers made bad deals like this, according to a study by Saurabh Bhargava, a Carnegie Mellon economist, and his colleagues. Workers were offered a choice of 48 plans that were identical except in cost sharing and premiums. Though no plan would have been optimal for every employee, a $1,000 deductible plan would have been better for many and at least a no-worse choice for 97 percent of employees who chose a lower deductible.

People make mistakes like this for a variety of reasons. Some don’t understand basic health insurance concepts. In an experiment accompanying Mr. Bhargava’s study, 71 percent of people couldn’t identify fundamental cost-sharing features of health insurance plans. This type of illiteracy was highly predictive of mistakes like overpaying for a lower deductible.

Another study, led by George Loewenstein, a professor of economics and psychology at Carnegie Mellon, found that people misunderstood plan features and costs. Even with plan details right in front of them, only 40 percent of privately insured Americans could identify how much they’d have to pay for anM.R.I. scan. Only 11 percent could report what a four-day hospital stay would cost them. Yet study subjects were overconfident. All said they understood what a “co-pay” was, but 28 percent could not correctly answer a question testing their understanding of the term; only 7 percent would admit to not knowing what “maximum out-of-pocket” meant, but 41 percent couldn’t define it.

Another study found that less than a third of respondents could correctly answer questions about coverage features of their own plan. Yet anotherfound that only a minority of workers at a large firm could answer questions about plan characteristics or their own, recent health care spending.

Without a doubt, choosing a plan can be daunting. A shopper in the Affordable Care Act marketplace can choose from 40 plans, on average. A typical Medicare beneficiary can choose from among nearly 20 Medicare Advantage plans and 30 stand-alone prescription drug plans.

In selecting plans, consumers are prone to mental shortcuts that often lead to poor choices. Plan labels — like the “gold,” “silver” or “bronze” — can fool people. To some, “gold” sounds better than “bronze,” even if it isn’t. In one study, people were asked to select hypothetical plans with these labels, but the researchers reversed the meaning of “gold” and “bronze” for half of them. It didn’t matter. Most people picked “gold” anyway.

The ordering of choices also matters. Consumers tend to select plans near the top of a list, a phenomenon that arises in other contexts: Economists download more papers from the tops of lists of new studies, as my colleague Neil Irwinreported; politicians at the top of ballots receive more votes.

Eric Johnson, a Columbia business professor, led a study that found that without substantial additional assistance, a consumer’s likelihood of selecting the lowest-cost plan is no better than chance. The researchers conducted a series of experiments on people similar to those who would shop for marketplace coverage. Each study participant was asked to presume he’d use a certain amount of health care and, based on that, to choose the lowest-cost plan from among eight choices, which varied by premium, doctor co-pay and deductible.Only 21 percent could accomplish this task, a figure not statistically different from chance. The annual cost of errors was about $250. A separate analysis showed that participants had a stronger aversion to an increase in costs in deductible or co-pay than to the same increase in premium. Because a dollar is a dollar, no matter how you spend it, this is another indication of irrational decision making.

But when study subjects were provided with a tutorial or with a calculator that revealed the full cost of each plan, or if they were placed in the lowest-cost plan by default (from which they could voluntarily switch), their chance of selecting the cheapest plan was much higher, upward of 75 percent in some experiments.

Though some Medicare beneficiaries switch to lower-cost drug plans over time, another way consumers get stuck with bad deals is by staying in plans as their premiums increase, a status quo bias. One study found that New Jersey enrollees in Medicare prescription drug plans paid an average of $536 more over three years because of this kind of inertia. Some insurers strategically enter marketswith low prices and increase them over time, exploiting consumers’ inertia. This “invest then harvest” pricing strategy has been observed in markets for Medicare Advantage planscommercial health insurance and others.

Providing consumers with easier access to cost comparison information can help. A study published in The Journal of Economics in 2012 found that when a random sample of Medicare beneficiaries got letters that compared prescription drug plan costs, they were more likely to switch plans and to save money, relative to nonrecipients. When pharmacy students helped California Medicare beneficiaries understand drug plan costs, 60 percent switched plans.

Few consumers get this much help. When researchers at the University of Pennsylvania examined the Obamacare online marketplaces last year, they found only a few that provided some of the tools consumers need. Most marketplaces presented plans in order of the cost of the premium, which doesn’t take other cost sharing into account. (However, California ranked plans according to total cost, Kentucky listed them randomly, and Minnesota ranked them based on best match according to a series of preference questions, similar in spirit to an approach recommended by University of California, Berkeley economists in a recent Brookings policy paper.)

Only three states offered cost estimators. The federal government’s site, HealthCare.gov, will offer more information about plans — like which physicians are in plan networks — and cost comparison tools.

If last year is any guide, once again few consumers will actively shop for a more beneficial plan. An analysis by the Department of Health and Human Services showed that more than 70 percent could have found a cheaper plan. The research is clear: Most won’t find that cheaper plan without a great deal more help.

Austin Frakt is a health economist with several governmental and academic affiliations. He blogs at The Incidental Economist, and you can follow him on Twitter at @afrakt.

Can Consumers Make Affordable Care Affordable?

Eric Johnson, a Columbia business professor, led a study that found that without substantial additional assistance, a consumer’s likelihood of selecting the lowest-cost plan is no better than chance….But when study subjects were provided with a tutorial or with a calculator that revealed the full cost of each plan, or if they were placed in the lowest-cost plan by default (from which they could voluntarily switch), their chance of selecting the cheapest plan was much higher, upward of 75 percent in some experiments.