I just want to reply to a couple of recent questions in comments:
A. Do the ACA substantive requirements for health insurance — no exclusion of pre-existing conditions, mandatory preventive care coverage, etc. — apply to all health insurance, or just to insurance bought on an exchange, like healthcare.gov?
No, but most commercially available insurance in general will meet the requirements. There are three major classes of insurance products which won’t meet all of the substantive requirements. The first are plans that were sold on or before PPACA was signed in March 2010. These plans are grandfathered. The grandfathered plans can continue to be offered as long as there is no substantial difference. Most grandfather plans will disappear over the next couple of years although I will be shocked if there is not some grandfathered plan with seven members still being sold in 2025. The second group of plans are group insurance plans that are self-insured. That means Big Mega Corp will contract with Mayhew Insurance to do the front end work, but Big Mega Corp pays all the bills and takes the risk of a $10,000,000 claim. Self-insured is fairly common at medium to large employers. Self-insured plans have far fewer requirements and regulations than fully insured plans. Fully insured means Big Mega Corp writes a big check to Mayhew Insurance and we bear the risk of paying out on a $10,000,000 claim. The final group of plans that won’t met all of the requirements are the closely held private firms that got profitable religion.
On the Individual market, there are very few grandfathered plans out there, and the other two categories don’t matter. Most of the plans are ACA compliant. Off-exchange has more variety than on-exchange, but the structure is very similar.
it turns out that this so-called “provider” is a Middleman Bill Processing Company. The actual provider sends the bill to this Middleman company, who then applies the discount, does the billing, and then sends it to the insurance company. Middleman Bill Processing Company shows up as the provider on the EOB.
What this also means is that the actual charges by the actual provider are obscured. I have no idea what the real Amount Billed is. The discount is not given. It’s all completely invisible. I got into an argument with the actual provider’s billing office because their billing rep thought I should be able to see this info. I could not.
So my question is: How is this legal or is it legal? How is it allowed for the “Provider” to be some anonymous Middleman Bill Processing Company?
This is legal and fairly common. Right now, Mayhew Insurance’s biggest single “provider” account is a claims processing company a time zone east of us. From a claims payment point of view, an insurance company needs a valid tax ID number, a valid national practitioner ID, a valid set of procedure codes and that is about it. Anything else is a bonus. From a claims point of view again, the charged amount or what the actual doc asks for is irrelevant. The amount paid will be the agreed amount between the insurer and the claims processing company for that set of codes and for that TIN. The allowed amount is what will count to deductible and co-pays and coinsurance, not the charged amount.
The medical loss ratio of the ACA stipulates that 80% of all insurance costs should be used for medical purposes, with 20% going for profits and overhead. That is billed as a cost saving device…. if the insurance plan can either pay for procedure A, costing 1000 dollars, and procedure B, costing 10,000 dollars, doesn’t it have an incentive to chose procedure B, allowing it to hike premiums next year and having the 20% it keeps become more valuable?
What am I missing?
Competition.
In states/regions where there are multiple insurers all trying to get and keep marketshare, if Company 1 pays $10,000 for procedure B while Company 2 pays $1,000, Company 2 will have much lower medical costs and thus lower premiums next year. It is extremely likely that Company 2 will have a Top-2 Silver product next year. That means people get full subsidy and very low out of pocket premium prices which means they get a lot of new membership from both the still uninsured pool as well as healthy membership from Company 1 as they are transferring.
This falls apart in states/regions with only a single insurer.
MomSense
Great questions and answers!
dp
Thanks so much for the response. Obviously, I was concerned about new individual plans, so I wasn’t thinking of the grandfathered plans or group plans. I enjoy reading your thoughts on the health insurance business. Thanks again.
rikyrah
As usual, I learn something new everytime I read a post of yours.
Bystander
I come here for the puppies, but, yeah, I have stumbled on to you know like facts here.
BBA
What does this mean? They signed up for some sort of religious exemption? I thought that was just for the Amish/Mennonites/etc. who reject insurance as a form of gambling and aren’t in Social Security either.
Richard mayhew
@BBA: hobby lobby et am where they can claim a sincere religious objection to providing essential health benefits
BBA
@Richard mayhew: Ah. I thought in those cases the insurer still had to provide the benefits even if the employer refused to fund them.
Violet
Richard, thanks for answering my question. I didn’t see this until this morning. I guess it’s completely legal and allowed, but from a patient standpoint it’s really confusing. When you get an EOB and the Provider is something like “MedProcessing Inc.” you’re like, “Whaaaaa…?” You have no idea who that is, and if you’ve had more than one procedure or visit in that same day, you don’t know who it applies to. I don’t think it should be allowed. At least the patient should be able to see the chain, where the actual provider is also listed, along with the actual charges.
The patient can’t see the agreement between the actual provider and the Middleman Processing Company. They can only see the agreed upon discount between Middleman Company and the insurer. The Middleman Company told me they have separate agreements with the actual provider and the insurance company and those are both secret and hidden from the other one, so that’s why it can’t show up on the EOB.
I think it’s wrong and absolutely open to abuse. The way I found out about the agreement is the Middleman Processing Company renegotiated their agreement with the Provider in the time frame when two of us on the same insurance had the exact same procedure done. Charges were different, but Insurance Company didn’t know that because it’s all obscured.
It’s a dumb layer of bureaucracy and it means that the Insurance Company can claim they don’t spend more on paperwork than they do. But they’re outsourcing the job and the customer doesn’t see the actual charges. Still think it’s wrong, even if your no doubt excellent Mayhew Insurance does it as well.
Thanks again.
Ella in New Mexico
@Richard mayhew: you stated:
My question is on behalf of my brother who works for a subsidiary of Honeywell, who self insures their employees using high deductible plans (His is about $8500 individual, $12500 family):
Since it is actually quite expensive and covers little out of pocket, he is avoiding going to the doctor at this point even though he is experiencing severe disability from a previous knee injury. Does he have the right to opt out of this crappy employer-provided coverage and find his own somewhere in the marketplace? His income is too high for the subsidized rates on the exchanges, but he could buy a plan that covers more and is no more expensive in premiums than the one he currently gets by going to local insurance brokers. If he does, will he lose the legal right to claim his health insurance costs on his Individual Income taxes?