HEALTH BENEFITS UPDATE
Considerations when negotiating in and out-of-network benefits
KEVIN C. LYONS
Generally, our members are offered four types of health benefit plans by their employers.
Health Maintenance Organizations( HMO) and Tiered Networks( Omnia or Liberty) have no out-ofnetwork benefits, so the out-of-network concerns do not apply because if you leave the network, there are no benefits provided at all.
In Preferred Provider Organizations( PPO) also known as Direct, Direct Access and Freedom Plans, and High Deductible Health Plans( HDHP), there are both in-network and out-of-network benefits. Whenever possible, it is in the member’ s best interest to use in-network providers as the carrier has negotiated a rate with them, and members are only subject to the proscribed co-pay for that plan and level of provider.
In an out-of-network situation, the member is subject to a yearly deductible as well as co-insurance of 20-to-40 percent, depending on the plan. To illustrate: If a doctor charges $ 3,000 for a procedure and the member is in the State Health Benefits Plan Direct 15, the member will pay a $ 100 deductible plus 30 percent of the balance, which would be $ 870, for a total of $ 970 for a $ 3,000 procedure. If you used an in-network provider for the same procedure, you would pay $ 15.
A dilemma rises when the provider manipulates the repayment schedule for out-of-network payments, which in New Jersey, are mostly based on a percentage of either Fair Health or Centers for Medicare and Medicaid Services( CMS).( So when negotiating health benefit design changes, make sure that you consider the out-of-network repayment schedule.)
Fair Health is usually a more accurate schedule of medical costs; CMS is considered low. The State Health Benefits Plan( SHBP) uses an index of 90 percent of Fair Health, but non-SHBP plans may be using an index of 150 percent of CMS, which would equate to a much smaller payment to the provider.
This can become problematic when using an out-of-network provider because the member has no contract with the provider and may be subject to what is referred to as“ balance billing.” This situation can occur if the provider choses to pursue the member for costs beyond the payment schedule.
If we use the example above and the 90 percent of Fair Health payment for the procedure is only $ 2,500, the member would be subject to the $ 100 deductible and $ 1,370( the aforementioned $ 870 plus the $ 500 difference).
To illustrate the disparities, recently, I was at a national seminar where knee replacements were discussed. I was shocked to see that a hospital in Hudson County was charging $ 99,000 for knee replacement surgery. The average in the U. S. is about $ 33,000. It would be a tragedy if that hospital was able to pursue a member for $ 66,000 plus because they manipulate the system.
While making healthcare decisions financially for all involved except the overpriced providers, it is almost cheaper to stay in-network whenever possible. When considering an out-of-network provider, we have to act as consumers as we do in every other aspect of our lives. Do we buy cars and drive them home before knowing the price? Do we buy homes by signing off on them and telling the seller to mail you the price after the closing? Not knowing the price for an out-of-network scenario would be just that moronic.
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NEW JERSEY COPS ■ MAY 2016