Mamma Said Knock Me Out (But, first, make sure you are in-network)

This week the California assembly passed a bill AB72 that addresses the problem of surprise medical bills.  It awaits the signature of Jerry Brown.  Its goal is to prevent excessive bills from out of network doctors.  It limits the allowable charges for such OON doctors to the average insurer's contract rate or 125% of the Medicare rate, whichever is higher.  Most importantly, it prevents the OON doctor from balance billing for the difference between their rate and the aforementioned limit.

This new law is great, then, right?  Not necessarily.  It can actually deincentivize insurers from negotiating rates if the doctor's rates become controlled by legislation.  That leaves the rates for this part of the health scare system still unregulated.  The result is that these doctors would raise their rates in order to compensate for the lower reimbursements dictated by law.  Who suffers?  The under or uninsured.

What are surprise bills?  The most common example of a surprise, OON bill is for anesthesiologists.  My family has had perhaps a dozen or two procedures over the years requiring general anesthesia.  In every instance, the anesthesiologists were OON even though the hospital and the surgeon were in-network.

Similarly, ER physicians are almost never in network even if an ER facility is.

This has resulted in some very large bills for me because the doctor charges whatever they want and is not bound by any contracted rate with an insurer.  In an emergent situation, an insurer is obligated to process the doctor's bills as in-network and their full amount.  But there's a catch.

If the doctor charges $1000 and the in network contracted rate is $500.  The insurance company will pay 80% of $500 (or whatever percentage is in your plan).  That's $400.  Normally, if the doctor was in network, the patient would be responsible for paying $100.  However, the doctor is allowed to balance bill for the $500 that exceeded the insurer's contracted rate.  So now the patient owes $600!  (Note:  there are restrictions for balance billing in some HMO plans.)

With anesthesiologists, sometimes they will honor the contracted rate and not balance bill the patient.  That has happened about 75% of the time with my family's procedures.  When it doesn't happen, then the patient gets hit with a large bill like above.

So you say, "Just make sure that the ER doctors and anesthesiologists are in network?"  Trust me, that's practically impossible.  I've tried to do this for the local ERs and gave up when no one could help.  For gas-passers, you never know who it is going to be until just prior to surgery.  Surgeons definitely do not like the patient demanding a new anesthesiologist minutes before a surgery.  In fact, they would likely cancel the procedure in such a situation.

Something has to be done about balance billing.  Those bills are a primary cause of medical debt and bankruptcy.  AB 72 is a great start.  However, it is still incomplete and will certainly be challenged in the courts for rate fixing.   I hope that Jerry Brown signs it and we can begin the process to solve this large problem.

Walmart Decides to Increase Their Pricing and Reduce Their Sales Force

Would Walmart actually thrive if they made their customers pay more and made it less convenient to do so?  Certainly not!  Walmart's success (as do most retailers and businesses) derives from keeping their customers happy.  Walmart does this by offering a wide variety of products at the lowest prices possible and making it easy for customers to buy them.  Their stock price rises and falls based on per customer loyalty and satisfaction which ultimately drive all other financial factors.  Walmart wouldn't survive if they made the radical changes suggested by this headline.

Health insurance companies are perhaps the only industry where consumer satisfaction is not the driving force for success.  Not surprising, the American Consumer Satisfaction Index published a study last year (ACSI Study 2015) showing that consumer satisfaction for health insurance companies is at a 10-year low.

It is no mystery why this is so.  Pretty much everyone is facing higher insurance costs next year with lower benefits.  Deductibles continue to rise, co-pay's increase (my ER copay went from $100 to $250), annual out of pocket maximums are getting higher...all the while, premiums just keep getting more expensive regardless of any rebates that ACA may offer.

Pay more...get less.  That's usually a formula for failure in the business world.  Not so with health insurance.  In fact that is pretty much their modus operandi.  This is why their CEO's are being rewarded with incredibly lucrative compensation packages and why insurer's profits continue to rise.

The main flaw in this equation is that we, as the insured, naively assume that our satisfaction is important to health insurance companies.  It is not.  CEO's are not striving to create happier consumers.  They are not beholden to the people paying the premiums.  Their main concern is to keep the shareholder's happy.   

And apparently, they are doing quite a good job at that.  Unfortunately, it's at our expense.