Private health insurance companies routinely deny legitimate medical claims. Most denied claims for doctors are for in-network (so-called “contracted”) services. In these cases, patients never see a bill, and the doctor must separately try to resolve the dispute with the insurance company. For out-of-network (“non-contracted”) claims, however, the doctor is required by law to send the patient a bill while trying to resolve the billing dispute. Most of these denied claims are for legitimate emergency services. They are simply routine claims, not exorbitant or outlier charges as some folks lobbying for the insurance industry would have you believe.
Don’t take my word for it. Consider recent comments from former health insurance executive Wendell Potter, who spent more than 20 years working for the giant health insurance companies Humana and Cigna. He explains the real cause of surprise medical bills. According to Potter, “It’s because of a scheme quietly hatched by insurance companies like the ones I worked at, where they decide which hospitals and doctors to include in their networks. They make these choices based largely on what will maximize profits and minimize care.”
It’s no wonder then that health insurers are making record profits. For example, UnitedHealthcare, UnitedHealth Group’s most profitable division, generated more than $10 billion in operating earnings last year. What’s even worse, health insurance chief executives are being compensated approximately $20 million per year (at the 10 largest health insurance companies), and at the same time private doctors are closing their practices at a record pace. This is troublesome from a cost perspective, too. Numerous recent studies have clearly demonstrated that when private doctors are forced to work for hospitals, health care costs go up significantly.
Health insurance companies are pushing for a law that would allow them to just pay a fee of their choosing, their “in-network” fee. This rate setting would drive private doctors out of practice even faster and cause more health care consolidation. The in-network rates aren’t negotiated by doctors. They also don’t reflect what doctors are really paid, because hospitals share their own fees with their employed doctors and pay them at a much higher rate. While the new House Ways and Means Committee surprise medical bill legislation, the Consumer Protections Against Surprise Medical Bills Act (H.R. 5826), is a step forward, it still contains a negotiation provision that ties payments to the in-network rate. That type of price control never works, and it will destroy our health care system. Yet health insurance companies are pushing for this huge handout, because it will allow them to dictate the price of treatment. One doesn’t have to be an economist to know that rates in a market like health care are in flux. That’s why this rate setting won’t work.
The solution to surprise medical bills is to have health insurers start paying the bills fairly if they are consistent with what other non-contracted doctors in the area are charging and being paid for those services. It’s that simple. That would be achieved through a fair negotiation process like the one that was set up in the landmark New York State surprise medical bill law of 2014.
Again, don’t take my word for it, but instead look to the recent comment from the New York Health Plans Association (NYHPA), the association that represents, yes, health insurance companies statewide. On the New York law’s method for resolving surprise medical bills, the Association states, “The current Independent Dispute Resolution process has worked well, ensuring that reimbursements for emergency services are fair and reasonable while holding individuals harmless.”
I couldn’t have said it better myself.
Access to care will be restricted, insurance premiums will go up, and many doctors will be forced to shut their practices if Congress goes down the rate setting rabbit hole. A level playing field is necessary, and the right way to do that is to implement a fair resolution process that holds health insurers accountable. At the end of the day, they must understand that we, as patients, won’t let them coerce Congress into passing devastating legislation to address surprise medical bills.
Andrew Langer is President of the Institute for Liberty. He also teaches on public policy at the College of William & Mary.