Out of Network Claims Explained
One of the most significant inefficiencies in health care is the pricing strategy of health plans regarding their policy on reimbursement for members who receive medical services from health care providers who are not contracted as part of the network. So called “out of network claims” are those that are sent by a health care provider to a health plan when seeking reimbursemnt for an insured. In other words, if you choose your own doctor, hospital, clinic, or other health care provider and that provider does not have a contract with the health insurance company that covers you, you may pay more out of your own pocket for those services. The health care provider may bill more for the services, but the health plan may either delay prompt payment or attempt to negotiate a lower payment.
Affordable Care Act and Out of Network Claims
So-called “Out of network claims” are a key component of building Accountable Care Organization business models. The reason is that to create incentives for members of an ACO plan to stay in the network of contracted providers of the health plan, they must realize cost savings as well as improved health care.
- The Affordable Care Act caps out of pocket charges to insureds in qualified health plans (QHPs).
- Self-insured employers under the Employee Retirement Income Security Act of 1974 (ERISA) are not exempt from this under the ACA though there is an exception.
- QHPs do NOT have to count out of network out of pocket costs for out of network. See https://www.cms.gov/CCIIO/Resources/Fact-Sheets-and-FAQs/aca_implementation_faqs18 , Q4 “If a plan includes a network of providers, is the plan required to count an individual’s out-of-pocket expenses for out-of-network items and services toward the plan’s annual maximum out-of-pocket limit? No.”
This creates a conundrum for health care consumers. If they wish to use a health care provider that is out of network, they may select their own doctor or other health care provider, but they may also incur higher costs in the form of ‘patient responsiblity’ which is billed by a health care provider but not covered by a health plan. (see Does a flaw in the ACO business model leave out the patient?)
Cedars Sinai Dropped by Anthem
The Los Angeles Times ran a story that Anthem is cutting well-respected health care providers UCLA and Cedars-Sinai from its network of contracted providers. Cedars alone is a $3 billion health care system and if industry averages apply, probably over 20% (twenty percent) of their patients are out of network or covered by Anthem Blue Cross. There are solutions that enable out of network claims cost reductions for health plans while accelerating payments to health care providers, and potentially reducing out of pocket costs on those claims to patients. There have been solutions that offer some of these benefits for years, but they charge the health plan for some of the savings, which increases administrative fees and therefore works against new Medical Loss Ratio (MLR) provisions of the Affordable Care Act . (See note below regarding CMS and Medical Loss Ratio).
Out of Network Solutions
Solutions that accelerate payments, increase the velocity of capital and decrease the cost of healthcare while supporting Medical Loss Ratio are the way of the future (see Out of Network Claims Strategy: Don’t Damage MLR). New standards such as ICD-10 are expected to have an initial negative impact on reimbursement speeds, so these solutions are going to be more important in the future.
Thomas Priselac, chief executive of Cedars-Sinai Medical Center, said the Anthem exclusions offer a “false economy” because they don’t reduce costs in the health care system overall. See: Cedars-Sinai and UCLA cut from Los Angeles health plan – latimes.com.
Why Medical Loss Ratio is Important in Solutions for Out of Network Claims
 Medical Loss Ratio – Many insurance companies spend a substantial portion of consumers’ premium dollars on administrative costs and profits, including executive salaries, overhead, and marketing. The Affordable Care Act requires health insurance plans to submit data on the proportion of premium revenues spent on clinical services and quality improvement, also known as the Medical Loss Ratio (MLR). It also requires them to issue rebates to members if this percentage does not meet minimum standards. MLR requires health plans to spend at least 80% or 85% of premiums received on medical care, with provisions imposing tighter limits on health insurance rate increases. If they fail to meet these standards, the insurance companies will be required to provide a rebate to their customers starting in 2012.