The Facts: Health Insurance Tactics


Confusing Consumers With a Numbers Game.
Here are the Current Practices:

Suppose your health insurance coverage for out-of-network services is based on a 70/30 coinsurance benefit design. In this scenario you would assume that you would pay 30 percent of the amount billed for a medical service. If your physician files a $1,000 claim to the health plan for an out-of-network service, your assumption is the health plan will pay $700 and you will pay $300 (30 percent). However, this is not the case. Health plans pay their percentage of the claim based on what they think the service is worth, what they call the “maximum allowable amount,” for that particular medical service. So for a $1,000 claim, the maximum allowable amount could be $530. This means that the insurance pays 70% of $530, which is only $374. The remaining portion of the $1000 charge is left up to the patient, a whopping $626. Surprised?


Just recently, in September 2015, New Jersey Department of Banking and Insurance issued an order against United Healthcare for INCORRECTLY SHOWING THE NETWORK COST SHARING AMOUNTS FOR OUTPATIENT SURGERY, FACILITY FEES AND OUTPATIENTSURGERY, AND PHYSICIAN/SURGEON FEES. This means that the company failed to advise patients of their actual payment responsibilities. In addition, the Department stated that it had “received consumer complaints against UHC regarding balance billing and other collection activity by out-of-network providers, including filing of lawsuits” because of UHC’s underpayment to many of New Jersey’s best physicians.

Similarly, in 2009, the New Jersey Department of Banking and Insurance issued Consent Order #C09-102 on November 12, 2009; Aetna reported to the Department that from October 2002 through September 2009 it improperly processed out-of-network hospital and non-hospital facility claims for persons covered under individual health coverage (IHC) and small employer health (SEH) contracts. Aetna had to reprocess all affected claims to remedy underpayments, including 12% interest.


New Jersey has a surprisingly small amount of health insurance carriers. And, we fall into the top 10 states with competition going down! “We find that the majority of U.S. commercial health insurance markets are highly concentrated. These markets are ripe for the exercise of health insurer market power, which harms consumers and providers of care.”1 A1952 will only help the handful of health insurance companies in New Jersey do even better. Premiums will continue to rise, while your ACCESS TO CARE will continue to suffer. _________________________________________________ 1American Medical Association, Competition in health insurance: A comprehensive study of U.S. markets, 2016 Update, page 8


Carriers are doing very well and have very large reserves of money, even the non-profits. Insurers have developed a range of interventionist strategies and tools to reduce their cost and increase revenue, “such as selective contracting with networks of providers (PPOs or IPAs); utilization review - for example, prior authorization of non-emergent hospital admissions and aggressive review of lengths of hospital stay; pharmaceutical benefits management; introduction of practice guidelines and physician profiling; and outright acquisition or formation of health maintenance organizations (HMOs) and point-of-service plans (POS).”
The Rise of Managed Care in the United States: Lessons for French Health Policy. Victor G. Rodwin, Health Policy Reform, National Schemes and Globalization. 1997

Carriers control cost by shifting payment responsibilities to patients. Rather than covering care with the dollars received from individual and employer premiums, more and more plans require patient to pay for care upfront in the form of deductibles – 1 in 5 Americans have high deductible plans and the number is growing. This is a huge transition creating a situation in which patients do not understand their responsibilities and are often unable to pay the deductibles. In addition, physicians often go UNPAID for their work when seeing patients with these plans, since insurers pay physicians NOTHING for any treatments or procedures until patient deductibles are fully paid (often thousands of dollars).

Carriers also control cost by including too few physicians in network. With narrow and tiered networks, insurance carriers fail to have the right amount of physicians in their networks - INCLUDING CRITICALLY NEEDED SPECIALISTS AND SUBSPECIALISTS - in their networks. New Jersey has one of the highest rates of NARROW NETWORK plans. This directly affects patient ACCESS TO CARE and directly creates the OUT OF NETWORK PROBLEM. Less in–network physicians equals increased cost to consumers.

Carriers also control cost by denying coverage. Access to insurance does not equal access to care. In addition to facing a shortage of network physicians, patients are regularly denied coverage for treatments, procedures and medications, even when they see IN NETWORK physicians. For example, in 2014, Horizon denied 8,496 claims JUST in Medicaid JUST for prescriptions. NJDURB February 2015 meeting materials The coverage hurdles are dangerous for patient health and result in increased long term patient costs, but more importantly, they negatively impact patient access to quality care. Most primary care physicians in private practice spend 10 or more hours a week on paperwork, mostly to get insurance coverage for patient care. Medscape Physician Compensation Report 2015


Aside from concerns about the lack of consumer choice and cost controls, we hear daily from physicians about the difficulty faced when dealing with insurers, whether in or out of network. Network contracts are unilateral; they are contracts of adhesion. This is the main reason physicians are out of network. Insurance companies directly affect the viability and well-being of New Jersey’s physicians. “The vast majority of New Jersey physicians (95.31%, up from 89.89% in 2014) believe that the changing healthcare environment has negatively impacted their role as a physician…According to the 2015 New Jersey Health Care Monitor, of those, more than 39% said that they felt an increased administrative burden as a result of the changing environment, while 26.5% said reduced reimbursement and 15.6% reported reduced time spent with patients were among the most prevalent ways in which their practice had be negatively impacted.” 2015 New Jersey Health Care Monitor, Brach Eichler

Below are examples of unfair business practices:
All Products Clauses: Physicians who become providers in one of an insurer's health plans, e.g., a PPO, are sometimes forced to participate in its other less attractive products. Conversely, a physician who wants to terminate participation in one product is automatically out of all of the insurer's other products. This is now an acute problem with new plans purchased by consumers through the federal healthcare exchange created pursuant to the Affordable Care Act. Exchange products offer low payments to physicians and high deductibles for patients, who often cannot afford them. Many physicians are treating patients with exchange plans as patients without insurance, since the coverage is so weak.
Contract amendments and contracts that permit “incorporation by reference” to new payment policies, rules, etc. are very loosely regulated. Though notice is required for changes, the physician has no control over the changes and no recourse except to terminate the entire agreement. Between the two tactics of all products clauses and unilateral amendments, we believe Horizon was able to place certain physician in Tier 2 of Omnia without their knowledge or approval.

Ratings and rankings: Carriers use secret methods to rate physicians and, in turn, terminate contracts or reduce contract benefits. This is exemplified in the Horizon Omnia network, in which Tier 2 physicians do not know why they are ranked as such. Further, physicians suffer great administrative burden with each new quality metric imposed by government programs and insurance companies; they are inconsistent, administrative burdens.

Lack of fee increases: Many physicians suffer flat payments despite increased costs. Without competition, carriers pay as little as possible, demoralizing our best physicians and leading them to leave the state. In fact, carriers have illegally and artificially kept payments low, as was done with the Ingenix database; it took the act of a State Attorney General to finally end the practice.
Place of Service Restraints and Payment Disparities: We are concerned that carriers are making decisions that will determine whether physicians may practice independently of a hospital. For example, one carrier’s policy on “Allowable Practice Locations for Pathologists” disallows payment to pathologists for office-based services, so that only hospital-based pathologists are included. We believe that this is anticompetitive and an unfair business practice. We also believe that it is not in the best interests of patients who are accustomed to receiving these services on site, such as at a large dermatological practice or an ambulatory care facility. In addition to a carrier’s ability to restrict the place at which a physician may practice, we are concerned that many services may be safely rendered in an office or ambulatory care setting at a lower fee than when hospital-based. If we are to bend the cost curve for healthcare, then we must ensure that services are being rendered in the most appropriate setting at the most reasonable cost.