The Department of Health and Human Services is imposing new reviews on health care premium increases of 10% or more. So I was interested to see a letter from my health insurer, which is raising premiums 9% next year but cutting the benefits. From the letter from the insurance company:
Currently, your reimbursement for certain out-of-network services, such as those provided in a physician's office, is based on a usual, customary, and reasonable (UCR) fee schedule...The amended benefit, effective on your renewal rate, will not use UCR but will reimburse out-of-network covered services delivered by non-participating providers based on 140% of the published rates used by Medicare.
A footnote to this last sentence explains, "When a Medicare rate is not available, reimbursement will be based upon certain gap methodologies, including a gap methodology using relative value data from Ingenix, Inc. This is different from the PHCS database. We and Ingenix are related companies through common ownership by UnitedHealth Group. When a gap methodology is not available, reimbursement is based upon 50% of the providers billed charge."
An accompanying chart explains that under the current "usual, customary, and reasonable" method, a customer would pay $2,180 for an out-of-network colonoscopy, while under the new, 140% of Medicare method, a customer would pay $3,370.
At least four points are worth making:
1. This is a good example of why insurance companies are unpopular. People don't like having to decode footnotes about UCR and PHCS (the "Prevailing Healthcare Charges System"). People like plain English.
2. The use of Medicare prices as a baseline even for private insurers is a kind of back-door government control on healthcare prices. Even if a physician doesn't accept Medicare's reimbursements because he thinks they are unreasonably low, the private insurance companies are now using them as a guideline for what is a reasonable price to pay. It's an expansion of government influence.
3. If HHS wants to try to control health care premium prices (as it apparently does), it can't do so with any effectiveness by just looking at whether the premium went up by 10% or more in a year. It has to also look at the coverage being provided in exchange for the premium. If it's a lot less coverage for the same price, it amounts to a price increase even though the premium has not increased. This requires a lot more sophisticated skill by a government price-controller than just looking at whether the premium went up by 10% or more year over year. It requires going through the whole policy and looking at things like deductibles and copayments and reimbursement rates (UCR? PHCS?) and whether accupuncture or substance abuse rehabilitation or a lot of other things are covered.
4. If more policies are going to be bought by individuals rather than by large employers, a company that figures out that part of its job is explaining this sort of stuff to customers in a user-friendly way rather than in a frustrating and complicated way will have some competitive advantage.
