Why your health insurer doesn’t care about your big bills

Michael Frank ran his finger down his medical bill, studying the charges in addition to pausing in disbelief. The numbers didn’t make sense.

His recovery by a partial hip replacement had been difficult. He’d iced in addition to elevated his leg for weeks. He’d pushed his 49-year-old body, limping in addition to wincing, through more than a dozen physical therapy sessions.

The last thing he needed was a botched bill.

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His December 2015 surgery to replace the ball in his left hip joint at NYU Langone Medical Center in brand new York City had been routine. One night from the hospital in addition to no complications.

He was even supposed to get a deal on the cost. His insurance company, Aetna, had negotiated an in-network “member rate” for him. that will’s the discounted cost insured patients get in return for paying their premiums every month.

nevertheless Frank was startled to see that will Aetna had agreed to pay NYU Langone $70,000. that will’s more than three times the Medicare rate for the surgery in addition to more than double the estimate of what some other insurance companies would likely pay for such a procedure, according to a nonprofit that will tracks prices.

Fuming, Frank reached for the phone. He couldn’t see how NYU Langone could justify these fees. in addition to what was Aetna doing? As his insurer, wasn’t its duty to represent him, its “member”? So why had This specific agreed to pay a grossly inflated rate, one that will stuck him having a $7,088 bill for his portion?

Frank wouldn’t be the first to wonder. The United States spends more per person on health care than any some other country. A lot more. As a country, by many measures, we are not getting our money’s worth. Tens of millions remain uninsured. in addition to millions are in financial peril: About 1 in 5 is actually currently being pursued by a collection agency over medical debt. Health care costs repeatedly top the list of consumers’ financial concerns.

Experts frequently blame This specific on the high prices charged by doctors in addition to hospitals. nevertheless less scrutinized is actually the role insurance companies — the middlemen between patients in addition to those providers — play in boosting our health care tab. Widely perceived as fierce guardians of health care dollars, insurers, in many cases, aren’t. In fact, they often agree to pay high prices, then, one way or another, pass those high prices on to patients — all while raking in healthy profits.

ProPublica in addition to NPR are examining the bewildering, sometimes enraging ways the health insurance industry works, by taking an inside look at the games, deals in addition to incentives that will often result in higher costs, delays in care or denials of treatment. The misunderstood relationship between insurers in addition to hospitals is actually a Great place to start.

Today, about half of Americans get their health care benefits through their employers, who rely on insurance companies to manage the plans, restrain costs in addition to get them fair deals.

nevertheless as Frank eventually discovered, once he’d signed on for surgery, a secretive system of pre-cut deals came into play that will had little to do with charging him a reasonable fee.

After Aetna approved the in-network payment of $70,882 (not including the fees of the surgeon in addition to anesthesiologist), Frank’s coinsurance required him to pay the hospital 10 percent of the total.

When Frank called NYU Langone to question the charges, the hospital punted him to Aetna, which told him This specific paid the bill according to its negotiated rates. Neither Aetna nor the hospital would likely answer his questions about the charges.

Frank found himself in a standoff familiar to many patients. The hospital in addition to insurance company had agreed on a cost in addition to he was required to help pay This specific. This specific’s a three-party transaction in which only two of the parties know how the totals are tallied.

Frank could have paid the bill in addition to gotten on with his life. nevertheless he was outraged by what his insurance company agreed to pay. “As bad as NYU is actually,” Frank said, “Aetna is actually equally culpable because Aetna’s job was to be the checks in addition to balances in addition to to be my advocate.”

in addition to he also knew that will Aetna in addition to NYU Langone hadn’t double-teamed an ordinary patient. In fact, if you imagined the perfect person to take on insurance companies in addition to hospitals, This specific might be Frank.

For three decades, Frank has worked for insurance companies like Aetna, helping to assess how much people should pay in monthly premiums. He is actually a former president of the Actuarial Society of Greater brand new York in addition to has taught actuarial science at Columbia University. He teaches courses for insurance regulators in addition to has even served as an expert witness for insurance companies.

The hospital in addition to insurance company may have expected him to shut up in addition to pay. nevertheless Frank wasn’t going away.

Patients fund the entire health care industry through taxes, insurance premiums in addition to cash payments. Even the portion paid by employers comes out of an employee’s compensation. Yet when the health care industry refers to “payers,” This specific means insurance companies or government programs like Medicare.

Patients who want to know what they’ll be paying — let alone shop around for the best deal — usually don’t have a chance. Before Frank’s hip operation he asked NYU Langone for an estimate. This specific told him to call Aetna, which referred him back to the hospital. He never did get a cost.

Imagine if some other industries treated customers This specific way. The cost of a flight by brand new York to Los Angeles would likely be a mystery until after the trip. Or, while digesting a burger, you’d learn This specific cost 50 bucks.

A decade ago, the opacity of prices was perhaps less pressing because medical expenses were more manageable. nevertheless at This specific point patients pay more in addition to more for monthly premiums, in addition to then, when they use services, they pay higher co-pays, deductibles in addition to coinsurance rates.

Employers are equally captive to the rising prices. They fund benefits for more than 150 million Americans in addition to see health care expenses eating up more in addition to more of their budgets.

Richard Master, the founder in addition to CEO of MCS Industries Inc. in Easton, Pennsylvania, offered to share his numbers. By most measures MCS is actually doing well. Its picture frames in addition to decorative mirrors are sold at Walmart, Target in addition to some other stores in addition to, Master said, the company brings in more than $0 million a year.

nevertheless the cost of health care is actually a growing burden for MCS in addition to its 170 employees. A decade ago, Master said, an MCS family policy cost $1,000 a month with no deductible. at This specific point This specific’s more than $2,000 a month having a $6,000 deductible. MCS covers 75 percent of the premium in addition to the entire deductible. Those rising costs eat into every employee’s take-home pay.

Economist Priyanka Anand of George Mason University said employers nationwide are passing rising health care costs on to their workers by asking them to absorb a larger share of higher premiums. Anand studied Bureau of Labor Statistics data in addition to found that will every time health care costs rose by a dollar, an employee’s overall compensation got cut by 52 cents.

Master said his company hops between insurance providers every few years to find the best benefits at the lowest cost. nevertheless he still can’t get a breakdown to understand what he’s actually paying for.

“You pay for everything, nevertheless you can’t see what you pay for,” he said.

Master is actually a CEO. If he can’t get answers by the insurance industry, what chance did Frank have?

Frank’s hospital bill in addition to Aetna’s “explanation of benefits” arrived at his home in Port Chester, brand new York, about a month after his operation. Loaded with an off-putting array of jargon in addition to numbers, the documents were a natural playing field for an actuary like Frank.

Under the words, “DETAIL BILL,” Frank saw that will NYU Langone’s total charges were more than $117,000, nevertheless that will was the sticker cost, in addition to those are notoriously inflated. Insurance companies negotiate an in-network rate for their members. nevertheless in Frank’s case at least, the “deal” still cost $70,882.

having a practiced eye, Frank scanned the billing codes hospitals use to get paid in addition to immediately saw red flags: There were charges for physical therapy sessions that will never took place, in addition to drugs he never received. One line stood out — the cost of the implant in addition to related supplies. Aetna said NYU Langone paid a “member rate” of $26,068 for “supply/implants.” nevertheless Frank didn’t see how that will could be accurate. He called in addition to emailed Smith & Nephew, the maker of his implant, until a representative told him the hospital would likely have paid about $1,500. His NYU Langone surgeon confirmed the amount, Frank said. The device company in addition to surgeon did not respond to ProPublica’s requests for comment.

Frank then called in addition to wrote Aetna multiple times, sure This specific would likely want to know about the problems. “I believe that will I am a victim of excessive billing,” he wrote. He asked Aetna for copies of what NYU Langone submitted so he could review This specific for accuracy, stressing he wanted “to understand all costs.”

Aetna reviewed the charges in addition to payments twice — both times standing by its decision to pay the bills. The payment was appropriate based on the details of the insurance plan, Aetna wrote.

Frank also repeatedly called in addition to wrote NYU Langone to contest the bill. In its written reply, the hospital didn’t explain the charges. This specific simply noted that will they “are consistent with the hospital’s pricing methodology.”

Increasingly frustrated, Frank drew on his decades of experience to essentially serve as an expert witness on his own case. He gathered every piece of relevant information to understand what happened, documenting what Medicare, the government’s insurance program for the disabled in addition to people over age 65, would likely have paid for a partial hip replacement at NYU Langone — about $20,491 — in addition to what FAIR Health, a brand new York nonprofit that will publishes pricing benchmarks, estimated as the in-network cost of the entire surgery, including the surgeon fees — $29,162.

He guesses he spent about 300 hours meticulously detailing his battle plan in two inches-thick binders with bills, medical records in addition to correspondence.

ProPublica sent the Medicare in addition to FAIR Health estimates to Aetna in addition to asked why they had paid so much more. The insurance company declined an interview in addition to said in an emailed statement that will This specific works with hospitals, including NYU Langone, to negotiate the “best rates” for members. The charges for Frank’s procedure were correct given his coverage, the billed services in addition to the Aetna contract with NYU Langone, the insurer wrote.

NYU Langone also declined ProPublica’s interview request. The hospital said in an emailed statement This specific billed Frank according to the contract Aetna had negotiated on his behalf. Aetna, This specific wrote, confirmed the bills were correct.

After seven months, NYU Langone turned Frank’s $7,088 bill over to a debt collector, putting his credit rating at risk. “They upped the ante,” he said.

Frank sent a brand new flurry of letters to Aetna in addition to to the debt collector in addition to complained to the brand new York State Department of Financial Services, the insurance regulator, in addition to to the brand new York State Office of the Attorney General. He even posted his story on LinkedIn.

nevertheless no one came to the rescue. A year after he got the first bills, NYU Langone sued him for the unpaid sum. He would likely have to argue his case before a judge.

You’d think that will health insurers would likely make money, in part, by reducing how much they spend.

Turns out, insurers don’t have to decrease spending to make money. They just have to accurately predict how much the people they insure will cost. that will way they can set premiums to cover those costs — adding about 20 percent for their administration in addition to profit. If they’re right, they make money. If they’re wrong, they lose money. nevertheless, they aren’t too worried if they guess wrong. They can usually cover losses by raising rates the following year.

Frank suspects he got dinged for costing Aetna too much with his surgery. The company raised the rates on his tiny group policy — the plan just includes him in addition to his partner — by 18.75 percent the following year.

The Affordable Care Act kept profit margins in check by requiring companies to use at least 80 percent of the premiums for medical care. that will’s Great in theory nevertheless This specific actually contributes to rising health care costs. If the insurance company has accurately built high costs into the premium, This specific can make more money. Here’s how: Let’s say administrative expenses eat up about 17 percent of each premium dollar in addition to around 3 percent is actually profit. producing a 3 percent profit is actually better if the company spends more.

This specific’s like if a mom told her son he could have 3 percent of a bowl of ice cream. A clever child would likely say, “Make This specific a bigger bowl.”

Wonks call This specific a “perverse incentive.”

“These insurers in addition to providers have a symbiotic relationship,” said Wendell Potter, who left a career as a public relations executive from the insurance industry to become an author in addition to patient advocate. “There’s not a great deal of incentive on the part of any players to bring the costs down.”

Insurance companies may also accept high prices because often they aren’t always the ones footing the bill. Nowadays about 60 percent of the employer benefits are “self-funded.” that will means the employer pays the bills. The insurers simply manage the benefits, processing claims in addition to giving employers access to their provider networks. These management deals are often a large, in addition to lucrative, part of a company’s business. Aetna, for example, insured 8 million people in 2017, nevertheless provided administrative services only to considerably more — 14 million.

To woo the self-funded plans, insurers need a strong network of medical providers. A brand-name system like NYU Langone can demand — in addition to get — the highest payments, said Manuel Jimenez, a longtime negotiator for insurers including Aetna. “They tend to be very aggressive in their negotiations.”

On the flip side, insurers can dictate the terms to the smaller hospitals, Jimenez said. The little guys, “get the short end of the stick,” he said. that will’s why they often merge with the bigger hospital chains, he said, so they can also increase their rates.

some other types of horse-trading can also come into play, experts say. Insurance companies may agree to pay higher prices for some services in exchange for lower rates on others.

Patients, of course, don’t know how the behind-the-scenes haggling affects what they pay. By keeping costs in addition to deals secret, hospitals in addition to insurers dodge questions about their profits, said Dr. John Freedman, a Massachusetts health care consultant. Cases like Frank’s “happen every day in every town across America. Only a few of them come up for scrutiny.”

In response, a Tennessee company is actually trying to expose the prices in addition to steer patients to the best deals. Healthcare Bluebook aims to save money for both employers who self-pay, in addition to their workers. Bluebook used payment information by self-funded employers to build a searchable online pricing database that will shows the low-, medium- in addition to high-priced facilities for certain common procedures, like MRIs. The company, which launched in 2008, at This specific point has more than 4,500 companies paying for its services. Patients can get a $50 bonus for choosing the best deal.

Bluebook doesn’t have cost information for Frank’s operation — a partial hip replacement. nevertheless its cost range from the brand new York City area for a full hip replacement is actually by $28,000 to $77,000, including doctor fees. Its “fair cost” for these services tops out at about two-thirds of what Aetna agreed to pay on Frank’s behalf.

Frank, who worked with mainstream insurers, didn’t know about Bluebook. If he had used its data, he would likely have seen that will there were facilities that will were both high quality in addition to offered a fair cost near his home, including Holy Name Medical Center in Teaneck, brand new Jersey, in addition to Greenwich Hospital in Connecticut. NYU Langone is actually one of Bluebook’s highest-priced, high-quality hospitals from the area for hip replacements. Others on Bluebook’s pricey list include Montefiore brand new Rochelle Hospital in brand new Rochelle, brand new York, in addition to Hospital for Special Surgery in Manhattan.

ProPublica contacted Hospital for Special Surgery to see if This specific would likely provide a cost for a partial hip replacement for a patient with an Aetna tiny-group plan like Frank’s. The hospital declined, citing its confidentiality agreements with insurance companies.

Frank arrived at the Manhattan courthouse on April 2 wearing a suit in addition to fidgeted in his seat while he waited for his hearing to begin. He had never been sued for anything, he said. He in addition to his attorney, Gabriel Nugent, made quiet conversation while they waited for the judge.

from the back of the courtroom, NYU Langone’s attorney, Anton Mikofsky, agreed to talk about the lawsuit. The case is actually simple, he said. “The guy doesn’t understand how to read a bill.”

The high cost of the operation made sense because NYU Langone has to pay its staff, Mikofsky said. This specific also must battle with insurance companies who are trying to keep costs down, he said. “Hospitals all over the country are struggling,” he said.

“Aetna reviewed This specific twice,” Mikofsky added. “Didn’t the operation go well? He should feel blessed.”

When the hearing started out, the judge gave each side about a minute to make its case, then pushed them to settle.

Mikofsky told the judge Aetna found nothing wrong with the billing in addition to had already taken care of most of the charges. The hospital’s position was clear. Frank owed $7,088.

Nugent argued that will the charges had not been justified in addition to Frank felt he owed about $1,500.

The lawyers eventually agreed that will Frank would likely pay $4,000 to settle the case.

Frank said later that will he felt compelled to settle because going to trial in addition to losing carried too many risks. He could have been hit with legal fees in addition to interest. This specific would likely have also hurt his credit at a time he needs to take out college loans for his kids.

After the hearing, Nugent said a technicality might have doomed their case. brand new York defendants routinely lose in court if they have not contested a bill in writing within 30 days, he said. Frank had contested the bill over the phone with NYU Langone, in addition to in writing within 30 days with Aetna. nevertheless he did not dispute This specific in writing to the hospital within 30 days.

Frank paid the $4,000, nevertheless held on to his outrage. “The system,” he said, “is actually stacked against the consumer.”

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