Why Consumer-Driven Health Plans Screw the Consumer

This New York Times article mentions the increasing number of companies offering high deductible health plans (HDHP) for 2009. Some are shifting entirely to these so-called consumer-driven plans. The popular theory behind these plans is that shifting more healthcare costs to the consumer will result in decreased costs overall because people will choose their care more carefully, thereby increasing competition among providers and decreasing healthcare costs and wasteful spending. Never mind the fact that competition among providers in our current, unchecked system has not reigned in costs at all. They continue to skyrocket well beyond inflation. It’s true that consumers are less likely to utilize care when they have to pay huge amounts, which should decrease costs in the short-term, but it will do nothing to promote prevention and management of illnesses before they become severe or life-threatening, and of course, outrageously expensive.

A key problem is that consumers, even when they assume full responsibility for researching the most affordable, quality care, do not have all the information they need to make informed decisions. Namely, providers and insurance companies alike withhold critical information about costs and contracts, so that consumers are left with the burden of paying upfront, sometimes 2-3 times the actual amount, until they sort out the contracted rate many months later. For example, I have several years experience with an HDHP, both on a group plan with my former employer and now on an individual plan. While under my former group plan, I visited a specialist for a rather benign, yet chronic problem. Being a relatively healthy individual, I had not yet met my deductible, so the provider asked to be paid upfront for the full cost of the visit, or rather his version of the full cost of the visit.

Here’s the rub. If I fulfill my end of the bargain by seeing an in-network (INN) provider, I am obligated to pay only the contracted rate for services, not the wildly inflated cash price the provider thinks his services are worth. Each INN provider negotiates contracted rates with particular insurers. The rates may be different for each insurer, but the two parties know what amounts will be paid and under what circumstances. But, neither of them will divulge this information to patients aka consumers! In my case, the billing department said they didn’t know the contracted rates. This is a lie, and this lie is being perpetrated by many providers who are too lazy to look up the contracts. In their defense, I know they may have hundreds of contracts and it’s not really feasible to have all this information at their fingertips, but this is no consolation to the HDHP consumer who gets screwed because she or he has no idea what the actual cost is.

In short, I was asked to pay $360, which I begrudgingly did because I had no way of knowing the contracted amount and needed to see the doctor for a follow-up visit. I certainly wouldn’t be allowed to come in for a follow-up if I hadn’t paid for the first visit. They essentially had me over a barrel. When I received my Explanation of Benefits (EOB) several weeks later, it showed the allowed amount for the entire visit was $120. The provider charged me three times the contracted rate, and it took six weeks and three phone calls to the billing department to get my $240 refund. I was told on multiple occasions by the provider that they had not yet received payment and that all refunds were processed on a monthly basis. Not only did they overcharge me, but they enjoyed over a month’s worth of interest on my hard-earned money, which I complained about to the billing manager. She acted surprisingly nonchalant about the amount I was initially charged as if this was no real concern to her.

And, it isn’t, of course, because the bottom line is that unethical providers will collect as much as they can knowing that most consumers are simply too ignorant, sick, or frustrated with the system to demand the fair price. They are not bearing any financial risk when they overcharge patients who comply with their usurious demands. They are no better than the Wall Street fat cats and predatory banks and lenders who are mostly responsible for the economic debacle we’re experiencing right now. And, it’s the little people who are losing. The insurance companies wash their hands of responsibility by stating that contracts are private and cannot be disclosed even to the those whom they directly affect—healthcare consumers.

So, to all the free-market-will-cure-all-of-healthcare’s-ills acolytes, I ask how consumers are supposed to determine the most affordable care if they are not privy to contracted rates and the true costs of services. Sure, some insurance companies have websites showing average costs of care for certain procedures, but these are marginally helpful and inaccessible to a large portion of the population that doesn’t have internet access. Moreover, even knowing the supposed going rate for a particular service does little to help one bargain with a provider who prominently displays a sign in the window stating, “Payment is expected at time of service.” Insurance companies should be legally required to disclose contracted rates for every billable service at the consumer’s request. Likewise, providers should be legally prohibited from charging more than the contracted rates for any billable service. Only then will we have the transparency necessary for the consumer to get a fair shake in determining the best care at the most affordable price.