Out-of-network coverage could send prices soaring


A proposal under consideratoin might require insurers in New York to provide out-of-network benefits for all plans they sell on the state's health insurance exchange. If New York implements that requirement, and if other states follow suit, the industry could experience widespread fallout.

Having access to doctors who aren't covered under your health plan's network could be a big advantage for many consumers. I certainly would appreciate being able to see whichever doctor I choose, regardless of whether my insurer has chosen to contract with that provider.

But there's more to consider than convenience. I've written before about the problem of hidden costs in the health insurance market (for example, when I underwent a medical service without even considering its cost and when a friend's helicopter ride to a major medical center cost $58,000). Indeed, very few people actually know how much healthcare really costs. That lack of price transparency plays a key role in this conversation.

If, for example, New York does require out-of-network reimbursements, insurers claim premiums could increase by as much as 30 percent. Plus, the change could cause actuarial problems as insures try to determine a premium structure that works for consumers and isn't too much of a liability for themselves.

One problem, according to America's Health Insurance Plans, is that out-of-network doctors often charge prices that are 10 times more than they bill Medicare for the same services. AHIP released a report last year detailing the difference between in-network and out-of-network provider charges.

The report found that a doctor in New York charged a patient $115,625 for lumbar spinal fusion, which was 62 times more than the  $1,867 Medicare paid for the same services.

I'm not sure if I, for one, would be willing to pay upwards of 30 percent more to see doctors. Maybe it would be worth it in some special circumstances, like if I was pregnant and strongly valued having a midwife for the birth or if I had cancer and the best oncologist in my area wasn't covered under my plan.

But the real problem here is the wide variation in healthcare costs. That's part of the reason why insurers create networks in the first place--it helps them control costs by negotiating lower rates that doctors will charge for different services.

So what's really to gain by requiring insurers to cover out-of-network benefits? It appears advantageous on paper, but it likely will result in more rising costs for us all. Maybe we should stick to the existing model that works and allow insurers to negotiate prices and mandate doctors adhere to those fees through a contract. It's not a perfect arrangement, but it might be a better option than the one proposed in New York. - Dina (@HealthPayer)