When patients with managed care plans see an out-of-plan provider, they may be shocked when they are billed for a portion of services that their health insurer refuses to pay. Physicians can be just as surprised when they learn that they must chase the patient for a payment that they expected an insurer to make.
Litigation overpayments from managed care plans often turn on whether the insurer must pay the usual, customary, and reasonable (UCR) rate for services that were provided to the patient. Medical billing experts play a vital role in determining the UCR rate.
What Are Managed Care Plans?
A managed care plan is a form of health insurance that relies on contracts with healthcare providers who agree to work for a reduced cost. The premiums for managed care plans are typically less than the premiums for a policy that allows an insured to received services from any healthcare provider.
Some plans, including health maintenance organizations (HMO), largely require patients to be treated by a primary care physician, although they generally pay for treatment rendered by a specialist if the referral is made by the primary care physician. Other plans, including preferred provider organizations (PPO), allow more freedom to choose physicians outside of the network, albeit at a higher cost. Either plan usually allows patients to obtain emergency care when it is needed without awaiting a referral.
What Are Non-Participating Providers?
Managed care plans make agreements with healthcare providers to pay a pre-determined rate for services. Those providers are “participating providers” because they have agreed to participate in the insurance plan. They might also be known as “preferred providers” or “network providers.”
A common definition of a participating provider is a provider “who agrees in writing to render health care services to or for persons covered by a contract or contracts issued by a health service corporation in return for which the health service corporation agrees to make payment directly to the participating provider.” In simpler terms, a participating provider bills the insurance company rather than the patient and gets paid a rate that is specified in the insurance contract.
A non-participating provider is simply a healthcare provider that does not have a contract with the company that provides health insurance to a patient. They are sometimes known as “non-preferred providers” or as providers who are “outside the plan” or “outside the network.”
How Do Non-Participating Providers Get Paid?
In many cases, non-participating providers can be reimbursed from the patient’s insurance at the rate the insurer has agreed to pay to “out of network” providers. However, since non-participating providers have not agreed to accept that rate as full payment, they may be entitled to bill the patient for the difference between the rate they charge and the rate they are paid. Billing the patient for that difference is known as “balance billing” because the patient is billed for the unpaid balance.
The reimbursement rate to non-participating providers varies from insurer to insurer and from policy to policy. In some cases, reimbursement for out-of-network services may be based on UCR rates. The UCR rate is generally the prevailing rate that is most commonly charged for a particular medical service rendered in a particular geographic area.
When insurers must pay a UCR rate, they often try to pay an artificially low rate. Physicians use medical billing experts to determine whether the actual UCR rate is higher than they payment that the insurer has made.
In some cases, the non-participating physician expects to receive the UCR rate but receives the rate that the insurer has agreed to pay to non-participating providers. The out-of-network benefit is often lower than the UCR rate. It might, for example, be based on the Medicare reimbursement rate. Those situations can result in balance billings to the patient.
What Happens When a Patient Assigns Benefits to a Physician?
While participating providers bill the insurance company directly, some insurance contracts do not permit direct payment to non-participating physicians. Instead, the insurance benefits are paid to the patient, who is expected to use those benefits to pay the physician. This puts physicians in a bind, as patients might treat the insurance benefit as a windfall and refuse to pay the physician.
Because doctors expect to be paid for their services, they typically ask the patient to execute an assignment of benefits before they provide treatment. The assignment relinquishes the patient’s right to receive the payments and authorizes the insurer to pay benefits to the provider rather than the patient.
Unfortunately for physicians, insurance contacts may include an anti-assignment provision. That contract clause prohibits the insured from assigning benefits to providers. Because the patient was not authorized to make an assignment, the insurer refuses to honor it. Courts generally enforce anti-assignment agreements if they expressly state that the patient’s assignment shall be “void” or “invalid” or that any assignment will give no rights to the provider who receives it and will not be recognized by the insurer.
Patients are generally given a subscriber agreement by their health insurer. Like most people who are confronted with legal documents, they don’t read the agreement and don’t realize that it contains an anti-assignment clause. Neither they nor the non-participating physician understands that the assignment of benefits will be unenforceable. Both the doctor and the patient are placed in a difficult position when the insurer refuses to pay the provider directly.
Some states, including New Jersey, have enacted laws that require managed care plans to honor assignments of benefits. Unfortunately, even when assignments are enforced, non-participating physicians do not always receive fair payment for their services.
Litigation Against Insurers to Receive UCR Rates
Some states, including Florida, have statutes that require certain managed care plans to pay out-of-network hospitals for the provision of emergency services to their members. In Florida, the insurer must pay the lesser of the provider’s charges or the “usual and customary provider charges for similar services in the community where the services were provided.”
Providers know the amount that they billed but they may not know whether their billing is consistent with the UCR for the services provided. A medical billing expert can help physicians and hospitals compare their billings to the UCR rate when an insurer refuses to reimburse them for their charges. Medical billing experts can provide evidence in support of litigation to recover unpaid UCR rates.
Medical billing experts have supported other litigation on behalf of physicians. A few years ago, class action lawsuits in New York and California challenged insurance companies that refused to reimburse providers for their services at the UCR rate. Those lawsuits were supported by testimony from medical billing experts. They were settled to the advantage of the physicians.