America's Health Insurance Plans compared out-of-network charges with rates providers that are typically reimbursed by Medicare, and found around the country that some out-of-network charges are more than 20 times the Medicare rate.
AHIP asked insurers to provide the highest out-of-network charges from providers in the most popular procedures, as well as the ZIP codes associated with those charges. New Jersey's providers charged the highest prices in the nation for initial critical care and subsequent hospital care, at 9,302 percent of Medicare reimbursement and 8,991 percent, respectively. Several orthopedic surgeries also were among the highest charges in the nation.
For John Sarno, president of the Employers Association of New Jersey, these are charges his membership is trying to avoid, and therefore shift the burden of payment for out-of-network care to employees.
"Employers are making out-of-network services cost-prohibitive for employees by the type of plans they are providing," Sarno said. "Deductibles and co-pays are going to be so much more higher out of network that the employee is going to have a real disincentive to go out. That's the primary way the employer deals with it."
Sarno added that providers' out-of-network prices are established at what they think the market can bear; the only question is who will pay that fee.
Stephen Timoni, a health care attorney with K&L Gates in Newark, said out-of-network charges generally are not inflated, but represent what the physician charges anyone for that procedure. He said contracts with insurers negotiate a discount on procedures; it does not change the established charge.
Timoni was part of a team that represented Bayonne Medical Center in a lawsuit brought by Horizon Blue Cross Blue Shield over an out-of-network problem. After Bayonne ended its contract with Horizon, the hospital advertised it would waive deductibles, coinsurance and other cost-sharing tools meant to discourage out-of-network usage. Horizon sued in 2009 for fraud, negligent misrepresentation, concealment and tortuous interference, but the case was ruled in Bayonne's favor in 2011. Bayonne and Horizon entered into a contract the following month.
Timoni said issues with out-of-network charges stem from loosely defined out-of-network benefits. Many plans say they will pay a "usual and customary charge," which is open to interpretation, and Timoni said even plans that pay a specific percentage of out-of-network charges consider the amount of the charge under the "usual and customary" terminology.
If a provider bills an insurer the established charge for an out-of-network procedure, the insurer can counter by saying that is not the usual and customary charge. Then the dispute may be subject to arbitration, Timoni said.
Timoni said providers are going out of network to get better leverage to negotiate contracts with insurers, but Sarno argued it's part of a strategy to gear up for the future.
Sarno said, under health care reform, there will be fewer opportunities to bill at the established charge, and therefore providers are trying to bank as much revenue in the short term as possible. He cited accountable-care organizations and value-based purchasing as ways providers will be paid for outcomes instead of volume of services in the future.