Saving money: Paying cash for health care even if you’re insured

Filed Under: Costs, Patients, Providers

how to cut health-care costs

Summary: People are telling us they are paying cash for common medical procedures, even if they’re insured — and getting lower prices. Is this common? Is it legal? Why don’t more people ask for lower cash rates, and why don’t more providers offer? Answers to these questions and more …

 

 

 

 


The situation, as described by two of our community members from our PriceCheck project crowdsourcing health care prices in California:

“I was told procedure would be 1850. I have a 7500 deductible. So I talked to the office mgr who said if I paid upfront and agreed not to report the procedure to Blue Cross, that it would be $580.”

On our Facebook page, one contributor wrote, “I was going to be billed $830 through my PPO for an MRI. The cash price? $500.”

An MRI: Sticker price $350, patient paid $300. “Cash price was $350, I negotiated down to $300 since my chiropractor refers patients to this facility often.”

Another MRI: Billed price $1,407; paid price $900. “Worked with billing for several weeks to work down price. Goes to show the price isn’t the price….”

This seems increasingly common among people who are insured using an in-network provider: if you ask, or sometimes even if you don’t ask, you’re offered a lower price. But it raises a whole list of questions. (Editor’s note: Post was updated with additional interviews on Sept. 15, 2014.)

“Most health care providers may be willing and able to offer cash discounts to patients who have no insurance or who choose not to have the provider bill their insurance carrier,” said David Harlow, a Boston-based health care attorney, who blogs at healthblawg. “There is a benefit to both parties: the patient — where the patient has a high-deductible plan and would be paying the full price out of the deductible — and the provider – who is happy to be paid, cash on the barrelhead, and not have to deal with submitting a bill to a third party payor and having that bill questioned and/or discounted.

“Many patients are prepared to pay cash for procedures in order to take advantage of significant discounts,” Harlow said.

He added that some contracts between providers and insurers may prohibit such practices. We have sought comment from insurers, but so far have not reached anyone. We’ll post an update here when we do.

People have learned that paying cash for prescriptions is often cheaper, especially for generics, even if you’re insured. We wrote a bit about this here on our prescription page. What we’re talking about that’s not so common is paying cash for medical procedures like an MRI.

The changing landscape of insurance and insurers

Many people think that because they’re insured, they’re getting the lowest price for a procedure. And even if they’re not paying for it, they think their insurance company is paying a low price, if not the lowest price. After all, that’s what insurance is for, right? There’s a “sticker” price that’s kind of like a manufacturer’s suggested retail price; but you can see on your bill and explanation of benefits that insurers never pay that price. Most of us think insurance gets you a lower price, as your insurance company negotiates the price down to a lower rate, often called a “member rate,” “negotiated rate,” “contract rate” or something similar?

And if the insurance company covers the whole thing, with little or no out of pocket for you, why ask for a lower price?

Well, not so fast.

With the skyrocketing number of high-deductible insurance plans, described by the IRS as anything with a deductible over $1,250 for an individual or $2,500 for a family, suddenly many individuals are responsible for costs before they satisfy their deductible, which could be as high as $6,350 for an individual or $12,700 for a family.  Also, many more insurance policies have co-insurance — that’s what it’s called when you pay, say, 10 percent or 20 percent of the price. (A co-pay is usually a fixed price you pay for a visit, say $20 for an office visit.)

With those new high-deductible plans, some policies ask you to pay the sticker price before you meet your deductible, and some ask you to pay the contracted price. So the contracted rate of $830 for the MRI above became $500 at a cash rate — except it does not count against your deductible. If you’re using the cash rate, it’s as if you’re declaring yourself to be uninsured.

So it’s important that  you know what your insurance plan says: are you paying the sticker price or contract price?

Here are some other questions.

Why would I want to do this?

To save money. The first person above saved  almost $1,300 by paying cash. The second person saved $330. We heard from one woman who consistently tells her mammogram provider that she’s uninsured; she pays $200 annually in cash, instead of having two or three times that amount applied to her deductible and/or removed from her Health Savings Account.

While this is increasingly common, it seems clear that asking extra questions in advance could avoid problems later, according to Hanny Freiwat, co-founder of Wellero, a startup that has built an app that lets consumers check provider and payment information, and pay at the point of service. (Update, February 2016: Cambia Health Care, which had funded Wellero, decided to mothball it in early 2016.)

“I have done this myself using the Wellero app to see the difference between the ‘Charge Master’ price and the ‘Insurance Contracted Rate’ for my product at that provider,” he said.” This is important to understand because providers sign different contracts with insurance companies and can be listed as in-network or out-of-network. In-network providers could have different designations (e.g. preferred, participating, ACO, etc.) as they have contracted rates with insurance companies.

“These designations dictate the fee schedule (contracted rate) applied to the visit. The consumer’s product type also plays a big role, since employers and health plans could negotiate benefits types, limits, what is covered and what is not, what services might require a referral, what services might require authorizations, drugs that require step therapies prior to getting approved, etc.

“These reasons are why asking for cash and paying out of pocket without using your insurance could be risky. Please keep in mind some services are bundled, some are covered by the insurance at 100% if you and the your doctor follow all the right procedures, and some are not covered at all.”

Does this cash payment apply to my deductible? 

Probably not. You should check with your plan documents to be sure, but if by paying cash you are effectively declaring yourself uninsured, there’s no reason for it to apply to your deductible.

How about my Health Savings Account?

If you have a Health Savings Account, it may or may not cover such cash transactions. You probably want to ask in advance.

“Insurers can’t control what you do with your H.S.A. money,” Freiwat said. “The rules are set by the federal government. Insurers are helpful in that most of what you do through them is usually pre-qualified as a medical expense and using your HSA account to pay is a safe bet. There are cases where the IRS might have a rule (e.g. massage therapy) that could conflict with the rules setup by the insurer. I think IRS requires a referral from a medical dr. while an insurer might be more flexible based on an employer saying ‘I want to cover Massage for my employees. ‘

“So insurance pays without referral post deductible but what is the correct action before you meet your deductible if you don’t have a referral? The insurer might even require a prior-authorization from the therapist which is not a referral.”

Here’s a link on what is covered under an H.S.A. 

Is it legal?

Yes. An increasing number of providers are posting prices on line, or telling us of their cash or self-pay prices.

A few caveats: often there are conditions, such as “must pay in advance” or “must pay on day of service.” We’ve been surveying providers on their cash or self-pay prices for more than three years now, and we encounter very little pushback from providers who say they don’t have cash or self-pay prices. Some of these providers tell us they’ll give cash prices in advance to patients but not to journalists. In California alone, we have found numerous radiology clinics listing prices, as you can see towards the bottom of this blog post. Here’s a post about prices online in other states.

Also, the big retail chains that have set up clinics in their stores routinely post prices online. Here’s a pricing page from CVS and here’s one from Walgreen’s.

One big hospital chain, Hospital Corporation of America, posts prices online for self-insured patients but those patients must meet certain criteria. You can see some of their prices in this searchable database we have put together for big-ticket items.

O.K., but is it legal?

Nothing requires a patient to tell a provider that he or she has insurance and wants to use it, Harlow said — but, again, provider-payer agreements may ban such payments.

Harlow added: “In order to protect itself against potential lawsuits brought by insurers, a provider should only offer a cash discount if it bears a rational relationship to the actual administrative savings to the provider related to avoiding the entire insurance billing and collection process, plus the benefit of having that money in hand earlier. Also, cash discounts should be stated on bills provided to patients.”

Once the market included “most favored nation” clauses in payor contracts, requiring that insurers get the lowest price charged by a provider, which would suggest that a person paying a price lower than the insurer price would be on the wrong side of the contract (and so would the provider). But these are no longer common, Harlow said. Many states have banned them, and the U.S. Justice department has prosecuted cases of insurers enforcing this type of clause.

“If the contract doesn’t prohibit the offering of a cash discount or contain an MFN clause, then the field is clear for discounting, though there should be some rational basis for the amount of the discount,” he said.

So the contract may prohibit this? 

Yes, that’s possible, Harlow and Freiwat agreed.

Are there regulations about this? 

There is a long history of regulation and legal maneuvering in this marketplace regarding illegal discounts, kickbacks and so on. Freiwat and his group over at Wellero, an app for payments that is part of the Cambia Health network, wrote a white paper about prompt pay discounts. It says, among other things, that out-of-pocket expenditures for patients are rising, and providers are having a hard time collecting. Hence, Wellero.

Their white paper quotes a document from the Department of Health and Human Services Office of the Inspector General detailing rules for prompt payment discounts: be consistent, post prices, have written policies, offer  “the same discount to all patients, insured or not” and agree not to advertise such discounts. The OIG advisory letter from 2008 is here; it refers to an even more detailed 1991 document about payments, anti-kickback regulations and the like from the OIG dated 1991.

We understand why the provider would want to do this — cash in hand — but wouldn’t the payer resist, because they are cut out of the action?

“There is no ‘action’ for the insurer if they are avoiding payment and don’t know about the service,” Freiwat said. “The product ‘risk pool’ is saved from paying and other people in the pool could benefit from these dollars.

“It gets tricky if the provider is a part of an ACO or HMO and is taking on some of the risk of managing the care of the people. They will lose out on incentives by having incomplete records at the insurance companies. That’s why this practice is often offered by smaller providers.”

How do insurers think about this? Is it allowed under the provider’s insurance contract? Under your insurance contract?

It’s generally in the insurer’s interest to keep you in network and on the books. But truly, if you’re paying insurance premiums and not making any claims — not asking them to pay anything — then it’s a win for them, right?

We’re trying to find someone from the insurance industry to comment on this.

We have heard anecdotally that sometimes the patient pays on cash, then tries to submit the bill for reimbursement. It’s not clear to us how often this happens, but it does happen, and insurers don’t like it. Imagine the conversation: “You were going to pay $1,850, but I negotiated a better rate: $580. Now I’d like to apply that to my deductible.”

We have also seen insurance companies starting to offer transparency tools like this one that I blogged about earlier this year. You will note that this is partial transparency: the payer is only telling part of the story.

How do I go about getting a low cash price?

It’s easier to do before the procedure.

Ask: how much will this cost? How much will it cost me? Do you have a prompt-pay discount? Do you have a discount for paying in advance? A discount for AAA members? (This is only partly a joke).

If you can get the procedure code (use our front-page search box; it will help you winkle out the number). See what Medicare pays for the same procedure (again, use our front-page search box).

If it’s one of the procedures that we price — there are cash or self-pay rates for 30-35 common, “shoppable” procedures in our database, for the 10 metro areas listed on our front page — you can use our pricing for a general idea of the range. Then if you need something we don’t price — say, a thyroid ultrasound — you can check out our list of providers, because we do give abdominal and pelvic ultrasound prices. Prices can vary by a factor of 10 or even 20.

Maybe you want to go up the street to a different provider if you’re being charged something you think is excessive.

Take notes. Take names. Take numbers. Get it in writing if you can. You may have to ask several people; we have learned that in some offices one person will say “no” while another person will say “yes.”

Also, if it’s important to you, you should ask if the money you pay can be applied to your deductible, or to your HSA.

What if I found out after I paid that I could have gotten a lower price by paying cash up front?

It’s much harder to make this happen after the fact. You can always ask the billing office if they’ll give you a refund. We have not heard anybody who got one, but you could ask. Please let us know what happens.

Remember, if you’re venturing into this territory: Be polite. Billing office and insurance office workers  are people too. We are all in this together, and they are not the villains. It’s the system that’s the villain.

The employer’s perspective: How can I reduce my costs? Can I get these low cash rates?

It’s not just individuals who are doing this, but also employers, who are eliminating their Preferred Provider Organization arrangements with the big insurers and switching to self-insurance.

“The disintermediation of the PPO industry is the single most significant change the US healthcare industry can pursue in an attempt to right-size payments for services,” said Mike Dendy, C.E.O. and president of Advanced Medical Pricing Solutions, a health-care cost containment company.

“PPO’s were created 25 years ago as a cost containment tool but quickly evolved into a way for hospitals to overcharge for services and hide behind a wall of opacity.  The largest PPOs in the country are owned by the largest healthcare insurance organizations, who act as administrators on behalf of employers.

“The large payers use their PPO networks as a point of differentiation and have (with the hospitals assistance) led consumers to believe that healthcare services are not available without their anti-value middleman role.  This is not the truth.

“Hospitals like the fact that they can over-charge for services via a PPO model but, like consumers themselves, have been put at a financial disadvantage themselves due to the outrageous profit-seeking mission of the PPOs and their owners, the large insurance companies.

“The ultimate loser however is the consumer who most often receives healthcare services via employer sponsored health plans.  By disintermediating the PPOs, employers can easily save 30% or more on hospital services and also provide net payments to the hospitals that are more than fair and reasonable.”
Do you have information to share? Tell us about it.

Finally, if you have a story to tell, tell it here: info (at) clearhealthcosts (dot) com.

 

(Update: Here’s another blog post from me about the same topic. Here’s a Wall Street Journal article about the topic. Here’s a recent piece from KevinMD about the topic.)