Health Insurance Premiums Generally

Due to poor supervision by the states and federal government, and a lack of interstate competition, health insurers have been able to raise premiums greater than the rate of medical expense inflation.  One look at the annual reports of almost any health insurer shows that health insurer profits have been, and continue to be, excessive to the point that the “Affordable Care Act” forces insurers to rebate grossly excessive profits to insureds.  While good for their shareholders, health insurers have failed like almost every other insurer to remember the purpose of insurance, to spread risk and to collect a reasonable fee for administering the resource pool.  

Another tactic of health insurers is their breach of duty to employer funded health plans.  Many employer health plans are self-insuring since ERISA provides a tax benefit for companies who self-insure.  Because most companies do not have the expertise to administer their health plan’s claim processing system, they retain a third-party administrator to run the plan. Typically these third party administrators are health insurance companies.  Amazingly, when it is not the insurer’s money on the line, many third-party administrators become overwhelmingly generous on paying claims, even those clearly not covered under the plan.  This sloppy administration leads to the self-insuring employer’s costs to rise, and in turn, the employer to charge their employees more to participate in the plan.

 

Prescription Drug Coverage

Misbranding Generic Drugs as Brand Name – Those with health insurance that covers prescription drugs know that there is often a significant difference in price between proprietary and generic drugs under their plan.  Most prescription plans have a nominal co-pay for generic drugs, whereas for the proprietary/brand drug there is a larger co-pay and possibly coinsurance. Several insurers and pharmaceutical benefit management companies have conspired to mislabel generic drugs as proprietary in order to increase the contribution of the insured, thus saving the insurer money. Tamoxifen (citrate) is one example of a generic drug being mislabeled as the brand/proprietary, Nolvadex.

Cutting Prescription Drug Benefits – The prescription drug crisis that lead to a $400 billion taxpayer subsidized drug benefit was precipitated by insurers colluding to drop prescription coverage for supplemental medicare policies.  The claim was that the insurers had to drop the prescription drug benefit because it they were “losing” money.  In another shining example of why you cannot trust government to regulate the private sector, these supplemental insurers were all allowed to drop prescription drug coverage from their policies.  The insurance companies knew that politicians would be quick to fill the void by offering a government program.  With seniors complaining in masses, the politicians responded to this manufactured crisis by creating a drug benefit.

Silent PPOs

A Preferred Provider Organization (“PPO”) is a network of doctors and hospitals who have negotiated discounts with a PPO management company (often an insurance company). Patients enrolled in the PPO can choose treatment from this network. Most PPOs are known as “directed PPOs” because the doctor gives the PPO a discount in return for the PPO’s steering its members toward the doctor. The PPO steers members to plan doctors by giving plan patients a list of participating doctors and paying a greater percentage of the bill when the PPO patient visits a PPO doctor. It should be noted that there are a small number of “non-directed PPOs.” In these few instances, the consideration for the doctor’s discounts is set forth in the contract and may include prompt payment, cash advances, or other services. However, for our purposes, when referring to PPOs throughout the remainder of this article, “directed” is implied to precede PPO. PPOs may also have utilization reviews and other cost containment provisions of HMOs and their derivatives. But for the doctor, PPOs require a discount as consideration for the PPO’s sending patients to the doctor. It is this very basic fact that creates the abuse called the Silent PPO.

Three major types of Silent PPOs exist. The first (and most prevalent at last report) occurs when a patient with an indemnity plan goes to his doctor, pays his full share of the bill, and expects his insurer to pay the rest. When the insurer receives the bill from the doctor, the insurer notices that it has a PPO contract with that doctor. Although this particular patient is not a PPO member, the insurer nonetheless only pays the doctor the discounted PPO rate. The second type of Silent PPO when a PPO patient who received services from a doctor in his PPO, pays his copayment, and the insurance company notices that this doctor is in multiple PPOs that it manages. The insurer then pays the lowest price they have negotiated for that particular service with that doctor, irrespective of the actual contracted rate with that doctor for that patient. The third and most insidious type of silent PPO exists when the insurer does not have a contract with the doctor at all, or has negotiated a higher payment than what the doctor has negotiated with another PPO. In this type of Silent PPO, the insurer pays only the lowest price negotiated with any PPO, using information provided by a third-party discount broker. The discount broker buys or rents lists of each PPO’s doctors and their discounts. The broker then resells the information to other insurers and PPOs for a percentage of the savings realized by the insurer or PPO. As more people are forced into PPOs because of soaring indemnity policy premiums, the latter two types of abusive silent PPOs seem destined to predominate.