Finally, don’t be afraid to ask your doctor before starting any expensive, extensive  or intrusive treatment whether it is really necessary or worthwhile under a risk/benefit analysis. Many expensive procedures are not only risky but often  do not result in improvement. For example, spine surgery comes with the risk of infections, paralysis, and loss of flexibility. A study in the Annals of Internal Medicine compared the outcomes of patients who underwent lumbar spine surgery with those who only did physical therapy. Two years later the study found no difference in pain or physical function between the two groups. Plus, about a fourth of the patients in the surgery group suffered complications, such as infections or repeat surgery , while only  about ten per cent of the physical therapy group felt  worsening symptoms. Remember when taking advice from  surgeons that they only get paid when they operate. Similarly, if your doctor recommends a brand name drug, ask  if there is a generic drug with the same chemical makeup for a much lower price.

Section 3. How to Reverse an Insurer’s  Denial of Request for treatment

Taking the time and energy to write the necessary appeal of a denial of treatment can be daunting but necessary. If your doctor has recommended that you see an out of network specialist, or have a certain procedure which your insurer still views as experimental, you will have to meticulously document the need and the credentials of the specialists you want to see and the success rate of the procedure your doctor is recommending. Many people are finding success turning to artificial intelligence sources such as  ChatGPT to both research and write these appeals, resulting in impressive multipage documents filled with technical references to medical journals that are often effective in winning appeals.  

Bear in mind that the success rate on appeal is over  50% so the odds are in your favor  if you do appeal . Send your appeal within the applicable deadline headlined in capital letters URGENT EXPEDITED REQUEST FOR RECONSIDERATION and send it to each of the top twenty executives for the insurance company and, if the insurance is funded by your employer and only administered by an insurance company send it to the CEO , CFO and other top officers at your employer as well, not just to   the employee benefits department. In this way your appeal will receive extra attention because the people who actually read it will at least think the higher ups will be looking . All it takes is for one of these decision makers to react positively and it will be approved,  so the more recipients the better. But no matter how brilliantly worded your appeal, you will lose if you merely send it to the post office box  listed for the employee benefits department. Who  you send the appeal to is no less important than what you say in  it. 

Also and concurrently with your appeal, reach out to your local TV station and newspaper  and social media outlets for publicity on the initial  denial which you are appealing . No company wants public notoriety  but it can work in your favor. NBC TV nightly news for example regularly runs a feature called “Cost of Denial” which spotlights the plight of patients who have been  denied treatment , and the newscast regularly provides follow up  reports on the many subsequent reversals of these denials achieved following such publicity.

Also note that the administrators of  self insured employer group benefits plans   often state erroneously  in denying claims that the government will not allow them to  make exceptions to the rules and regulations governing such plans.  This happened when an employee covered under one such  plan failed to sign up her  baby for coverage within 31 days of birth as required on the company website, despite her phone call in to the plan administrator’s office before that deadline . The mother was  exposed to a  huge maternity hospital bill. But employer self funded plans can always make exceptions to its own rules and regulations such as this 30 day notice deadline . The law just requires that any adjustments to their rules must be  applied fairly to all members in the plan. The law even  allows them to give greater exceptions to people with adverse   health factors  such as the documented  medical complications that this new  mother’s premature baby encountered. The denial was reversed after publicity by Pro Publica investigative journalist Marshall Allan. See his book Never Pay the First Bill as listed in the Section 6  list of resources for further information.      See also Laurie Todd’s book “Win Your Insurance Appeal in Five Days.”

Section 2. How Individuals can  Challenge Exorbitant Medical Bills after treatment

When you get your first bill, realize that it may well be erroneous and/ or you that you may be able to negotiate a lower price. Professional  patient advocates frequently find overbilling errors in as much as 80% of the bills they review for their clients.

The first step you need to take after receipt of an exorbitant bill is to request an itemization of each charge on the bill. You have a legal right to an itemized bill from your provider that includes an explanation of each service provided and the proper billing code used for each charge.  Most bills are submitted simply with one aggregate number and you have to take the initiative of requesting this itemization to ensure that each charge accurately reflects what happened. Use the sample letter in Section 6 to request this itemization.  

You are looking for specific codes that lay out the charges for physician services. Doctors and other types of providers bill with current procedural terminology, or CPT, codes. Hospitals use international classification of diseases , or ICD-10-PCS, codes for the procedures they bill. To understand each code, just Google the code number with the term “medical billing code” and read the descriptions. You can also consult the website www.medlineplus.gov, which is written in layman’s terms and published by the U.S. National Library of Medicine. Merriam Webster’s Medical Dictionary is also helpful.

The itemized invoice  that you should receive will show charges for each billing code that are like a manufacturer’s suggested retail price, or MRSP. Nobody is expected to pay those charges. Insurance companies are supposed to negotiate discounts off these list prices. Uninsured patients might be told to pay them, but they should always negotiate for a better deal.

The next step is to request and review your insurance company’s explanation of benefits (EOB) statement . For each service and its associated CPT code, the EOB should show , in columns from left to right, how much the provider charged, how much (‘allowed amount”) the insurer paid, and how much your coinsurance (‘copay’) amount is that you owe, which is usually a fixed price depending on the location of the  encounter. For example, the patient’s copay may be set at  $20 for a doctor’s office visit, or $50 at an urgent care clinic, or $250 at a hospital emergency room.

The next column lists your deductible, if any, before insurance policy benefits will be applied. Finally the last column , “Your Share”  shows the net amount you are expected to pay.       

Check the EOB to make sure the charges relate to services you actually received and that  they were accurately run through your plan. Call the customer service department whose number should be listed on your insurance card to report any charges for services not received and for help in verifying that charges for services actually rendered were accurately described and paid.  Next, exercise your legal right to obtain a copy of your medical records to see whether the services charged are actually documented in those records. If they are not, the charges cannot stand.

Exaggerating the complexity of services rendered is a common way that doctors and hospitals inflate the cost of care. Medical providers get paid more for each level of care they provide so there is a strong bias among industry vendors to overstate  their services. This is  called upcoding, which is using a ‘higher’ code than appropriate to describe the services actually done, such as using the favorite CPT code 99283  to bill a comprehensive head to toe exam that also involves  taking a detailed medical history of the patient with decision making of moderate complexity. But if that detailed physical examination and interrogation did not happen you need to speak up. Patients can contest the bill to the hospital or other provider and also reach out to the specific doctor involved and ask for an adjustment of the bill.  Then the bill can be resubmitted to the insurer for proper  and lower payment.

Also, you will want to make sure that your insurance  company did not pay, and leave you stuck with an  unpaid balance , for any improper claims.

Insurance companies autopay almost all the bills that come in from doctors and hospitals. They do not typically examine whether the  care was appropriate. They merely check to see if the medical biller accurately completed the claim form, by including the right patient information and diagnosis and procedure codes and other details to explain what happened. This lack of scrutiny allows billing errors  and even fraud to run rampant, because insurance companies often treat the doctors and hospitals as their customers , not their patients. The insurance companies need to keep the clinicians happy so they will stay in the insurer’s network. If medical facilities and providers overcharge the insurers, so be it. The carriers can just raise the premiums the next year to make patients fund whatever money they need.  

The lax claims processing by carriers can lead to other costly mistakes. For example, under the Affordable Care Act all insurance plans are required to cover, at no cost to the patient, certain preventative services for adults, such as vaccines, breast cancer screening , and colorectal screening. The services should be coded as preventative and the insured patient should pay nothing , even if they have not met their annual deductible. However these services often do not get coded as preventative , which means the costs get passed on to the patient. We as healthcare consumers must be vigilant in catching these mistakes ourselves.     

Next, use pricing resources such as Healthcare Bluebook (www.healthcarebluebook.com)  and Fair Health Consumer (www.fairhealthconsumer.org) to check whether the prices being charged for each CPT coded service  are fair. The HealthcareBluebook.com website gathers payment information from employers who fund their own health plans and publishes what it calls a fair price for a service or procedure. The FairHealthConsumer.org   website does something similar but its data shows  what insurers pay. If  you have the itemized statement with the billing codes you can plug the codes into each website to get a price comparison. It also may be possible to get the Medicare  price for your procedure in your area of the country  and use that as your target price in negotiating any cash settlement, although bear in mind that providers are always looking to get something more than that from their non Medicare patients.  Also, check the hospital website to find the cash  price it may post there for your particular procedure. Your goal in gathering all this comparative price data is to establish what the medical industry calls the UCR, which is the usual, customary and reasonable price for the procedure or services in question, and then to use that UCR, which ideally should be something close to the Medicare price ,  to argue that the bill you received is unreasonable.       

If your appeal to the specific doctor involved  to  reduce  his bill does  not work, then take all the research you have compiled and send it with your request for bill reduction to the CEO of the hospital or director /chief managing officer of the physician group or other medical provider you are dealing with.   

You can also ask whether your provider has a financial assistance policy. All nonprofit hospitals are required as a condition of their nonprofit service to demonstrate some level of community service and philanthropy, while most for profit hospitals advertise that they do as well. Such financial aid   could result in a sliding scale discount based on your income. Many people qualify, and discounts can range from 20 %to 90 % .  For example, a family of five making $100,000 could qualify for up to a 90% discount at some hospitals, depending on the size of the bills compared with the aggregate family  income. Thus even if you make good money you may be eligible. A prompt payment discount may also be feasible if you are able to pay a negotiated reduced bill as a lump sum payment.   If you are covered by your employer’s self funded plan, in which an insurance company’s role is limited to being only the plan administrator, your  employer’s human resources department may be able to help you in negotiating the bill down to an amount you can afford, assuming that any such payment would be coming out of your pocket as part of your deductible.   

Many  appeals are successful  by  these methods. However  if you are still unable to get  reconsideration and reduction of  egregious charges for services not rendered, you can consider telling the doctor involved that you are considering filing a complaint against his or her medical license with your state’s medical licensing board if the charges are not corrected.

You can also consider reaching out to other patients who have challenged excessive medical bills. Do a search on Facebook for groups dedicated to fighting back against the high cost of health care. Often anyone can join and post a question or offer a solution as to how to handle a bogus or excessive bill. People can find encouragement and support in resources on Facebook  such as the Patient Safety Action Network Community .   

Should You Hire a Professional Patient Advocate?

Additionally consider hiring a professional patient advocate. They do charge a fee , but you might need the tenacity and experience they bring to the necessary negotiation  , especially if the amount involved is thousands of dollars.  You can check out the  National Association of Healthcare Advocacy consultants at www.nahac.com or go to find an advocacy   directory  online at https://umbrahealthadvocacy.com).  It is important to interview the advocate to understand the person’s credentials,  references, prior experience and especially their fees to determine whether it is worthwhile to proceed with them or whether you should mount the challenge on your own.   

Should You Sue in Small Claims or District Court for Debt Relief?

You can also consider suing in small claims court  or the relevant district court as such  action  does not require an attorney. The clerk of courts for civil actions can advise you in which court to file your complaint depending on the amount involved and even show you how to fill out a complaint form.  Once you have done your homework and understand the extent to which your medical bills are either bogus or overstated, you can provide that documentation when you file your legal complaint against whoever is billing you.   You can only sue for the amount that you determine that you are being overcharged, plus recovery of any court costs that you must pay to file your complaint.  As explained elsewhere on this website , the fact that you may have signed a form combining authorization for treatment  and consent to pay all bills, a  form that your provider may have insisted upon before providing treatment,  can be contested in court as a contract signed under duress . This is called  a contract of adhesion because the provider has all the leverage over a sick person in need of treatment. Courts will not enforce such one sided contracts provided you demonstrate ,as will be explained below, your timely written dispute of exorbitant bills upon your receipt of same from your provider ‘ s bill collector. See the section below concerning how to deal with bill collectors, as your interaction with them will necessarily precede any court action and your actions in that  stage of your dispute will set a foundation for any subsequent legal action, whether it is initiated by you or whether you are in court defending against any action to garnish your wages or attach any liens to your real estate.  

Section 2. How to Deal with Debt Collectors

If you are facing medical debt collection, do not ignore it.  Your hospital or other  provider may be chasing you for the money, or  they may have assigned or sold your debt, often at a steep discount off face value, even pennies on the dollar, to a professional debt collector if you have not paid your bill within three to six months after initial presentation. Old debt like this  is  not worth much so in a way your leverage improves once the professional debt collector starts calling. They have likely given up on getting everything that is billed to you, so you have  fresh opportunities to negotiate to  pay much less than the full tab as your dispute moves into this new phase. If your debt has been sold to a third party collector who is now pursuing you for payment, realize that there is no longer any use appealing to your  medical provider for a discount or other relief.  Find out who actually owns your debt once third party collectors begin contacting you. A debt buyer who paid only two to three cents on the dollar to purchase your hospital debt would  be happy to settle for a small fraction of what you are deemed to owe , say five to ten cents  on the dollar in this hypothetical ,as he would  still make a profit.  Reaching agreement on that steeply discounted price  should be your goal in negotiating with the professional debt collector. You might be able to get an even better deal if you agree to pay in a lump sum rather than an installment plan.    

Several states notably Massachusetts now prohibit the reporting of medical debt by credit rating agencies, so check with your state attorney general’s office to learn whether you have that protection. Debt collectors  however will often  threaten to  ruin your credit rating by   reporting your alleged delinquency to the credit rating agencies even if such a ban exists in your state. The debt collection industry has been guilty of so much abuse and deception that it has been reined in by the federal law known as the Fair Debt Collections Act. The act allows you to dispute a debt , but you must do so in writing within 30 days of being contacted by the debt collector. If you fail to do so within that deadline, you are legally deemed to waive any right to dispute the debt. Therefore  you should not ignore those collection calls and letters. Be sure to send your letter disputing the debt to the debt collector by certified mail return receipt requested so that you have proof of its delivery within the 30 day deadline.  

The Fair Debt Collection Act  also requires the debt collector to provide the debtor with verification of the debt. That is something every patient should demand. It may be impossible for the debt collector who bought your debt from your hospital or other medical provider to produce this information, because many of the debts they pursue are so old , and /or may have been bought and sold so many times ,that they simply cannot produce it. It will be labor and time intensive in any event for the debt collector to track down the documentation  you are demanding from the doctors and hospitals , who have a general reputation for  disorganized  record keeping.   In such cases  the debt collector may simply throw up his hands and walk away. Even if he persists, you now have  leverage in negotiating a nuisance value settlement  once your pursuing collector  realizes that he lacks the debt verification required for any legal enforcement action against you . Lacking such ability to win a case  in the court system, he cannot garnish your wages nor lien your house, provided of course that you respond defensively  and timely by filing an answer in court  if he does attempt to  make a formal complaint for such action there.

 A sample debt  dispute letter ,which also includes a demand for debt verification,  is included in Section 6 of this website,  You can tailor it to the facts of your situation. Again, make sure to send this  letter to your debt collector at his address of record as shown on  his written notice of demand  within 30 days of your receipt of the first such demand you receive  from him so you can  preserve your rights to contest the debt further if necessary.   

Negotiating a compromise debt  settlement 

If you do decide ,after all your research into fair pricing as outlined above,  to negotiate  a deal for a discounted payment with the debt collector for an amount that reflects what you believe you owe, beware of committing to any installment pay plan  that you may not be able to  keep. Aim ideally for paying in total only somewhere between 5% to  15% of what is being demanded. If you can do pay it in a lump sum, seek an additional discount for sparing your collector the time and energy involved in monitoring your compliance with an installment payment plan.  It is important to understand at the outset of any negotiation that if you agree to an installment  payment plan and do not abide by it, missing even one payment, your account goes into default. That means you could be deemed to  owe  not the discounted negotiated amount that you finally agreed to pay in installments, but instead the entire and probably exorbitant amount that the debt collector was originally seeking before you bargained it down to that  lesser sum.    You get only one chance to make a deal, so make sure that it is a deal you can afford . Do not be bullied by collectors who press you to sign on to a larger monthly payment than you can  afford. It is safer to drag out a lot of small payments over time if you are on a tight budget. You can always double up on small monthly payments and accelerate your payment schedule  if you come into more money. Just make sure there is zero interest, or a low enough interest rate that your debt will not balloon over time.

Above all, do not  allow the debt  collector to impose any sense of shame on you as leverage in negotiating a settlement. You are not to blame for getting sick. It is not your fault that our society has allowed profiteers to take over our health industry and harm you with price gouging. It is a moral travesty that we have corporations in our  predatory healthcare  and prescription drug  industry raking in billions of dollars each year ,  and hospital and health insurance executives and  pharmacy benefit managers and insurance brokers raking in  millions in annual compensation , while ordinary Americans get send to collections.   In every other developed country health care is recognized as a  public good to  which everyone should  have access without reference to their ability to pay.

Is Bankruptcy an Option for You?

You could bring up the subject of bankruptcy when you negotiate with a debt collector. For example, if you told a collector that your financial situation is so bad that you are considering bankruptcy, you may gain additional leverage to bring down his demand to an amount you can afford to pay.   

If your financial situation is dire and you cannot afford to pay even the discounted amount that your pricing research and negotiating skills can secure,  bankruptcy may be your best option, especially if your assets are worth less than you owe. Bankruptcy could be a logical step to protect you and your family . The stigma attached to bankruptcy is misplaced as  circumstances happen that can put even the best and most honorable people under the gun. Medical debt is one of the leading causes of bankruptcy in this country.

Filing for bankruptcy can cost as much as $1,000 , but you can avoid much if not all  of the expense by using a nonprofit organization called Upsolve (www.Upsolve.org) . Upsolve is a free bankruptcy filing tool for people who qualify based on their income and circumstances. Its service is like TurboTax for bankruptcy. Upsolve is geared for people who have the simplest Chapter 7 bankruptcy cases and who do not own a home or make above the median income in their state. It also has a listing service to connect anyone who is considering bankruptcy with an experienced attorney for a free consultation. The nonprofit organization’s revenue comes from donations and fees paid by attorneys who participate in the listing service.   

 A bankruptcy can show up on your credit report for as long as seven years, but if you already have  a low credit score the impact of bankruptcy on your credit rating will be minimal compared to its benefits. Bankruptcy clears out all the debt you declare in your filing and gives you a fresh start which will enable you to improve your credit rating over time.

Section 4. How Employers Offering Group Coverage Plans Can Get More for their Money

Human resource directors and company executives often rely on health insurance brokers to guide them through the tangle of costly and confusing benefit options offered by insurance companies. However what many do not realize is how the health insurance industry steers the process through lucrative incentives and commissions.  These enticements do not reward brokers for finding their clients the most cost effective options. They reward brokers instead for maximizing their own profit and that of the insurance companies that most brokers serve.    

Employers with more than 25 employees often  finance their own employee benefits group plan and use brokers to help them select an insurance company to serve as the third party administrator of such a self funded plan. Alternatively, employers who do not wish to self fund can select  a standard full insurance policy to provide coverage for themselves and their employees. Brokers provide a variety of important services to employers  in selecting an insurance carrier, choosing among benefit options, enrolling employees in the selected options, and helping employers with claims and payment issues. Insurance company payments to brokers are legal and have been accepted as a cost of business for generations, but the costs to the employers and to their insureds to whom these costs  are passed on in the form of rising premiums is becoming greater each year.

If you are an employer, you need to find out whether your healthcare insurance advisor is making an income from someone other than you. If he is taking money from the insurance company to which he is steering your business, you may rightly question where his loyalties lie and whether he has sufficient incentive to advocate for your best interests in his dealings with the insurance carriers.  The Consolidated Appropriations Act of 2021 requires brokers to disclose to employers with whom they work any direct or indirect compensation that brokers receive from insurance companies. Unfortunately many of not most brokers will not make such disclosures unless their  clients are sufficiently savvy to ask.

Insurers  typically pay brokers a 3% to  5% commission for each employer they sign up. That could be about $50,000 per year on the premiums of a company with one hundred people, payable for as long as the plan is in place. That’s $50,000 in revenue to a broker for a single client . As the client pays more in premiums, the broker’s commission increases because his commission is baked into the premium.  So it is always better for the broker to have premiums going up.  The setup is akin to a single real estate agent representing both buyer and seller in a home sale.

Commissions can be even higher, up to 40% or 50% of the premium, on supplemental plans that employers can secure to cover employees’ dental and vision costs, cancer care, or long term hospitalization. These commissions come from the insurers, but the cost is built into the premiums that the employer and employees pay for the benefit plan.

But there is more. Layer on top of the broker’s commissions the additional bonuses that brokers can earn from some insurers. These bonuses as well are indirectly included in the overall cost of the health plans.

It is simply not possible for brokers to represent what is best for employers they advise when their paychecks are coming from  insurance carriers and other industry vendors.

As the average cost of employer sponsored health insurance premiums has tripled in the past two decades,  to more than $21,300 per family, a small but growing contingent of brokers are questioning their role in rising costs and have responded to employers’ demands for flat fees paid directly by the employers as brokers’ only source of revenue. The fee may be a similar amount to the commission they could have earned from the insurance companies, but because the conflict of interest is eliminated the brokers are free to consider plans than can be advantageously  tailored to their clients’ specific needs.

A heavy equipment distribution company in Wisconsin switched to one of these  reform minded brokers, David Contorno, and saved big on its health plan while also improving benefits for its employees. Contorno’s company, E Powered Benefits (www.epoweredbenefits.com), is based in North Carolina and Oregon but works with employers all over the country on a fee only basis paid exclusively  by his clients as he no longer  accepts money from the insurance carriers. The employers who hire him pay him a flat fee plus a bonus based on how much savings are achieved by the insurance plans he designs for each of them. His total payments have worked out to approximate what he would have made under his former arrangements with insurance companies for their commissions and bonuses, but he is happy to be relieved of any conflicts of interest. Contorno bought an independent claims administrator in to a thorough review of  the Wisconsin company’ s employee healthcare  claims data with a view to closer cost tracking. Now Contorno realizes that one of the biggest lies being sold to employers is that the only way to reduce healthcare costs is to reduce employee benefits or raise their deductibles. He has found that he can reduce costs while improving benefits. Contorno provided resources to help this company’s  employees find high quality but lower cost providers. The company had the Cigna network at the time, so prices were set by that insurer if employees stayed in the Cigna network. However the employees could often get better prices by going outside the Cigna network. Contorno set them up with a vendor that had negotiated prices with a national network of doctors and surgery facilities and medical imaging centers.             

This Wisconsin company  waived employees’ out of pocket costs if they chose to use these providers who had these lower set prices, saving the employer and the plan thousands or even tens of thousands of dollars depending on the service or procedure.  The company  also contracted with a vendor for drug coverage that does not use the secret rebates and hidden pricing schemes that are common in the PBM industry.  The company’s  yearly health care costs per employee dropped more than 25% to a point lower than they had been over ten years previously.

Contorno now consults for about three dozen employers, ranging in size from 50 employees to thousands. The employers he serves  have evolved beyond the traditional preferred provided organizations , better known as PPO’s. The PPO’s contractually prohibit employers from setting the price, because the insurance carriers are contractually obligated to agree to the discounts or prices they have negotiated with the in network doctors and medical facilities. So now the benefits plans that Contorno manages do not have any networks at all, but instead typically offer rates of say, 140 to 150 per cent of Medicare rates for doctors and hospitals.  The plans generally  run smoothly, but sometimes a hospital or doctor will balance bill a patient for the balance of what his employer’s health plan will not pay. In those cases, the employer’s benefits plan defends the patient, contesting the bill and if necessary enlisting a professional patient advocate or attorney to fight the case. The worst case scenario is agreeing to pay what the medical provider wants , which is the same amount the employer would have been paying under a traditional PPO network. Except in that case, the employer would have been paying those generally higher PPO rates for every claim instead of for the occasional one.       

Contorno is part of a group of forward thinking brokers called the Health Rosetta (www.healthrosetta.org) which certify health insurance consultants  nationwide who agree to follow certain best practices, including eliminating any hidden agreements with insurance companies or other industry vendors that would raise the cost of employee benefits.  To be certified, these benefits advisors must disclose to the employers they serve all their direct and indirect sources of income , including  bonuses, commissions, and consulting fees. There are more than two hundred Rosetta certified brokers nationwide, and many others who follow a similar philosophy consider themselves part of the movement.

The next challenge  is to reform the contracts that employers sign with the insurance companies and vendors that provide the benefits.   These contracts  often limit an employer’s ability to access the data they need to analyze their spending , or restrict an employer’s ability to audit their covered employees’ claims to make sure they are paid properly. The insurance industry’s standard contractual norms have unfortunately  normalized these information suppression  tactics. Coalitions of self funded employers are now emerging to challenge these practices, notably the National Alliance of Healthcare Purchaser Coalitions (www.nationalalliancehealth.org), which represents groups of employers who collectively provide benefits to over 45 million Americans. These employer purchasing coalitions are increasingly turning to  brokers who are paid only by employers and have no side deals with any insurance carriers.

Indeed brokers who have stopped taking insurance company money are uprooting the old practices that used to hold employer paid group benefit plans captive to the interests of the big insurance carriers.  John Harvey is a Rosetta certified consultant based in Phoenix Arizona who used to make his money the old way through insurer paid commissions and bonuses. Now as an employer  fee only consultant he is more motivated to challenge  insurance company schemes to save money for his clients. One of those schemes involves the hidden fees that insurers take when they serve as third party administrators (TPA’s)  of employer funded group healthcare  plans. It goes like this. A self funded health plan is hit with a big out of network bill, and the insurer administering the plan negotiates a lower payment for the medical provider. Then the insurer pays itself a hefty fee based on how much it “saved” the health plan. The fee taken by the third party  administrator, typically one of the big insurance companies, for reducing the bill is about 30% of the amount “saved”. That practice in itself incentivizes exorbitant out of network bills. The bigger the charges that are billed, and the bigger the discount that the TPA insurance company  negotiates off that bill, then the bigger the fee that this TPA gets to pay itself from the employer’s money. Here’s a real life case  example of how this works. A self funded employer health plan  gets  an out of network  bill for $161,000  from an outpatient surgery center.   The TPA negotiates the bill down to $13,000. Then the TPA rewards itself with a $43,000 fee for the price reduction. That means the fee that the TPA takes to reduce the price amounts to three times what the medical provider actually receives for the service.    

Sometimes employers do not learn that their broker did not get them the best deal until they switch to a different consultant. Josh Butler, a Rosetta certified broker in Amarillo Texas took on as a client a company of about 200 employees that had been previously signed up for a plan that had high out of pocket costs. The previous broker had enrolled the company in a supplemental plan that paid the employees $1000 to help pay their uncovered costs while hospitalized. However Butler said the premiums for this coverage cost about $100,000 a year and only nine employees had used it. That would make it much cheaper to pay for the benefit without insurance. The previous broker was probably getting a sizable commission on this supplemental plan , amounting to 40% of the premium  for the first year alone. Insurance companies offer huge commissions to brokers to promote lucrative supplemental plans like dental, vision, and disability. The total commissions on a supplemental cancer care plan offered by one insurer is  57% of the premium. These massive first year commissions lead some unscrupulous brokers to “churn” their supplemental benefits, convincing employers to jump between insurers every year for the same types of benefits. Brokers may also “product dump”, which means pushing employers to sign up employees for multiple types of voluntary supplemental coverage, with hefty commissions attached to each product.

Carl Schuessler is a Rosetta certified broker whose company Mitigate Partners (www.mitigatepartners.com) is based in Atlanta. He helps employers in fully insured plans find out how much profit insurers are making on their premiums. Some states require insurers to provide that information, so when he began consulting  for a resort inn in Florida he obtained the report  for the inn’s recent three years of coverage with UnitedHealthcare. He learned that the insurer had paid out in claims only about 65% of what the inn had paid in premiums.   However in those same years the insurer had increased the inn’s premiums substantially . Schuessler transitioned the inn to a self funded plan . Moving companies from an ‘insurer built” to an “employer built” benefits model is the most important first step because it allows the employer to break free from the overpriced prepackaged plans offered by the insurance carriers. Traditional insurance is a black box loaded with hidden costs.  Often there is no way to see a spending breakdown and difficult to detect the lucrative industry self dealing that makes healthcare insurance carriers some of the most profitable companies in the country. In the past, a organization  would have to have at least 200 employees before they would consider going into a self funded benefits plan, where the employer takes on the responsibility of funding the costs. But now consultants are helping organizations with  50 or even fewer employees transition to a self funded plan with positive results.

Typically even self funded plans have had their benefits administered by one of the large insurance carriers. However more and more reform minded  consultants like Schuessler whose fees are only paid by employers are helping their clients  pay less and get more by not using the big insurance carriers as TPA’s.   The big insurance carriers will not blink when they use a self funded employer’s money to pay one hospital $130,000 for a knee replacement and $40,000 at another for the same procedure. A good plan administrator will instead review all costs , or engage a professional auditor to review them, and refuse to pay the exorbitant ones at face value.

Schuessler views his twin goals as cost reduction and benefits improvement for his clients. With the Florida inn’s new self   funded plan, deductibles for the 200 employees dropped from $2500 for individuals and $4500 for families to zero. Copays on generic drugs and many brand name drugs were also eliminated. The resort contracted for primary care at a local clinic for $15 per visit. For emergency care, the inn’s new self funded plan pays about 150% of what Medicare pays for each such visit. The plan similarly offers noncontracted  providers a fee that is based on a percentage of Medicare. For care than can be planned in advance, the inn has a custom built network of medical providers including doctors and hospitals with agreed upon rates. It is a direct pay relationship that cuts out the bureaucracy of dealing with a large insurance carrier. The plan still allows employees to go anywhere they want, but the employee will pay a higher copay if they do so. That gives employees the incentive to use the providers who are contracted with the health plan. If a noncontracted provider comes after the employee for more money,  the company has patient advocates on call to negotiate the bill down.   

 The inn ‘s chief financial officer can now see all the claims that the plan is paying whereas in the past the insurer who  used to run  the show declined to provide this data.   In the first year after transitioning from a fully insured to a self funded plan with an employer paid administrator, the inn saved 34% , which was almost $2 million. The inn now has to be more directly engaged on overseeing its benefits plan but it used some of the money it saved to hire what it calls a benefits champion to focus on it. The doctors and hospital they use appreciate getting paid directly and quickly by the health plan . Because there are no patient copays , the medical provider is also spared the hassle of chasing down a patient for payment.

Schuessler has packaged benefits into what he calls the Fair Cost Health Plan so he can replicate the Florida inn’s success with other employers. A 315 employee hospital , also in Florida, recently completed its first year on Schuessler’s  plan. It went from spending over $2 million in a traditional paid provider organization  (PPO) model where it could not contract for services on its own  to less than $1 million by direct contracting for services, as the Florida inn did. Meanwhile, employees had no copays and no deductibles under the plan.

When Schuessler put a similar “direct pay” plan in place for a school district in Florida, he made use of a company called Green Imaging (https://greenimaging.net)  which contracts directly with imaging centers nationwide to provide  MRI’s , CT’s  and other scans at a reasonable price. The school district’s health plan waived out of pocket costs to its employees to incentivize them to use the Green Imaging centers. In the first year, the plan saved about $1.5 million on imaging costs alone.

Another example of the successful turnaround of an employer  group coverage plan comes from the state of Montana. The state government of Montana like most large employers self funds its employee healthcare plan. That means it pays the bills and hires an insurance company or other firm to process the claims. Employers as explained elsewhere in this website should have the right to know what they are spending their money on, but the health care system profits by hiding this information from the people who are paying the tab. When the head of Montana’s state plan, Marilyn Bartlett,  asked its administrator, Cigna Insurance, for detailed information about how much the state taxpayers were paying for procedures at each hospital in the network, Cigna declined to provide it, claiming that its contracts and pricing terms with each hospital were secret. A cumbersome querying process set up by Cigna allowed Ms. Barlett to get only  limited information. But the company would only give her aggregate data, with things lumped together, to show what her plan paid each hospital. That’s like telling a family to  reduce its total spending on utilities without providing a breakdown of what is spent on heat, air conditioning, electricity and water.    

Keep in mind that an entire ecosystem of medical industry vendors is making a nice profit on what you spend on healthcare, and in many cases their profits increase when your costs rise. So if you as an employer paying premiums for either a self funded or fully insured plan start asking your insurance company or insurance commission paid broker how you can spend less for the same coverage level , you may  not get enthusiastic cooperation. That’s why Marilyn Bartlett ended the Montana state’s plan  relationship with Cigna. The state plan signed on with a new administrator, Allegiance Benefit Plan Management, which ironically is a Cigna affiliate. She finally could get from the new administrator  at least  an analysis of individual payments for health care services provided to the state employees. The breakdown was stunning. When Bartlett looked for example at a common knee replacement procedure, with no complications and a one overnight hospital stay , she saw that one hospital had charged the plan $25,000, then applied a 7 % insurance negotiated discount, so the plan paid $23,250. A different hospital gave a better discount, 10%, but on a higher sticker price of $115,000. So the plan got billed $103,500, which is more than four times the amount it paid the other hospital for the same operation.

Insurers can  have much different discounts for each procedure  at each hospital. Most people have no idea how big the variation is when it comes to paying for medical services or drugs although now the federal government does require hospitals to disclose these negotiated rates if asked to do so. As the above example demonstrates, the insurance network discounts are meaningless  for comparison purposes if the underlying charges , i.e., the hospital’s sticker price, for services and procedures, is neither  capped nor disclosed.

Bartlett wanted to find out from her new administrator Allegiance why the more expensive hospital in this example would be paid so much, but Allegiance declined to provide further information citing the proprietary nature of the Allegiance/Cigna contract with the hospital. So Bartlett found a work around by going directly to the hospital to get the bills for a detailed cost breakdown on that $115,000 knee replacement procedure.  She discovered that about $70,000  of the total charges was attributed  to the cost of the implant.  Sensing an overcharge Bartlett tracked down the sales representative    for the implant device manufacturer and learned the hospital had paid only $1,500 for the device. The hospital charge for the implant constituted a 2000 % markup.

Employer sponsored health plans are being overcharged all over the country. Researchers from the RAND Corporation compared  what Medicare paid and what employers were paying hospitals. On average employers were found to be  paying on average two to three times more than Medicare with no relationship between cost and quality of service.  The RAND researchers (www.rand.org) published a map that shows the higher and lower cost hospitals in each state. Check the hospitals near you to see where they fall on this scale.

When Bartlett of the Montana state health plan asked her administrator Allegiance to compare what the state plan was paying each hospital in the state with what Medicare paid to each of them, she discovered a variation in her state  hospitals’ pricing ranging from twice to five times the Medicare rate. In other words, if Medicare paid one hospital $10,000 for a particular procedure, the Montana benefits plan would pay anywhere from $20,000 to $50,000 for the same thing, with Montana state taxpayers and state government employees covered under the plan  paying these additional costs .

While hospitals complain that Medicare costs are too low,  cost reports show that hospitals routinely profit on Medicare payments. Also, hospitals could  reduce their spending on unnecessary administrative costs and in the case of private equity owned hospitals, on shareholder dividends.  As explained elsewhere in this website, Medicare continuously adjusts its payments to account for the costs of labor and other expenses in various regions of the country  and is the best standard for fair and reasonable pricing. As the head of her state agency tasked with making policy for her state  employee health plan, Bartlette realized that she like other persons having  similar responsibility for group benefits coverage plans are  fiduciaries under ERISA laws ,   charged with serving the best interest of the employees covered under the plan her state’s health plan. She also   realized that her fiduciary duty required her to find the best benefits for the lowest price. She determined that Montana ‘s state plan must  eliminate the  prevailing crazy quilt of price and discount variations and instead  pay each participating hospital  the same set pricing above the Medicare amount. This  method is  known as reference pricing.  Because the buyer sets the price, it becomes   impossible for hospitals to arbitrarily raise their prices and also protects employer sponsored plans from the secret game of inflated charges and               “discounted “prices which has traditionally empowered the healthcare industry to extract more money than it deserves from health plans.        

Bartlett determined that the new rate for all hospitals would be a little more than twice the Medicare – still a rich deal for the hospitals, but a good starting point for the state health coverage plan to get prices under control .The contracts would also prohibit the hospitals from billing patients for whatever the plan refuses to pay, a practice known as balance billing. It would mean a boost in pay for some lower cost hospitals in that state, but she had to persuade the wealthier hospitals to take less than they had been charging.      

Bartlett as the head of the Montana state plan then went on a public relations campaign as well as a massive advocacy outreach to the state legislature and governor’s office to outmaneuver  the industry lobbyists’ efforts. She  finally secured the  cooperation of the wealthiest hospitals , who realized they could not afford to lose the revenue to be generated by participating in the state plan.  Since implementation of the new arrangement, all hospitals in Montana have had reasonable financial performance , according to the Montana Hospital Association, with none of the catastrophes predicted by the wealthier hospitals.  The plan has  saved so much that it has reduced premiums by $25 million.

The health insurance industry has not appreciated Bartlett’s efforts . America’s Health Insurance Plans (AHIP), which is the  insurance industry’s government   lobbying group, has been circulating misleading propaganda that claims the changes to the Montana state  health plan did not work, but they manipulate the facts. AHIP propaganda claims the plan lost money on high dollar cases, but those losses were mostly due to the rare claims from out  of state providers that were not subject to the Mediare reference pricing model that all in state providers now observe. The counterattacks from insurance industry lobbyists should not be  a surprise. The insurers have not kept costs down and have profited by making employers spend more. Also, reference based pricing eliminates their networks, which are a primary method of controlling the pricing and making money.  If employers set the prices- and thereby see the prices- insurers and hospitals cannot continue profiting from exorbitant payments.

The reforming head of Montana’s state plan, Marilyn Bartlett, is now a senior policy fellow at the National Academy for State Health Policy (https://nashp.org). In her new position Bartlett is showing other state leaders how to protect themselves  from the healthcare industry’s profiteering.

A new tool she has developed helps self funded employers analyze Medicare cost reports so they can see how much hospitals are making from Medicare payments. That knowledge can give employers the confidence to demand prices that are closer to the Medicare benchmark.  Bartlett has testified before Congress and spoken at gatherings across the country. Her work has inspired other states. North Carolina officials have been fighting for reference based pricing in their state’s employee benefits plan.

Bartlett has also been working with employers by advising health plans in Colorado, Indiana, Maine and other states. The  Colorado Business Group on Health   has formed the Colorado Purchasing Alliance (www.pbgh.org) to duplicate Bartlett’s work in Montana by entering into direct contracts with medical providers at Medicare referenced prices. They are cutting out middlemen who negotiate prices in secret, so doctors and hospitals can get a fair price and the employers who fund the health plans can avoid big markups.

About 2% of employers are now in some type of reference based pricing plan and another 10% are actively working on it, according to a survey by one insurance brokerage firm. Many of the employees have been successful, but others have had to defend against doctors or hospitals who  balance bill patients for whatever amount the plan refuses to cover.

One lesson to be learned is that employers need to take the management of their health plans out of the human resource department and put it under the control of the CEO  or CFO(chief financial officer), at least for the initial period when the challenge of reforming  a group healthcare plan , interviewing consultants and brokers, and negotiating direct pay arrangements with medical providers is being tackled. Executives need to have the same diligence about purchasing health care that they apply to the purchase of other goods and services as they push back against a parasitic insurance industry and its  entrenched mode  of operation,  a mode   that needs to change if our  economy is to prosper.

The moral of the story is that health care costs are drastically reduced while benefits improve when the middlemen are cut out of the picture and employers guided by consultants and administrators with no conflict of interest negotiate directly with medical providers for fair and reasonable prices .

 Amazon is now also showing the way with its advertised employee benefits of only $5 per month with a $5 copay, an arrangement that  can only be achieved with direct pay relationships with medical providers. 

More importantly, Amazon now offers to the general public through its One Medical service (https://amazon.com.onemedical)both in person and virtual (telehealth) visits providing on demand care 24/7(formerly known as Pay- per-Visit) which is free to Amazon Prime members and reasonably priced for non Prime members. In person visits at over 200 offices nationwide can range in cost from zero up to $50  with insurance and without insurance   from $250 up to $400. Telehealth/video visits on demand  are advertised with variable prices starting from $29.  Amazon has made direct arrangements with medical facilities in each region of the country, for example with MassGeneralBrigham in the Boston area to  use its doctors and other service providers. Amazon’s Health AI is powered by artificial intelligence and answers questions about health care and  symptoms and connects as needed to health care providers.  The Amazon Pharmacy also provides free delivery of prescription medication.   

If you are a small business, you may wonder how you can negotiate lower prices on your own with medical providers. It can be more easily done if small and medium sized and even larger businesses  in a region band together in healthcare purchasing coalitions to gain more leverage with the aid of professional consultants who follow the Rosetta model of undivided allegiance  to your interests, but you can also do it on your own if you hire a consultant who will be totally dedicated to your interests and your interests alone.  You can find a partial listing of such consultants in Section 6 of  this website.  Talk with other businesses in your area, and with your local chamber of commerce and your local trade associations to start the ball rolling on forming a purchasing coalition  if that route appeals to you, or initiate changes to your group benefits plan on your own with the help of a reform minded consultant . View  the resources listed in the directory in Section 6  for additional help.  

Rooting Out Fraud ,Waste and Abuse in Group Benefits Plans   

Self insured employers who fund their employee group benefits plans could be doing more than most of then are doing now to root out fraud, waste, and abuse. They do not need to actually prove fraud, which can be difficult, but they do need to identify suspicious overpayments that were approved by the company administering their plan. That can easily be done if they can get hold of their claims data, which they have a right to do as they are paying the bills.

For example, the administrators running New Jersey’s School Employees Health Benefits Program could see their plan was being exploited when they analyzed their out of network payments to acupuncturists, chiropractors, and physical therapists. The plan had virtually no limit on those payments, and this critical loophole created a feeding frenzy of clinics trying to lure in as many teachers as possible for treatment. One practice delivered free bagels and orange juice to local schools. Another provided free chair side massages on site at local schools. The acupuncturists , chiropractors and physical therapists donated cash, and supplies to local schools. The leaders administering the health plan, which covered about 158,000 educators and their loved ones, could see that the plan needed to be redesigned. By their estimates the plan overpaid for the services by about $130 million a year. The claims data showed that some acupuncturist and physical therapy sessions were paid on average at over $600 per visit. More than seventy of them earned more than $200,000 annually from the teacher plan alone. The situation  may not have been fraudulent , but it certainly involved  exorbitant payments. The teachers union initially blocked the redesign of the plan, but after a Pro Publica investigative story ripped the cover off this scandal the teachers relented . The plan was revised to limit such payments resulting in significant savings which in turn allowed premiums to go down , which led to a membership increase.     

Employers may want to hire experts who specialize in analyzing claims for overpayment and fraud. This service is provided by a growing number of companies and they can pay for themselves by preventing a healthcare plan’s money from being squandered. One such expert is Dr. Eric Bricker, an internal medicine doctor who also has a healthcare finance background. He has helped thousands of employers manage their benefits. He cofounded the company which is now known as  Alight Solutions , (https://www.alightsolutions.com) which  helps employers and their workers find quality health care at the best value.   

To root out fraud and abuse, Dr. Bricker suggests the following steps.  Self funded employers should  first get hold of their claims data and find out how many claims are paid to each doctor or hospital  and check  how much each provider charged and was paid for each visit. Analyze the high volume providers even if the amount charged or paid was low. Sort the data by the number of claims for each provider to identify  which providers have the highest number of claims. The largest hospital in your area will be high volume, but perhaps there is an obscure doctor or clinic  showing up in your claims data that has submitted hundreds of claims within a calendar year, with a high dollar charge per claim. It is easy for such individual providers to rack up half a million dollars in claims, says Bricker.  Then divide the number of claims by 260 which is the number of work days in a year. Is there a lesser known provider who sees many of your employees per day? If so, that would be suspicious. If the volume for any one provider is impossibly high it may be that the provider is waiving the out of pocket costs from your employees.  That may be a sign the provider wants to make an excessive charge to the health plan and needs to incentivize the patient to allow it to happen. If the suspected abuse is happening with an out of network provider , move to a point of service (POS) plan which does not pay out of network claims. Demand itemized bills that detail the charges for each drug or treatment or procedure that took place.

Employers may want to incentivize their employees to examine their explanation of benefits (EOB) statements  and report erroneous  charges for any service that either did not take place or was overstated. Consider letting employees  share in savings when they discover a charge that should not be made and make them understand the correlation between plan savings and lower premium costs. If you can, move the plan to a third party administrator (TPA)with a lower threshold for  examining individual claims . The major carriers  might have auto adjudication levels of $2000 a claim or higher, meaning they do not examine claims of lesser amounts. But a different  TPA might examine any claim over a much smaller threshold, say $500. The suspicious claims can then  be caught before they are paid and/or the plan is redesigned to prevent reoccurrences.      

The appendix contains information to identify the variety of  resources described in this website which can help self funded employers  design efficient and affordable healthcare plans as well find  disinterested administrators for such plans.

The appendix also contains a list of questions employers can ask their current brokers to uncover any conflicts of interest in their dealings with insurance companies.  Insurers are required to provide such  information in some  states . If your broker declines to answer, is evasive, or discloses substantial ties to industry vendors, then it may be time to look up any of the fee only consultants referenced in this section and in Section 6, with additional resources available through the National Alliance of Healthcare Purchaser Coalitions .