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Let's say I have a choice between two plans, both offered by the same insurance company. Plan A is a high-premium, low-coinsurance, low-deductible plan. Conversely, Plan B is a low-premium, high-coinsurance, high-deductible plan.

For a given service from a given provider, is there a general rule that the insurance allowed benefit will be the same on the two plans (assuming it's a service that's covered under both plans)? By "allowed benefit" I mean the rate that the insurer agrees to pay for that service to that provider: if it's an in-network provider, then it's a negotiated rate between the insurer and the provider, if it's an out-of-network provider then the insurer has some kind of system for calculating it (eg, I've seen "70% of the 80th percentile charge from the FAIR health database"). The most common terminology seems to be "allowed benefit" but some insurance companies use "allowable amount", "approved charge", "maximum allowable", "negotiated rate", "contracted rate", "eligible expense", etc.

I can see that from the insurer's point of view they have much more incentive to set a lower allowed benefit for Plan A (where the insurer is likely paying most of it) compared to Plan B (where I am likely paying most/all of it), but do they actually do that?

Maybe the answer is different for in-network vs out-of-network providers?

EDIT to add: I've been doing a bit more research and I found an article by a David Belk MD where he states:

What this means is that insurance companies have enormous control over the medical industry. They set all rates of reimbursement for all medical services no matter how trivial. These rates vary greatly from policy to policy even for the same service from the same provider.

Follow-up question, if the answer is "the allowed benefit will generally be different for the two plans": how do I go about comparing the plans? Call the insurer and ask "Hypothetically, if I had a MRI done at lab X, and I were on plan A, how much would you pay the lab? And what about if I were on plan B?" And repeat, replacing "MRI" with every other procedure I think I might need, and replacing "lab X" with every provider I might like to use. Would they even give me that information? I hope there's an easier way.

(To be specific, I'm currently comparing some employer-sponsored PPO plans from Empire BCBS of NY, but I'm hoping there's a general answer to my question.)

  • 1
    What do you mean "allowed benefit"? – littleadv Jan 22 '14 at 8:16
  • @littleadv "allowed benefit" depending on the insurer might be called "allowable amount" or "approved charge" or "maximum allowable" etc. It's the amount that the health insurer will pay to a given provider for a given service. Certainly it depends on the service, on the insurer, on the provider (eg, I've had my BCBS pay 10x as much for the same blood tests if done at a hospital lab rather than an independent lab - presumably the hospital lab has a better negotiating position). Without knowing this number, it's impossible to compare plans because the co-ins etc is always a fraction of it. – Lev Bishop Jan 22 '14 at 15:03
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Unless there is a specific procedure that is not uncovered by one of the plans, it just becomes an algebra problem.

For most services the negotiated amount is the same. I have seen differences with dental insurance where certain procedures (braces) are not covered by some plans while they are covered by a more expensive plan. It is possible the the number of visits to a specialist could differ, There also might be differences in ER visit charges. For the majority of procedures in a doctors office the negotiated rate is the same for all plan versions for the same insurance company.

The extra premium reduces the deducible and decreases your co-insurance. You have to determine where the cross over point is, and how likely you are to reach it in a typical year, and what happens if you hit the out-of-pocket maximum. The lower premium plan usually has a higher out of pocket maximum.

The biggest issue can be prescription coverage: A month of medicine before the deductible is met may cost hundreds of dollars, but after meeting the deductible the cost may be tens of dollars. If you or member of your family takes a prescription medicine every day, you may be guaranteed to meet the deductible just by the prescriptions.

Here is one examples for a doctors visit:

Cost of procedure if you visit the doctor without insurance:$200 Negotiated price with the Insurance company: $125

  • Plan A: high-premium, low-coinsurance, low-deductible plan.
  • Plan B: low-premium, high-coinsurance, high-deductible plan.

Early in the year before the deducible has been met:

Both Plan A and Plan B

  • If the doctor is in-network: You pay $125, and the amount remaining before meeting the deductible is reduced by $125.
  • If the doctor is out-of-network: You pay $200, and the amount remaining before meeting the deductible is reduced by $125 because that is what the insurance company believes is reasonable and proper. Note some companies have two deductible accounts (one for in-network, one for out-of-network.)

Middle of the year, after the deductible has been met but before the maximum out of pocket has been met:

Plan A and Plan B:

  • If the doctor is in-network: You pay X% of $125, where X is the coinsurance amount. The Insurance company pays: (1-x%) of $125. The amount remaining before meeting the maximum out-of-pocket is reduced by X% of $125.
  • If the doctor is out-of-network: You pay $75 plus Y% of $125, the Insurance company pays: (1-y%) of $125 and the amount remaining before meeting the maximum out-of-pocket is reduced by Y% of $125 because that is what the insurance company believes is reasonable and proper. Some may also credit you for the extra $75 in the out-of-pocket cost but you will have to check with your insurance documents.

End of the year, after the maximum out of pocket has been met:

Plan A and Plan B:

  • If the doctor is in-network: You pay $0, the Insurance company pays $125.
  • If the doctor is out-of-network: You pay $75 , the Insurance company pays $125.
  • Thanks for the long answer. You clearly explained how to do the calculation once you know the allowed benefit (in your example, $125), but it doesn't really answer my question. Your example gave "Negotiated price with the Insurance company: $125". My question is: is that number, $125, always the same for plans A & B? Or might it be different, eg, $50 for plan A and $125 for plan B? – Lev Bishop Jan 22 '14 at 15:09
  • Regarding prescription coverage, there's a rare bit of transparency there: the insurance usually gives you a list of the prices, or a website lookup, so you can research in advance of buying the plan what you'd likely pay for different drugs. I'm looking for something similar for the medical services. – Lev Bishop Jan 22 '14 at 16:00
  • Some companies do have the same type of tool for the basic procedures. You can always ask the insurance company. Some companies will even look at your previous years usage and give you an estimate for the next year. The goal of going to these high deductible plans is to let the consumer control their costs, the only way that happens is if they provide all the information. – mhoran_psprep Jan 22 '14 at 16:14
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    @LevBishop - R&C will not change for a given company's plans A, B, and C. – JoeTaxpayer Jan 22 '14 at 20:04
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I think what you are asking for is whether the 'reasonable and customary' are the same between the plans offered by the insurance company.

My wife had her appendix out. The hospital bill was $24,000, but the insurance R&C was $12,000.

On our 20% co-pay plan, we paid $2400.

Our current plan, we'd pay $2000, the maximum deductible, and be done for the year.

Either way, the hospital gets $12,000

  • Thanks, Joe. That is indeed what I am asking. Are you saying that the insurance rate (eg $12000 for an appendix removal) from a specific hospital is in general the same between plans from a given insurer? Or just that it would be for your specific 2 plans? How did you find this information, given that your wife didn't have her appendix out a second time, under the new insurance (I hope)? – Lev Bishop Jan 22 '14 at 20:06
  • 1
    To really be sure, you ask the Insurance company. Tell them you're deciding between the two choices, and want to confirm R&C (reasonable and customary reimbursement to hospital) is unrelated to plan chosen. I'm near certain it must be, as the hospital doesn't care, it's a contract with the insurance company not with you. – JoeTaxpayer Jan 22 '14 at 20:23
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I think the best bet may be contacting the lab or medical professional providing the service, and asking them what is your "contracted rate" (what my insurance calls this figure) with such and such insurance. They might be able to tell you. It's an excellent question tho, and I've never gotten an answer on this. You literally have to pick a product with no knowledge of the price. Thanks for the question and all the info here!

-1

Short answer, no, two plans from the same insurer do not have to have the same inclusions and exclusions. As negotiated by two different employers or other group managers, two plans from the same insurer can include or exclude a variety of "non-essential" medical procedures, or cover such expenses at different levels (with or without varying amounts of coinsurance or copay, before or after deductible is met, in-network vs out-of-network, etc). The same employer can also offer different tiers of coverage in which certain specific types of expenses are covered at different rates, over and above the basic changes in deductible, coinsurance and max out-of-pocket.

For example, when I was first hired by my current company, healthcare was offered through BCBS. BCBS, by default, includes coverage for surgical weight loss procedures such as lap-band, gastric sleeve etc. However, my employer got them to exclude that coverage in the specific plans offered to us. While BCBS obviously considered liability for bariatric surgery a good risk (probably compared to the long-term additional liability of covering an obese person), my employer first saw the potential for short- to medium-term premium increases across our relatively small coverage pool to subsidize even one of these expensive procedures, and second, saw the side effects of these procedures, especially while learning to adapt to the smaller stomach size, as having a disproportionate impact on worker productivity. These costs outweighed any change in premiums that BCBS would have calculated for the additional exclusion.

Similarly, my employer offered different tiers of coverage. The basic tier had a high deductible ($5,000 individual, x2 family) and max OOP ($10k individual, x3 family), and specifically stated that prenatal and perinatal maternity care was post-deductible; anything beyond the basic co-paid office visit cost, such as ultrasounds, glucose tests, nuchal fold scans, amnios and other relatively routine but expensive tests counted toward that $5k deductible before the insurer would pay a penny. However, the "gold" tier of coverage, in addition to lower deductibles and max OOPs, made those same maternity-based procedures pre-deductible; there was still a coinsurance amount, but the insurer would pay 80% whether the deductible had been met or not. The tradeoff was a four-fold increase in premiums.

These are just some examples of the differences that can be negotiated between the manager of an insurance group and the insurer. Virtually every clause in the full Statement of Benefits, not all of which is laid out in tabular form in the Benefits Summary, is up for negotiation, and each change can have a complex effect on premium prices.

  • I read this question differently than you. What I read was OP asking if R&C will be the same between plans offered by the same insurer. As in my appendix example. It looks like your at a different level. But I'd ask, if lap band GS has an R&C of $10K for plan A, won't it still be $10K for plan B even if the procedure isn't covered? Or would plan B leave you to pay the hospital full retail? – JoeTaxpayer Jan 23 '14 at 2:15
  • If Plan A covers procedure X and Plan B doesn't, if you're covered by Plan B you pay the full cash price for X. That's pretty standard practice IME; the insurer isn't going to negotiate with its network for better prices on things it isn't paying for itself. – KeithS Jan 24 '14 at 16:58
  • Do you know this for fact, or are you surmising? I don't actually know, but it would seem strange that an item the insurance company has already negotiated for one of their plans is suddenly priced at retail. (BTW, I appreciate your answer and am not the DownVote.) – JoeTaxpayer Jan 24 '14 at 18:49
  • I know this for fact based on my example; my wife and I were interested in bariatric surgery, and I was initially excited at hearing BCBS covered it in general, until I looked at our specific plan and saw it was excluded. The doctor who would have performed the surgery was in-network, so anyone else walking in with a card for a BCBS of Texas plan would have gotten the surgery at the MAA "negotiated" by BCBS, but because our plan specifically excluded it, we got the cash price. It actually turned out less than the MAA but we would have paid 100% of it instead of 20%. – KeithS Jan 24 '14 at 20:38
  • So the 'covered' cost was higher than what you paid with no insurance? I believe you, but this is all a sign of a broken system. – JoeTaxpayer Jan 24 '14 at 20:43

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