Stop blindly signing the Agreement to Pay forms.
These forms, which are pretty universal (in the U.S.), generally state that you are agreeing to pay the bill if, for any reason, the insurance company denies the claim.
On the surface this sounds quite reasonable, but as a direct consequence of the distorted way in which medical billing is done, it is far from reasonable and people need to stop signing these damn things.
Here's a case in point from my personal experience yesterday.
I have a partially torn rotator cuff and I need a physical therapy evaluation (followed by quite a bit of physical therapy). The evaluation typically takes a half hour to an hour (which I know for a fact since I had a similar injury several years ago on the other shoulder). So when I show up for the appointment they want me to sign the form and so I ask them how much the cost will be if insurance denies. As expected, they have no idea -- they want me to sign a blank check saying that I agree to pay whatever amount they choose to BILL the insurance company (as opposed to the amount they expect to actually get PAID by the insurance company). So I refuse to sign unless they give me a number. They finally give me the phone number for their billing estimates department, who tell me that they are going to bill the insurance company $471. Sound a little excessive for an evaluation that will take less than an hour? Yeah, by quite a bit. So I told them that, if insurance refuses to pay, I would agree to pay whatever insurance WOULD have paid. They didn't bite, so I told them to cancel the appointment and I would take my business elsewhere.
I then contacted two other physical therapy places and asked them what their cash-pay price for an evaluation was. The first place was $120 and the second was $75.73. The front desk person at both places were able to immediately give me that price without any need for anyone (them or me) to call anyone else. The first place gave me an appointment for the 7th of October and, since I would like to get seen before then, I went to the second and they were able to get me in on the 1st. When I told them that I was not going to sign their standard Agreement to Pay form but that I would sign one that stipulated that I would agree to pay their cash-pay price if insurance refused to pay, they both agreed (rather reluctantly, but I think the fact that they had already given me their cash-pay price had them boxed into a corner). Later I called up the first place and asked them what their cash pay price was (something I just didn't think to do when I was there earlier) and was told that it was $85.
So the first place was going to bill my insurance for nearly six times (5.8x) the amount they would have accepted in cash and they wanted me to agree to pay that over-inflated amount if anything went wrong. HAD I signed the Agreement to Pay at the first place and HAD the insurance company refused to pay, they WOULD have come after me for the full $471 and I would have had to fight tooth and nail to get it resolved for anywhere near a reasonable amount. I know this because it has happened to me twice.
A number of years ago I had some labs done and the insurance denied the claim saying that the same tests had been done too recently, so the lab came after me for $818. However, the EOB (Explanation of Benefits) that I received denying the claim included the allowed amounts (i.e., the amount that the lab was willing to accept as payment in full from the insurance company per their contract with them) which totaled to $75. It took well over a year to get that resolved and I ended up paying about $150 when the dust settled.
If you look at your EOBs, you will discover that massive overbilling is the norm. My most recent statement for lab work totals $336, of which the allowed amount is $26.63. A review of my many EOBs over the last couple of years shows very few where the bill amount isn't at least 2x the amount actually paid, that most were around 5x, that diagnostic labs and prescriptions are seldom less than 10x, and that emergency room related bills are often in the 20x range.
Remember, the amount that the insurance allows is the amount that these providers agreed to accept IN ADVANCE as part of becoming part of that network. These represent amounts that constitute acceptable payments that cover all expenses plus whatever profit is deemed acceptable for goods and services rendered. No provider is going to join a network in which they lose money on every transaction.
So why the endemic overbilling?
It's actually fairly simple. Each provider has a single billing system and they bill the same amount for a given service no matter who is footing the bill. Not only is this make the system easy, but it provides cover because they can't be accused of charging different people different rates -- the fact that they give different groups different discounts is much more hidden and can be plausibly explained away pretty easily. Most of their billing goes to either Medicare or a private insurer and in either case the amount actually paid is predetermined by the contract and will be the lesser of the contracted rate or the billed amount, so there is no risk associated with overbilling, but if they bill for less than the contracted rate they will, of course, only get the amount billed. So they definitely want to bill at least as much as the highest contracted rate will be.
It's been my experience that the contracted rates paid by insurance companies are within spitting distance (on either side, but not without occasional exceptions) of the cash-pay rate that they will accept from someone without any insurance at all. So why aren't the billed amounts within, at least, say a factor of two of the cash-pay price?
Again, it's pretty simple. If you ask for the moon, you will sometimes get it.
A very common way in which this happens in the medical coverage on your automotive insurance. This does NOT involve negotiated rates and this coverage has a cap that is almost always fairly low (I think $5k is the default in Colorado). Since this coverage is primary and has no deductible in the event of an auto accident, this insurance gets billed first and exhausted quickly. Because there are no negotiated rates in place, the auto insurance has little choice but to pay the full billed amount and, since the caps are relatively low, they know they will hit the cap on most accidents and so they don't really care whether they pay out $5000 on a claim that should have been closer to $500, or pay out $5000 on ten more rational claims -- in fact, the fewer claims it takes to hit the cap, the less paperwork they have to deal with.
Now consider where most bills related to auto accidents originate from, at least initially. The emergency room and diagnostic labs. Is it any surprise that these providers have the highest multipliers on their billed rates? They DO collect those outrageous billed amounts when they are able to get first in line on submitting a claim against an auto insurance policy's medical coverage.
Now, while I have all kinds of ideas for simple changes to how billing is done that would bring the billed amount much more in line with the actual amounts that are paid, we as individuals don't have any direct control over that.
What we DO have at least SOME control over is the ability to make it known to providers that we are aware of the game and that we do NOT have to play by their rules -- we DO have the ability to take our business elsewhere and to make them very much aware of the fact that it is their unrealistic billing practices that are driving it.
Oh -- and about an hour after I made the appointment with the second place, the original place called me back and agreed to let me sign a modified agreement in which I was only held accountable for the cash-pay price. So clearly that ARE sensitive to the issue WHEN it is resulting in a loss of business. I told them that they should have agreed to that when I offered it and that it was too late -- that I would not only take this appointment elsewhere, but that all of my physical therapy appointments would be with another provider, that I had personally blacklisted them and would only do business with them in the future as a last resort, and that I had every intention of telling as many people as I could to avoid them in the future.
These forms, which are pretty universal (in the U.S.), generally state that you are agreeing to pay the bill if, for any reason, the insurance company denies the claim.
On the surface this sounds quite reasonable, but as a direct consequence of the distorted way in which medical billing is done, it is far from reasonable and people need to stop signing these damn things.
Here's a case in point from my personal experience yesterday.
I have a partially torn rotator cuff and I need a physical therapy evaluation (followed by quite a bit of physical therapy). The evaluation typically takes a half hour to an hour (which I know for a fact since I had a similar injury several years ago on the other shoulder). So when I show up for the appointment they want me to sign the form and so I ask them how much the cost will be if insurance denies. As expected, they have no idea -- they want me to sign a blank check saying that I agree to pay whatever amount they choose to BILL the insurance company (as opposed to the amount they expect to actually get PAID by the insurance company). So I refuse to sign unless they give me a number. They finally give me the phone number for their billing estimates department, who tell me that they are going to bill the insurance company $471. Sound a little excessive for an evaluation that will take less than an hour? Yeah, by quite a bit. So I told them that, if insurance refuses to pay, I would agree to pay whatever insurance WOULD have paid. They didn't bite, so I told them to cancel the appointment and I would take my business elsewhere.
I then contacted two other physical therapy places and asked them what their cash-pay price for an evaluation was. The first place was $120 and the second was $75.73. The front desk person at both places were able to immediately give me that price without any need for anyone (them or me) to call anyone else. The first place gave me an appointment for the 7th of October and, since I would like to get seen before then, I went to the second and they were able to get me in on the 1st. When I told them that I was not going to sign their standard Agreement to Pay form but that I would sign one that stipulated that I would agree to pay their cash-pay price if insurance refused to pay, they both agreed (rather reluctantly, but I think the fact that they had already given me their cash-pay price had them boxed into a corner). Later I called up the first place and asked them what their cash pay price was (something I just didn't think to do when I was there earlier) and was told that it was $85.
So the first place was going to bill my insurance for nearly six times (5.8x) the amount they would have accepted in cash and they wanted me to agree to pay that over-inflated amount if anything went wrong. HAD I signed the Agreement to Pay at the first place and HAD the insurance company refused to pay, they WOULD have come after me for the full $471 and I would have had to fight tooth and nail to get it resolved for anywhere near a reasonable amount. I know this because it has happened to me twice.
A number of years ago I had some labs done and the insurance denied the claim saying that the same tests had been done too recently, so the lab came after me for $818. However, the EOB (Explanation of Benefits) that I received denying the claim included the allowed amounts (i.e., the amount that the lab was willing to accept as payment in full from the insurance company per their contract with them) which totaled to $75. It took well over a year to get that resolved and I ended up paying about $150 when the dust settled.
If you look at your EOBs, you will discover that massive overbilling is the norm. My most recent statement for lab work totals $336, of which the allowed amount is $26.63. A review of my many EOBs over the last couple of years shows very few where the bill amount isn't at least 2x the amount actually paid, that most were around 5x, that diagnostic labs and prescriptions are seldom less than 10x, and that emergency room related bills are often in the 20x range.
Remember, the amount that the insurance allows is the amount that these providers agreed to accept IN ADVANCE as part of becoming part of that network. These represent amounts that constitute acceptable payments that cover all expenses plus whatever profit is deemed acceptable for goods and services rendered. No provider is going to join a network in which they lose money on every transaction.
So why the endemic overbilling?
It's actually fairly simple. Each provider has a single billing system and they bill the same amount for a given service no matter who is footing the bill. Not only is this make the system easy, but it provides cover because they can't be accused of charging different people different rates -- the fact that they give different groups different discounts is much more hidden and can be plausibly explained away pretty easily. Most of their billing goes to either Medicare or a private insurer and in either case the amount actually paid is predetermined by the contract and will be the lesser of the contracted rate or the billed amount, so there is no risk associated with overbilling, but if they bill for less than the contracted rate they will, of course, only get the amount billed. So they definitely want to bill at least as much as the highest contracted rate will be.
It's been my experience that the contracted rates paid by insurance companies are within spitting distance (on either side, but not without occasional exceptions) of the cash-pay rate that they will accept from someone without any insurance at all. So why aren't the billed amounts within, at least, say a factor of two of the cash-pay price?
Again, it's pretty simple. If you ask for the moon, you will sometimes get it.
A very common way in which this happens in the medical coverage on your automotive insurance. This does NOT involve negotiated rates and this coverage has a cap that is almost always fairly low (I think $5k is the default in Colorado). Since this coverage is primary and has no deductible in the event of an auto accident, this insurance gets billed first and exhausted quickly. Because there are no negotiated rates in place, the auto insurance has little choice but to pay the full billed amount and, since the caps are relatively low, they know they will hit the cap on most accidents and so they don't really care whether they pay out $5000 on a claim that should have been closer to $500, or pay out $5000 on ten more rational claims -- in fact, the fewer claims it takes to hit the cap, the less paperwork they have to deal with.
Now consider where most bills related to auto accidents originate from, at least initially. The emergency room and diagnostic labs. Is it any surprise that these providers have the highest multipliers on their billed rates? They DO collect those outrageous billed amounts when they are able to get first in line on submitting a claim against an auto insurance policy's medical coverage.
Now, while I have all kinds of ideas for simple changes to how billing is done that would bring the billed amount much more in line with the actual amounts that are paid, we as individuals don't have any direct control over that.
What we DO have at least SOME control over is the ability to make it known to providers that we are aware of the game and that we do NOT have to play by their rules -- we DO have the ability to take our business elsewhere and to make them very much aware of the fact that it is their unrealistic billing practices that are driving it.
Oh -- and about an hour after I made the appointment with the second place, the original place called me back and agreed to let me sign a modified agreement in which I was only held accountable for the cash-pay price. So clearly that ARE sensitive to the issue WHEN it is resulting in a loss of business. I told them that they should have agreed to that when I offered it and that it was too late -- that I would not only take this appointment elsewhere, but that all of my physical therapy appointments would be with another provider, that I had personally blacklisted them and would only do business with them in the future as a last resort, and that I had every intention of telling as many people as I could to avoid them in the future.