A while back, my co-blogger and I published our first investigative post. I thought readers of TMBN might be interested in learning about one of my industry’s “dirty little secrets,” as well.

One attraction of network-driven health plans is that consumers receive “discounts” for services rendered in-network. This is especially important when dealing with High Deductible Health Plans, because of the larger exposure an insured has before the insurance “kicks in.” Using network providers can save a lot of money.

Well, in theory.

You see, the sales training that agents get, and the pretty sales material published by the carriers, and the policies which we deliver, all neglect to mention a salient point: only “covered” services are eligible for network pricing. If you're on an insured plan (as opposed to an ERISA, or “self-funded” one) and you receive non-covered services, even in-network, you pay full freight.

By way of illustration: a young lady is diagnosed with breast cancer. After a mastectomy, she undergoes reconstructive breast surgery. Of course, this would be subject to her deductible and co-insurance (if any). Since she chose an in-network plastic surgeon, she is eligible for a “discount” on the surgery, reducing her net cost.

Same lady goes to the same surgeon for breast-enhancement surgery. She does not expect her insurance to pay for this (as it’s elective, and not medically necessary), but she certainly expects to enjoy the same kind of discount, because the surgeon's “in-network.”

She pays full-freight.

Hunh?

Whoa there, pardner: the doc’s in-network, why wouldn’t she get the discount? And further, why would the insurance company care that she got it, since they’re not on the hook for it?

After all, part of the premium goes to pay the network access fee, so it is arguable that the insured should have full benefit of said network, regardless of whether the insurance pays for it or not. And where, exactly, does it say that she’s not eligible?

We contacted numerous carriers to determine why this is the case, and those that deigned to respond all offered the same reasoning: network pricing is negotiated directly between the MCO (Managed Care Organization) and the provider, and all of these contracts stipulate that said provider is not obligated to honor the discount for “non-covered” services. It’s sort of a “payback” for them, to help mitigate their (perceived) loss at the front-end.

It strikes me as fundamentally wrong and stupid that a carrier would agree to this, since it directly and negatively affects their insured. What’s arguably worse, though, is that none of this is explicitly acknowledged in either the training agents receive, the sales materials carriers disseminate, nor even the policies that are issued.

Out of sight, out of mind, hunh?

Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.”  He blogs every day (or so it seems) at InsureBlog.