How much do I owe for out-of-network care?

March 30, 2012 in health care costs, Health Insurance, Hospital Bills, Insurance Bills, Medicare, Member Stories

Looking at Medicare- vs. “usual and customary”-based reimbursement

By Robin Gelburd

Many Americans with private health insurance have plans that reimburse for out-of-network care. But consumers often don’t realize the wide variation in reimbursement rates among insurers and the implications for their wallets.

At FAIR Health, the independent not-for-profit corporation dedicated to bringing transparency to healthcare costs and out-of-network reimbursement, we have noticed that differences in formulas can make a big difference in reimbursements.  A number of private health plans are now basing out-of-network reimbursement rates on a percentage of Medicare fees – as opposed to the usual, customary and reasonable (UCR) standards that reflect actual provider charges.

Medicare-based reimbursement formulas, generally 110% to 140% of the fee set by Medicare, often result in reimbursement amounts that are much lower than those calculated under UCR. If their insurer uses a Medicare-based reimbursement method, consumers often will have to pay a larger portion of their medical bills out-of-pocket when they seek out-of-network services.

What’s even more perplexing is how the numbers work out. Contrary to what consumers might expect, a reimbursement that is 140% of a Medicare-based fee (a standard percentage) is often much lower than one that is 70% of a UCR-based fee, since Medicare payments are usually substantially lower than market rates to begin with.

To help consumers understand these two formulas for calculating out-of-network reimbursement, FAIR Health has introduced a new online tool called Medicare Compare. Simply go the FAIR Health Medical Cost Lookup, enter your provider’s location and the medical procedure, and click on “Compare” to see Medicare- and UCR-based reimbursement amounts side by side. We hope consumers will find the tool useful when they are choosing among alternative health plans that reimburse out-of-network care differently. For consumers already in a plan that reimburses out-of-network bills on the basis of Medicare, the tool can help estimate how much they will have to pay out-of-pocket if they choose to go out-of-network.

Be sure to ask your insurer or contact FAIR Health if you have any further questions about Medicare- and UCR-based reimbursement.

Robin Gelburd is president of FAIR Health.

2 responses to How much do I owe for out-of-network care?

  1. Hi Robin – do members have any grounds for appeal if they have a substantially higher out of pocket cost because the insurer reimbursed at the Medicare rate?

    • Insurers determine how their plans will reimburse claims for out-of-network care. While plan members may appeal a denial based on any grounds they think are reasonable, they should keep in mind that an appeal centered on Medicare-based reimbursement may not be successful. It is a good idea for members to understand how their plans set out-of-network reimbursement rates before seeking out-of-network care. This information enables members to better anticipate their healthcare expenses and plan accordingly.

      Members can contact their member services representatives or consult their plan documents to find out how their plans reimburse out-of-network services. However, we do know that some consumers have used FAIR Health estimates for appeals purposes under these circumstances.

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