Other articles in Summer 2009
A Modest Proposal: Insurance Companies, Not Providers, Should Bill and Collect Deductibles and Coinsurance
Cynthia M. Roehr, CPA
Surgeries are never fun, but they are necessary. Recently my family member received excellent surgical care at our community’s surgery center. This encounter yielded ten separate provider bills. Each bill came to my home through the postal service in a separate envelope. The insurance company also mailed me “explanations of benefits” for each encounter. Thus just the postage for these mailings was nearly $10.00, and we know cost of each mailing was much more than just the postage amount. I then spent $4.40 in stamps to mail my payments to the providers. Three of these bills were for less than $10.00 each. The absurdity of this is that the money for their payment was sitting at the insurance company in my flexible spending account. Why are we wasting all of this money asking multiple care providers to communicate with and collect from the same patient? Our current process needs to change.
This proposal is offered as a challenge to the current standard practices used in the healthcare industry. Currently, patient deductible and coinsurance amounts are assigned to claims as they are adjudicated by the insurance company. The collection of these amounts is then the responsibility of the care provider. I would like to propose that insurance companies hold the responsibility to bill and collect these deductibles and coinsurance amounts. This change would result in tremendous cost savings to healthcare as a whole and improved simplicity for patients. Following are reasons to support this change:<.p>
- Patients would receive one bill from one entity—their insurance company—and would only need to make payment to this single entity.
- Plan benefits are designed and administered by insurance companies. They hold the contracts with the employers and patients. Only the insurance company understands the intricacies of how any claim was adjudicated and thus should be responsible for explaining and administering these benefits to its contract holders.
- Care providers should be allowed to concentrate on being care providers. They should not need to employ financial counselors, and patient account representatives to collect their patient accounts.
- Some patients are underinsured. Under the current system, insurance companies and employers are never made aware of patients that are unable or unwilling to uphold their responsibilities under their insurance contracts. If the insurance company were aware of the non-payment, perhaps a more appropriate plan design could be adopted for the patient.
- Current deductible levels are high enough that multiple care encounters are assigned to each patient’s deductible amount. This results in multiple providers mailing statements to the same patients. Coinsurance is also applied to numerous claims for most patients.
- The processing of every check or credit card payment has a cost associated with it. Because multiple providers are being paid, this duplicative effort results in added costs to healthcare.
- Insurance companies already send patients “explanation of benefit” reports for each adjudicated claim, so this mailing is already occurring. Changing it to a “billing” instead of an informational “mailing” would not add any additional costs to healthcare.
- Insurance companies have excellent data on patient addresses and contact information for the patient. This would allow them to efficiently locate and communicate amounts owed. Currently every provider has to maintain and update their systems for every address change.
- Insurance companies are financial institutions; medical practices are not. Smaller medical practices lack the systems and personnel to efficiently administer and monitor patient payment plans.
- Currently medical care providers are forced to employ “financial counselors” to assist patients in establishing payment arrangements. Thus multiple providers’ counselors work with the same patient and require that patient to complete each entity’s financial request forms. Under this proposal, only one counselor and form would be necessary.
- Many insurance companies own or are affiliated with banks, which will allow them to help patients arrange appropriate credit when necessary to pay for unplanned medical expenses.
- Insurance companies already administer most of the flexible spending, health reimbursement, and many health savings accounts. By having knowledge of and access to these funds, insurance companies can streamline the savings accounts’ release to pay amounts owed according to the plan design.
- Because insurance companies manage the patients’ health care accounts, they know the patient’s ability to pay, which gives them a significant information advantage over providers.
- Insurance companies can accept payments by ACH from patient’s bank accounts. Most care providers do not have access to such payment mechanisms.
- Through their relationships with employers, insurance companies also have the ability to allow for payroll deductions to fulfill unpaid obligations.
- Copayments differ from coinsurance and deductible amounts as these are typically fixed amounts and clearly understood by the patient as being owed at the time of service. This proposal would require that any office copayment amounts be clearly printed on the insurance card. One recommendation to this policy is that any benefit design where copayments are based on a percentage of the billed or allowed amounts should be treated like coinsurance or deductibles and be collected by the insurance company. It is for these cost savings and simplification to the collection process that I assert insurance companies are best positioned to bill and collect deductibles and coinsurance amounts. I believe this simplification would be well accepted by patients and providers. While the insurance industry may have some objections, this proposal, if fully considered, would eliminate much unnecessary duplication and waste. Please review the above proposal as a viable means to help current medical practices eliminate inefficient and unnecessarily costs which do not promote patient care or quality.
If you agree with my assessment and would like to see this change enacted, legislative action will be necessary. The insurance industry isn’t going to just capitulate and make this change. Please assist me by contacting your state and federal legislators to help me convince them of the millions of wasted administrative dollars that would be saved.