PriceCheck: Can You Negotiate A Better Rate Than Your Health Insurance Company?
Look closely at a bill from your health care provider, and there's likely a sigh of relief your insurance company negotiated a better rate than the initial charge.
But those negotiations are often secret, and it's hard to compare one insurance company to another.
So how do you know whether they are negotiating the best price?
Several people who participated in Health News Florida's price comparison project said they were frustrated after finding out that rates negotiated by insurance companies were higher than what they could get by bargaining on their own.
Mike Butler is one of them. Butler was hampered by a nagging pain in his hamstring last year and began searching for answers. His primary doctor ordered physical therapy at a South Florida hospital.
After a few visits, Buter got a breakdown of the costs from his insurance company. The overall charge was $777 . But his insurer negotiated it down to $354 per session, and cost Butler $70 out of pocket.
"If my insurance company actually paid $283 for 45 minutes of physical therapy and I would have to pay a further $70...(that) is absolutely insane,” Butler said.
And since he wasn't getting the results he was looking for, Butler decided to ditch his insurance and pay cash to a physical therapist who was not in his network.
The move saved him $20 per session and he got a good diagnosis and a treatment that led to pain relief.
“I feel that this negotiated insurance rate is ludicrous,” Butler said. “The amount of money that they are actually saying that they've negotiated on my behalf is a joke. It just doesn't make sense."
A look at the physical therapy treatment Butler received in Health News Florida's Pricecheck database shows that different insurers have negotiated a wide range of prices -- depending on location and facility. While Butler's insurer's rate was $354 per session, other Floridians who received the same procedure saw rates ranging from about $6 to $162 a session.
Steve Weissman is an attorney in Pembroke Pines. He served as interim president of a Miami-area hospital, and gained insight into the negotiating process. He said insurance companies may have an incentive to negotiate higher rates on behalf of their clients.
“It's in their interests to see health care costs -- that means physicians, laboratories, hospitals and pharmaceuticals -- continue to have price increases,” Weissman said.
He said a provision in the Affordable Care Act contributes to those price increases. It requires insurance companies to spend 80 percent of customer premiums on health care - the "medical-loss ratio". The law states that the remaining 20 percent can be used toward administrative costs and profits.
Weissman said that rule leads to insurers charging higher premiums to increase profits.
“It's the only way by law that they are allowed to increase the premium charges and it’s the only way by law now under the Affordable Care Act they can get an increase in profit,” he said.
U.S. Health and Human Service Secretary Sylvia Burwell disagrees. She said the provision -- meant to prevent excessive corporate bonuses and shareholder dividends -- has slowed the rate of premium increases and helped improve the overall cost of health care.
"So I think there are a number of things that indicate what we have seen is actually influences that have reduced costs in the system,” Burwell said.
She says in the five years since Obamacare passed, premium increases in employer-based plans have slowed and spending on Medicare has been lower than expected.
Still, Weissman argued that a better way to reduce medical costs is to require all providers publish the prices they charge for services.
“Providers can continue to set their own rates, but a different rate for each patient must be prohibited,” Weissman said. “Without legitimate pricing, price competition cannot exist and health care costs are going to continue to skyrocket.”
As for South Florida patient Mike Butler, he said as of now, he doesn't trust his insurance company to negotiate a better rate.
“I have zero confidence,” Butler said. “As far as I'm concerned, my health insurance is strictly catastrophic health insurance."
Until something changes, he'll continue price shopping on his own.