High deductible health insurance plans now seem to be the norm for employees of large companies (see: High Deductible Health Insurance Plans Becoming the Norm in Large Companies). A recent article discussed one tricky aspect of such plans that buyers need to be aware of (see: High-Deductible Health Plans Can Cost Patients A Discount). Below is an excerpt from it:
As workers consider their health insurance options this fall, chances are there's one on the open-enrollment menu with a deductible of more than a $1,000. Coverage like that is often linked to a tax-advantaged financial savings account to pay for medical expenses that fall below the hefty deductible. More than two-thirds of employers expect to offer high-deductible plans next year, according to a survey by [a benefits consulting company]. The premiums are typically lower than for traditional insurance, so these high-deductible plans can be appealing, especially for healthy people who don't expect to need much medical care over the course of the year....[Purchasers of such policies] have also been encountering another problem lately with high-deductible plans: Providers not giving consumers insurance discounts they're entitled to. Insurers and hospitals and other providers sign contracts that spell out how much the insurer will pay for various services. The contracted rate is typically significantly lower than the rate the provider would charge someone without insurance for the same service. So, for example, if the bill is for $1,500 and the contracted rate is $800, normally an emergency department would write off the difference....But if the consumer is responsible for the bill because it falls within their deductible, the hospital often doesn't make the adjustment and give the consumer the discount....If the insurer were paying the bill, the error would be caught and corrected...but consumers aren't educated enough to know they should receive that discount.
To briefly summarize, the insuree pays the first $1,000 or $2,000 of healthcare costs under the provisions of a high deductible plan. A good question to ask is whether he or she is provided the same discount for initial services that is provided to the insurance company for subsequent services covered by it. The reason that this is important is, first, the discount negotiated by the insurance company or Medicare with the providers in a network can he very large. Secondly, the "retail" cost for even simple procedures can also be very high. The reason for this is that the "retail" charges for services have little relationship to their true cost (see: Why the Prices Charged by Hospital for Inpatient Care Are Irrelevant; How Do Hospitals Get Paid? A Primer; Comparing the Details of Hospital Charges in the State of Oregon). Providers know that they will receive only a faction of the cost billed from the insurance companies so they jack up the retail rates to ensure that what they actually receive is sufficient to cover their cost plus some profit.
Here is only one real-life example of how this works. A friend visited his dermatologist for an annual checkup that took no more than 20 minutes. It could have been done in half the time but residents and medical students were involved. As part of the visit, a couple of minor skin lesions were frozen with liquid CO2. The amount charged for the short visit was $439.00. The amount that Medicare paid the provider for the claim was $136.26 which is 31% of the amount billed. The charge for a normal yearly physical including routine lab tests could be as much as $700-$1,000, wiping out the insurance deductible with one swipe. I provided details of a similar encounter (i.e., routine colonoscopy) previously with a retail charge of $7,535.27 for the procedure (see: A Short Narrative about the "Cost" of a Routine Colonoscopy; Two Doctors for a Colonoscopy; Maximizing the Bill for Medical Services).