The Usual and Customary Controversy--Who's Cheating Whom?

New York AG Andrew Cuomo recently announced an investigation into how insurers pay for out-of-network services. He charged that consumers were being "defrauded" by insurers who were "manipulating reimbursement rates."

Cuomo used the example of a charge for an office visit of $200 that the insurer cut back to $77--the insurer claimed the lower amount was reasonable and the maximum that should be paid.

In a recent editorial, the New York Times asked, "Have health insurers been systematically cheating patients and doctors of fair reimbursement for medical services?"

That is a good question.

So, I conducted an in depth investigation of my own. I pulled our family's recent insurance company EOBs.

I found one charge for an office visit where the physician billed our insurer $190--which our Blue Cross PPO cut back to the in-network allowable charge of $84.17. Under the PPO contract, the doc accepted the $84.17 as payment in full.

Then there was the Quest Diagnostics charge for my annual physical lab test of $67.71 that the PPO cut back to $11.55--which the provider accepted as payment in full. There was another lab test, as part of my annual physical, that had a "list price" of $223 that was cut back to $24.50 because of the network discount--which the lab also accepted as payment in full.

In fact, all of my annual physical lab tests were billed for a total of $477.81--which my PPO reduced to $62.70--a savings of $415.11. The lab accepted the $62.70 as payment in full.

So what does Cuomo do, he de facto calls a $200 physician charge as reasonable and the insurer's claim that the physician charge really ought to be $77 as "fraudulent."

I will suggest that the New York AG, and his crack investigative staff, as well as the New York Times editorial board, pull their own insurance company explanation of benefit (EOB) forms and get a dose of reality!