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Health insurance is a highly regulated industry. One of its unique aspects includes “Usual and Customary Reimbursement” charges, mandated in the state of Texas. Lee Spangler, Vice President of Government Relations at Blue Cross and Blue Shield of Texas, shares some insight on this law and how it has inadvertently impacted Texans.
Continue the conversation with us and view Unusual Impact of UCR Charges Part 2.
You can also listen to this discussion in podcast form on Apple Podcasts and SoundCloud .
Blue Promise is a podcast and online video blog that aims to address complicated health issues with candid conversations from subject matter experts. New editions are published regularly and are hosted by Dr. Dan McCoy, President of Blue Cross and Blue Shield of Texas, and his co-host, Ross Blackstone, Director of Strategic Influence.
DAN: Health insurance is a highly regulated industry. One of its unique aspects include the usual and customary reimbursement charges mandated in the state of Texas. In this episode of Blue Promise, we'll share some insight on this law and how it is inadvertently impacted Texas. Thanks for joining us for this edition of Blue Promise. I'm Dr. Dan McCoy, I'm the president of Blue Cross and Blue Shield of Texas. Today we're coming to you from the heart of Austin in our offices beside the Texas state capital. I'm here with my co-host Ross Blackstone.
ROSS: Thank you Dr. McCoy and we have Lee Spangler here with us he's Vice President of Government Relations for Blue Cross and Blue Shield of Texas. Thanks for being here Lee.
LEE: Happy to be here. These are my offices.
ROSS: Exactly. Thanks for sharing the space with us. OK. So, during the 2019 Texas legislative session the issue of usual and customary reimbursement came up. What is that all about kind of give us some context there.
LEE: Well interestingly enough it actually arose in a consumer protection viewpoint not so much in terms of what usual and customary is but in essence what patients are billed by providers. Patients are getting surprise bills from physicians after they go to a network facility. They're treated by an out of network physician and they get billed so that the issue of usual and customary hasn't come up at the legislature as a topic it's come up as a result of the actions of the providers and the need to provide them with consumers with protections.
ROSS: Presumably there would be a set of maybe a pricing schedule for certain conditions or services that doctors could follow that would be this would be the typical, the typical costs that you would charge for something that the usual costs or the customary cost ad are you saying that that we don't really have that and that's why there's this.. there's surprise billing.
LEE: Well we've actually had about 15 year’s worth of controversy over this issue. What should carriers pay. What should physicians charge and then how should our members the consumers of Texas the patients of Texas be treated as a result of all of those disputes and disagreements. So, a very very long ago 15 years ago the Department of Insurance instructed anesthesiologists who were practicing in hospitals that they should not bill patients beyond what they receive and payment from an insurance company and that's how this issue actually arose in the state of Texas was the billing behavior of anesthesiologists and the Department of Insurance saying you shouldn't do it. And so, as a result of that you've had legislation introduced in each session since and you've had a number of regulatory interventions by the Department of Insurance to try and resolve the issue of when should patients be billed, or should they be billed at all after the carrier settles the claim.
DAN: But I think the big issue too is if patients were to receive something that's called usual and customary it might not necessarily be very usual and customary to them they're going to see it as a pretty egregious amount in some cases.
LEE: That's right and so you've got another set of bills that are intended to address that. And actually there's one bill in each chamber they’re companions that are intended to go after a price gouging in personal medical emergencies because again it's it might be their usual and customary charge but you're right Dan, it shocks everyone else's conscience.
DAN: Let's get just a little nerdy here on a little bit of insurance law that there are really kind of two types of insurance. There's the vast majority of Texans are on a PPO plan and then there's some Texans who are on an HMO plan but these are treated a little bit different. Right. By this rule can you explain a little bit about the nuances of that?
LEE: Sure. So, on the PPO side of course that is not a closed network. Consumers.. members can receive treatment in and out of network in other words they always have a benefit without regard to who treats them. Right. It might be a different level of benefits but they always have a benefit. And so the issue on the PPO side has always been. Well. Why am I getting this bill after I've paid my coinsurance or deductible...
DAN: Would that be a surprise bill?
LEE: That would be a surprise bill. Where's this other bill coming from, so the physician has received payment from the patient, from our member. They've received payment from us. The physicians receive payment from the hospital for being available… Just for being available not for providing the service. And then the physician on top of those payments then demands more payment directly from the consumer… so..
DAN: Because they're under this cap of usual and customary, right?
LEE: Because, they have a usual customary charge and we're under regulation we're required to fairly settle claims that's based… that's the most basic duty that we have. And so, what physicians think their usual and customary charges is much different from what we think is a fair settlement of the claim.
ROSS: You're referring to something kind of called Billed Charges, right and that's what the providers presume that they can actually bill and then there's something called the Allowed Charge which the insurance company says this is what we think is actually reasonable, right.?
LEE: That's right. And that's what we base our calculations of patient responsibility upon…So..
ROSS: Is that based on clinical evaluation, evidence-based medicine, there's a whole lot that goes into that. This is not just insurers making this arbitrary decision of what should be allowed.
LEE: Absolutely you're correct. And it also goes to the regulations that Dan was talking about previously on the preferred provider benefits side, the PPO side. The regulations talk about the usual and customary charge that are payments that have to be based on the usual and customary charge whereas in the HMO world where there is a different set of regulations that command how we have to behave there. The regulation says it's usual and customary rate but then there's an overriding requirement that we also make sure that our enrollee, our member is held harmless and by that they mean that there's no balance bill. So, you've got these two lines of business; one Open Network, one Closed Network. Open Network, we have to base our payments based on usual customary charge. On the HMO side, ultimately, we might have to pay Bill Charge entirely.
DAN: Okay but let me, can I just kind of dissect that for a minute because that's pretty alarming what you just said on the bill side of it, is there any upper limit on what the bill could be and who regulates what a provider actually builds for a charge?
LEE: There is no upper limit, it’s basically what will the market bear. I mean really it can be said it
DAN: But you just said the market on an HMO product would have to bear 100 percent of it regardless of what they charge.
LEE: And that's what's led to the problem we see in Texas is an incredible increase in the bill charges of providers.
DAN: So that's the consequence.
DAN: There's a disconnect between market reality and actually what I would consider kind of bill charges.
LEE: That's.. that's right. You've had a regulatory intervention that's caused this disconnect.
DAN: So then how do providers determine what they're going to charge for a service if it's just what the market would pay.
LEE: There's really no upper limit and they can set their charge in any way they see fit.
DAN: So is that what's led to surprise billing problems. Because I mean if charges were reasonable to some degree it wouldn't hit the radar screen as much but is that been part of the problem? Charges are just too high charges are too high and they continue to get higher and I think that the reason this issue it's been around like I said for 15 years and it's only become louder and louder the complaints keep coming in. And they're more and more strident and desperate if you will from members because the delta used to be pretty close. What a physician would charge and what a carrier fairly settled that was pretty close. But over time these charges continue to increase and increase and increase and the delta is just such that now. The balance bills that members see are just… off the chart and again that's why you've got bills like the gouging bill, like the unconscionable charge Bill. It's reached that level.
ROSS: Dr. McCoy, I think we've given some of these numbers before on Blue Promise but in Dallas, a knee replacement can cost anywhere from about sixteen thousand dollars to sixty-two thousand dollars. In Houston, a hip replacement could cost anywhere from about eighteen thousand dollars to forty-five thousand dollars. So, there's a pretty big delta there. Lee does it matter if we're talking about In Network versus Out of Network when it comes to usual and customary reimbursement rates?
LEE: Well. That. It really shouldn't matter in terms of the charges that we're seeing. The charges are across the board. So it shouldn't change with the line of business that happens to cover a person. I think what the difference that you're talking about deals with our behavior and what's expected of us as a company in the state of Texas. In Network we offer a better benefit on the PPO sign, a different level of coverage if you will a higher level of coverage in network than out of network on the HMO side it's prepaid health care.
DAN: So I guess the issue the issue really is though the impact of being in network and out of network can have a big impact on a consumer.
LEE: That's right.
DAN: Because if a consumer is out of network and they say are responsible for paying a percentage of the charges but the charges have an unlimited cap then theoretically the member can have an unlimited responsibility even though they think that it should be reasonable usual and customary. In the next segment of Blue Promise we're gonna dive into some of the approaches of addressing usual and customary reimbursement while holding the patient harmless. Thanks for joining us.
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