Health Care Customs

Out-of-network costs leave the insured in a hole

Emily Marino was insured when she discovered she had breast cancer, so the bills were the least of her problems. Or so she thought. Though she was covered by Oxford, Marino ended up with some $25,000 in out-of-pocket expenses after undergoing a lumpectomy, mastectomy, and the countless hospitalizations, tests, and appointments that can come with breast cancer. Even now, almost a year and a half after her diagnosis, Marino's follow-up bills are still piling up. Much of this mounting debt can be traced to the sometimes giant discrepancies between what her out-of-network providers at Memorial Sloan-Kettering billed and the mysterious, ever-shifting charges known as "usual and customary rates" (or UCRs in HMO-speak).

These are the prices that Oxford and other insurers use to figure out how to reimburse doctors and hospitals not in their networks. The numbers are crunched by actuaries and based on data from 150 insurance companies, according to Oxford spokesperson Madeline Hardart. Depending on the contract, which is usually chosen by the employer, UCRs come at different levels. Oxford plans may guarantee 70th, 80th, or 90th percentile UCRs, which should mean that, respectively, 70, 80, or 90 percent of doctors charge those rates or less.

Insurers rely on these lengthy lists of prices, organized by procedure and zip code, to protect them from being stuck with the more expensive bills; this way, if a price is out of whack, the company has justification not to pay it. But the numbers can be well below what doctors end up charging— meaning the patient gets stuck with much of the costly bill. The UCR for some blood and urine tests Marino had, for instance, was only $75, though she was billed $257.40 for them. For a radiation therapy field, she was reimbursed only $209.48, though she was billed $340. And for a chemotherapy injection, Oxford paid only $47.83, leaving her with a balance of $275.57.

Marino, an accountant and mother of three, might have been able to cover one or two such discrepancies, but altogether the outstanding costs of her illness were staggering. "I was just looking at these numbers and saying, 'Oh my God,' " says Marino.

Part of her problem was that she was not aware that her policy only paid usual and customary rates for out-of-network costs, even for hospital stays. Marino, fearing for her life, wasn't thinking about such things. When a colleague recommended breast surgeons at Memorial Sloan-Kettering, she simply went there. "At that point," she says, "the bills weren't my major concern."

When Marino did feel well enough to confront the fact that she had huge debts to pay, she also realized that she had no way to question the validity of the seemingly arbitrary figures. How did the company arrive at these unassailable numbers? According to an April 1998 letter from Oxford about Marino's case, their UCRs were calculated by the Health Insurance Association of America (HIAA), the industry trade group that represents mostly for-profit companies (and that ran the famous "Harry and Louise" ad campaign credited with bringing down President Clinton's health care reform effort). "We believe [the HIAA database] fairly reflects the usual, customary and reasonable charges in the area," states the letter.

There was nothing to convince Marino of that fairness, however. Just getting in touch with the association is a near impossible feat. The HIAA sold off its UCR-calculating "property" around the time of Oxford's letter, according to communications director Richard Coorsh. But while Coorsh says the buyer was Ingenix, a company in Reston, Virginia, there was no listing for an Ingenix in Virginia, nor was there one in Salt Lake City, where Coorsh says Ingenix is headquartered. The confusion stems from the fact that Ingenix is but a subsidiary of a larger company, United Health Group, which owns several UCR-setting businesses. But when HMO Watch finally reached that company, Ingenix executives were unwilling to comment for this story.

Calls to the customer service department of Ingenix revealed that, for $10 each, patients can buy the price range for a procedure in a certain area of the country, though, even then, Ingenix won't provide an exact number.

So, while teams of actuaries are no doubt doing something complicated to arrive at the idea that someone in Emily Marino's zip code should be reimbursed exactly $234.62 for a radiation treatment aid (she was charged $522.20), it is virtually impossible to check on what that something is. Not even the state Department of Insurance has information on these shadowy players.

Oxford's Hardart suggests that UCR shortfalls can be avoided by not getting care out of network. The Oxford plan that Marino belongs to allows such care, she says, but because Oxford has the largest network of physicians in the area, "it is seldom necessary to go out of network."

Even so, Marino wouldn't necessarily choose her doctors differently if she had to do it all over again. With her cancerous breast and lymph nodes gone and her hair grown back, she only regrets her bills.

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