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BALANCED BILLING vs CAPTIVE INSURANCE AND REFERENCE-BASED PRICING

When it comes to medical insurance, you may have heard some negative things about balanced billing. What’s the truth and how does it compare to referenced-based pricing?

Balanced Billing Is A Broken Model

Balanced billing is a strategy where hospitals bill a certain amount, then the carrier negotiates a discount with the hospital. The carrier then pays out a certain amount and the price of it slowly goes up each and every year. 

It is clearly a broken model. 

Balanced Billing
Referenced-based pricing uses a different strategy. 

Instead of the hugely inflated model used in balanced billing, carriers set their pricing at a specific level that is fair. 

The pricing is above the low baseline of what hospitals will accept but nowhere near the egregious kind of amounts it can be. It should come in somewhere in the middle and that’s what the plan will pay. 

It can be incredibly impactful in terms of cost savings – some have seen savings somewhere in the region of 30%. 

Is There A Downside To Referenced Based Pricing?

In the majority of cases, there is no downside. What was have seen in around 1% of cases is that the hospital rejects the payment. They will then send a bill to the recipient of the treatment, i.e. a balanced bill. Unfortunately, these situations even happen with traditional models. 

Did you know that medical bills are the number one cause of bankruptcy in the US? This is because of balanced billing.

When a reference-based pricing model is done properly, you have a claim advocate or attorney that negotiates, handles, and protects both the plan and the patient from the balanced bill. 

This means no one is ever left in the lurch which is not the case in the traditional market. 

The Problem With Balanced Billing

Wes Sierk speaks on his experience with the medical system when he had a brain injury. 

He says that your insurance is supposed to cover you if you have an emergency. 

The trouble is that once you’re in the ICU, they have you. 

The bill he got for the first day he spent in hospital was $186,000. 

One of the things he noticed when he was checking it over was that there was an amount of $4,000 for a Physical Therapist on that first day. 

He called his insurance provider, Signa, and told them not to pay for that. 

In response they said well, they might have had to come and move your legs or something similar. 

He was in a coma. How does a physical therapist work on a patient in a coma? 

One good thing about balanced billing was that this was negotiated down to around $85k. 

Risk Distribution

With balanced billing, the insurer will say “this service is covered, but as an outside person came in to administer you with “X”, that wasn’t covered so you now owe $1,400.” 

As another example, he had to go for an MRI scan that was approved and carried out at the facility he had been told to go to. The insurance would still only cover $400 of it. The extra $2,200 then needed to be paid. 

It’s not hard to see that things quickly start adding up. 

Ultimately, when it comes to medical billing, there can be issues with either a balanced billing or referenced-based pricing system.

With referenced-based pricing, however, when property structured there is legal protection that you don’t get with balanced billing. 

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