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?

Balance Billing Explained

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.

Reference-Based Pricing Alternative

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%.

In the majority of cases, there is no downside. However, around 1% of cases have seen the hospital reject the payment. They will then send a balanced bill to the treatment recipient. 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 correctly, 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.

Real-World Impact

Managing Director 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, Cigna, and told them not to pay for that.

They responded, "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.

Comparing the Models

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.

However, referenced-based pricing, when properly structured, provides legal protection is not available with balanced billing. 

Would you like to lower costs while simultaneously improving benefits to your employees?

Click this link for our group benefits assessment to find out how:

https://www.riskmgmtadvisors.com/group-medical-benefits-assessment