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New Health Insurance Changes Take Effect | 87 comments (87 topical)

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But it has to do with contracts (5.00 / 1) (#40)
by Democratic Cat on Thu Sep 23, 2010 at 12:24:05 PM EST
Being in-network means that the doc, hospital, etc. has signed a contract with the insurance company to provide services at a discounted rate. The docs, hospitals, etc. who are out-of-network for a specific insurer are those that have not signed these discount contracts with that specific insurer. I was surprised to learn recently that there are substantial areas of the country where even the largest insurers have not signed up all or even any of the providers. If you are an insurance company, it pays to expend resources in an effort to sign up providers in the most densely populated areas. As with so many things, unfortunately, there is less bang for the buck in rural areas, and so essentially whole swaths of them get designated as out-of-network.

The insurance companies drive volume to in-network providers by charging patients different reimbursement rates for in-network and out-of-network thereby encouraging them to stay in-network. By offering a provider higher volumes of patients, an insurance company can get better discounts from the provider. Some providers don't sign up because the insurer's patient volume is not worth it to them for the discounted rates the insurance company is asking for--and due to all the well-known problems associated with getting paid by an insurance company.  

So, whether docs are in or out-of-network depends both on the insurance company's decision of where to focus its resources and how hard to bargain with providers, and the providers' weighing of patient volume versus discounted rates and other hassles.

(Sorry for the extended lecture. I've studied the insurance industry enough to think that it's a pretty interesting industry -- and one that has no business being involved in health care!)

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I was stating a fact (none / 0) (#55)
by waldenpond on Thu Sep 23, 2010 at 01:37:58 PM EST
I'm not sure if you are responding to me. Were you disagreeing? [whether docs are in or out-of-network depends both on the insurance company's decision]  I couldn't quite tell as you were going on about simplistic revenue maximization theories of an individual physician or insurer versus my statement of fact that insurers define entire regions as out of network (and other insurers jump on board.)

A simple example....  A health system of 13 hospitals has a 'contract' with an insurer.  The insurer defines 11 hospitals as in network and 2 rural hospitals as out of network.  The 2 hospitals pay a higher share and the individual employees at those two hospitals pay higher premiums.

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Never seen that situation (none / 0) (#74)
by Democratic Cat on Thu Sep 23, 2010 at 03:52:17 PM EST
I've seen a lot of insurer-provider contracts, but never one that designated some locations of a provider (under the same contract) as in-network and some as out-of-network. The provider has the incentive to demand in-network status if it's going to give the discounted rates to the insurer.

But since your last sentence refers to the premiums paid by a hospital's employees to the insurance company (rather than the discounts negotiated between the insurer and the provider) maybe we are talking about two different things.

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New Health Insurance Changes Take Effect | 87 comments (87 topical)

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