Eliminating out-of-network (OON) benefits in self-funded employee healthcare plans tackles several problems for employers and benefits administrators: healthcare plan costs, dealing with laborious ERISA out-of-network appeals and the potential for fraud.
Employers and their insurance companies negotiate contracts with in-network healthcare providers and facilities such as hospitals and rehabilitation centers. For out-of-network providers and facilities, however, the employer and insurance payer have little control over billing because there is no such agreement. There are no agreed upon costs for procedures. In such cases, OON providers can essentially bill what they want for services. And because OON providers are not pre-vetted through contract negotiations, it opens the door for fraud, waste, and abuse for those looking for an opportunity.
Employers often provide OON benefits for members such as a 60-40 plan. In such cases, employees using an out-of-network provider will likely have a deductible that is twice the normal amount in an 80-20 plan, their co-insurance could be half and out-of-pocket cost is as much as doubled. Mike Adams, the former head of Dean Foods Benefits & HR Systems, is a benefits innovator. He advocates for employers eliminating OON benefits. The move to do just that saved the Dean Foods plan spend significantly – an estimated $900,000*. It also closed the door on predatory providers, primarily mental health and substance abuse/alcohol abuse inpatient facilities who were taking advantage of out-of-network benefits and recruiting employees knowing they would be able to manipulate insurance billings while not being a contracted in-network provider.
Employers are often reluctant to look at limiting any OON benefits, however. Adams said employers would be surprised at how easy it is to do and how undisruptive it is for members and employers. With 18,000 employees at Dean Foods, there were possibly five or six cases of employees being impacted that didn’t involve the predatory mental health & substance abuse/alcohol abuse inpatient facilities. That very low volume was easy to deal with and create workable solutions that the employee and provider were happy with.
“There is the perceived impact and then there is the actual impact. The perception is more onerous than the reality of it. This situation of removing out-of-network benefits initially seems like it is limiting employee choice and freedom but it’s not because 98.5% of claims are in-network anyway.”*
A January 2020 Business Group on Health report said, “eliminating out-of-network (OON) coverage may sound like a disruptive move, but several employers have been successful in steering employees toward higher-quality in-network providers and reducing costs by removing coverage for OON providers.” The report when on to say that employers who had eliminated OON benefits found “the change generated significant savings, contributing to a negative cost trend for the year. Employee noise and disruption were minimal due to an effective communication and transition strategy. In key OON use areas, including physical therapy and substance use disorder treatment, overall patient visits remained steady, but costs decreased, and appropriate care was covered at in-network rates.”1
The problem Adams saw in OON claims was the fraud that existed within those claims: “Predatory facilities are good at saying, ‘We’ll work with your insurance carrier, you don’t worry about being out of network.’ But behind the scenes they are recruiting patients, illegally providing incentives for admissions and creating egregious inpatient bills for extremely low quality and inefficient care. On the employee side, it is an emotional decision for the member. They want to believe the OON provider will work with them on costs.” But these are the situations that end up costing the employer and the employee. By eliminating OON benefits, those who are trying to dupe the system will shy away from those members.
Many doctors and healthcare facilities do not take OON patients or encourage them to go to an in-network provider instead.
“Doctors’ office insurance coordinators are going to do a lot of the work for you; the inherent nature of the process lends itself to fixing itself up front and it not being an issue,” Adams explained. “An unscrupulous provider who knows there is going to be an artificially inflated charge and knows you don’t have a OON benefit is going to be concerned that he or she won’t get paid. The process gets shut down early on and the provider won’t take that member as a patient.”
Plan administrators and insurance companies are armed with exceptions and single-case agreements for situations where an employee may require care out-of-network for a rare or serious illness or in an emergency. In other words, to stop out-of-network benefits in self-funded plans does not mean there are no options for individual situations. But it does mean that employers can reap the benefits of cost savings by eliminating inappropriate out-of-network spending and fraud, waste, and abuse.
“The whole thing … was a huge savings for us,” Adams said of eliminating out-of-network benefits. “I never had a call that an employee had been billed for the difference for an out-of-network provider or got stuck with a big surprise bill. And that is so important because that is a fear.”
The ideal time to make a move to eliminate OON benefits is at the beginning of a new plan year so employees can plan for it during annual enrollment. Planning and employee awareness as well as extra advocacy/concierge services can help ease an employee population into such a change. As for insurance providers, the change is likely neutral and can be a cleaner process for paying claims. It also gives rise to insurance providers classify as secondary that can reduce the cost of OON claims. In the end, it is the employer’s money on the line.
* Based on Dean Foods employee population while Adams was head of Benefits & HR Systems.
1. “Eliminating Out-of-Network Benefits: Best Practices,” Business Group on Health, January 9, 2020. https://www.businessgrouphealth.org/en/resources/eliminating-out-of-network-benefits-best-practices