Wednesday, January 22, 2014

The Sad State of the Blue Cross Blue Shield PPO plans: Premera, Amazon and Empire Blue Cross

Oh, the sad state of the Blue Cross Blue Shield PPO plans.

The whole point of such a plan is doctor choice, right?  By agreeing to pay higher coinsurance for out-of-network care, you can go to any doctor you like(*).  In my case, the in-network coinsurance rate is 10%, and the out-of-network is 30%.

(*)In order to make this work, of course, you need to cap the charge from the out-of-network doctor to a reasonable level (known as the allowable amount).  In fact, "reasonable" has been the historical standard -- the doctor's charge must not exceed a "usual, customary and reasonable" (UCR) amount, often implemented as some percentage (say, 80%) of the typical charges for that service in that geographical area.

There have been many arguments over the proper calculation of that UCR amount, and the lawsuits have flown.  New York State sued several insurers over their use of the Ingenix database, which NYS claimed understated the true UCR cost of medical services.  The resulting settlement required the insurers to fund a new database, Fair Health, to properly estimate these costs.

Unfortunately, the result has not been what NYS had hoped.  Many health insurers have stopped using UCR altogether and have moved to a more "objective" standard for the allowable amount -- the Medicare reimbursement rate.  I'm no expert in Medicare, but it's clear to everyone that Medicare pays much, much less than a UCR rate.

Enter my story.  I work at, at this point a very large internet company that would seem to offer reasonable benefits.  Prior to 2013, our medical plan was with Aetna.  In 2013, we switched to Premera.  That change cost me $5,000.

I needed some surgery, and I was warned away from the leading practitioner in Seattle.  In fact, for this particular surgery, most of the people in the online forums I frequented mentioned the quality of a surgeon in New York City.  He was high-volume and had published very encouraging results.  (I don't think I'd call him a boutique surgeon, though, and his rates were entirely within reasonable amounts.)

Amazon's contract with Premera is UCR-based, in general.  Though Premera doesn't operate in New York City, they tout the expansiveness of the Blue Cross Blue Shield doctor network, of which they're a member.  There's a Blue Cross Blue Shield affiliate in New York City, Empire Blue Cross.  I thereby have access (i.e. in-network) to any of the doctors contracted with Empire.  Great.  As I've said, though, my surgeon was out-of-network.

Unfortunately, here's the kicker: even though Premera is Amazon's insurer, and even though my surgeon had no relationship with Empire Blue Cross since he's out-of-network, Amazon's contract with Premera stipulates that the local affiliate, Empire, sets the allowable amount.  And Empire...wait for it... uses the Medicare rate.  $3,500 is allowed for a surgery that has a Fair Health UCR of $19,000.

Too bad I couldn't convince my doctor to come visit a Seattle hospital and operate here.

Here's where I note that Amazon's previous contract with Aetna paid UCR in New York City.  Their allowable would have covered the whole amount.  Note, however, that I believe Aetna does offer some plans using the Medicare rate.

So...whatever.  I negotiated with the surgeon and paid a reduced rate.  When all was said and done, I was out about $5,000 that I wouldn't have otherwise paid.  It was worth it.
I petitioned to Amazon to overrule this decision (we're a self-funded plan), but I was denied.  I suppose I can see the other side to it -- I mean, I did know what it would cost and went ahead anyway, and the UCR in New York City is a lot higher than the UCR in Seattle (again, according to Fair Health).  Amazon suggested that I continue my appeal with Premera (which denied both my level 1 and level 2 appeals), although this was a strange request -- from what I gathered talking to Premera, this was an Amazon-specific clause that allows the host Blue to set the allowable amount.  Premera was just following the contract that Amazon had requested.

In the end, though, I think it's wrong of Premera to allow Amazon to play these games with their PPO offering and also to pretend there's more doctor choice in their plans than there really is.  They write the documentation for Amazon; they stand behind their plan; and they allowed Amazon to weaken the offering in a very subtle, underhanded way.

Interestingly, I filed a complaint about this with the Washington State insurance office, but it turns out that self-funded plans such as Amazon's are not regulated by the state, only by Federal law (ERISA).  Premera rightly requested the WA State Insurance Commissioner to remove the complaint.