One of the hallmarks of in-network-only plans is that the provider prices have been pre-negotiated as a precondition for the doctor or hospital to join the network – and the insurer and employer to benefit from the lower costs – in exchange for the volume the provider receives through the insurance network. Preferred Provider Organization (PPO)-style plans, similar to the earlier indemnity-style plans, provide coverage (albeit at greater cost to the member) for non-negotiated, out-of-network providers. Employees get more choice at greater cost, and doctors receive some reimbursement from the plan and the remainder from the member. Ever since out-of-network PPO plans surpassed in-network Health Maintenance Organization (HMO) plans in popularity, almost 25 years ago, insurers and employers have been looking for creative approaches towards managing this out-of-network spend.

Viewpoints from Adam Okun

Initially, the most effective approach was to reduce what pricing was deemed usual and customary (UCR) for these out-of-network services.

Because there is no contract between the out-of-network doctors and the carriers, a uniform cost must first be declared reasonable by the insurer. This is determined by accessing a database of charges for that service and then applying a percentile cutoff. So if a carrier or employer wanted to reduce out-of-network spend, it can simply say it’ll only consider 70th percentile (instead of 80th or 90th percentile) of all typical charges to be the reasonable level before applying deductibles and coinsurance. This has the effect of reducing the out-of-network amount subject to reimbursement by the plan.

A unique opportunity presented itself a decade ago…

when Ingenix, the database that insurers utilized to determine what pricing is deemed reasonable and customary for these out-of-network services, was shut down by the New York attorney general. Many carriers encouraged, or outright forced, their employer plans to utilize a Medicare-based reimbursement schedule – which was often much lower than the new database that was being established by Syracuse University, called FAIR Health – to determine UCR. Though some clients went along with it, others felt moving to a Medicare-based standard was a step too far and remained on UCR.

Fast forward to 2020 and UnitedHealthcare (UHC) is taking another swing at reducing out-of-network spend.

This time, UHC is borrowing a page from the world of reference-based pricing by partnering with its sister company, Naviguard, to not simply reduce the spend to Medicare levels and walk away, but to provide the member advocacy around negotiating the balance bill levels should the provider deem the reimbursement too low. This clever tactic has been deployed by reference-based pricing companies, such as ELAP Services and Advanced Medical Pricing Services (AMPS), to eliminate provider networks in general. UHC is now introducing it to support Medicare-based reimbursements for out-of-network services.

There is no doubt there is going to be member abrasion and likely litigation.

And I don’t think all employers will take well towards foisting this on their members for out-of-network services – particularly for those groups that have a very rich and paternalistic benefit program. But after continued frustration with high out-of-network prices, perhaps the time has finally arrived for employers to embrace some of the inevitable disruption that will be coming to out-of-network spend.


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EPIC offers these opinions for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this article and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.


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Adam Okun

Northeast Region Employee Benefits Practice Leader – New York, NY