Weapons of Mass Corruption: Perverse Insurance Incentives

high medical bills close up with stethoscope

Several years ago, a patient named Debra Altman had back surgery that was mostly covered by her husband’s UnitedHealthcare (UHC) insurance policy. A year after surgery, long after the related claims had been processed, the Altman’s received a $169,600 check from UHC.

Almost immediately thereafter, they received a bill from a company called BHLH LLC, for the very same amount.

The Altman’s were obviously not worried about their out-of-pocket costs. They had good insurance and everything appeared to be covered, including the $169,600 bill.

But $169,600 is a great deal of money and they were worried about turning it over to a company they had never heard of.

After some investigating, they learned that the “neuromonitoring service” for which they were being billed, and for which UHC seemed happy to pay, should cost at most $5000 –and that Medicare would pay only $2000.

Why would UnitedHealthcare pay $169,600 for what, by most estimates, should have been $2,000 to $5,000 at most?

Wrapper Networks

In its contracts with employers is a provision generally referred to as a “Wrapper Network,” though it’s not generally called that in the contract and instead is buried in legalese.

Under the Wrapper Network clause in an employer’s contract with an insurance carrier, insurance carriers essentially say, “Look, sometimes your employees go out of network. We try to help them avoid that, and you should too, but it will happen from time to time.”

They go on to say, “But don’t worry, we have this other network outside of what your employees know as ‘in-network.’ So while the charge will be an out-of-network charge, we’ll save you money by tapping into our extended network (The Wrapper) where we get lower rates than the billed charges. When we do that, we keep 1/3 of the savings. That way we all win.”

To the employer, that’s great news. Their large, national insurance carrier is going to protect them from high out-of-network charges.

But they don’t.

In the Altman’s case, the bill from the neuromonitoring firm was likely closer to $500,000. That’s a fictitious number intended to allow the neurologist doing the monitoring and the insurance company to play games with us. That’s why we refer to Wrapper Networks as a “Weapon of Mass Corruption.”

What happens is that after receiving the $500,000 bill, UnitedHealthcare says to the employer, “Through our Wrapper Network, we only pay $169,600.” That’s about a $330,000 savings. UnitedHealthcare keeps a third of that, netting $110,000.

[Note: We are assuming that UHC’s deal with the employer is typical. The precise numbers and percentages may be different in this particular situation. It’s all a secret, so who really knows? But the $169,600 is factual.]

The employer — well, they paid $169,600 plus $110,000 for a total of $279,000 — for $2,000 to $5,000 worth of services. But they never knew it because it’s buried in all of the other numbers associated with their insurance plan.

When this happens to people, it’s extremely difficult to get a copy of an original bill–the Altman’s were never able to.

What Needs to Change

In the end, the Altman’s were told their billing details were between the neurology firm and the insurance carrier, despite the law clearly stating that they are entitled to an itemized bill.

Since they suffered no financial damages (their bill was paid), they had no real legal recourse. It was the Altman’s employer that was out the $279,000 in this case.

Mr. Altman was never able to get his employer to pay any attention to the situation.

And to make matters even worse, the contracts between the insurance carriers and employers prevent the employer from auditing these transactions because they’re outside the “normal process.” That’s another clause found in just about every contract between employers and insurance carriers.

Insurance carriers are working hard to keep this process hidden and opaque. All the data is kept confidential. Why would they make it easy to find or understand when they’re making so much money by keeping patients and employers in the dark?

This is one of the many deep, dark secrets of legalized collusion that goes on in our current healthcare system.

It’s time for things to change and that begins by educating both employees and their employers on the nature of self-insuring and the questions patients should be asking every time they are seeking medical care.