Three weeks ago one of my kids sustained an injury from an accident that led to a trip to an after-hours emergency clinic. Fortunately, the injury wasn’t as bad as it could have been, but whenever these things happen, you can’t help but wonder what the cost will be for the treatment.
We paid a $40 co-payment upon arriving at the clinic, but how much the cost of the treatment would ultimately be—and how much of that would be covered by health insurance—are always open questions. We shouldn’t think about money when we or a member of our families need medical treatment, but between the cost of that treatment and the complexity and uncertainty of health insurance coverage, you just can’t help worrying about it.
The hour long visit to the clinic brought us a medical bill of $767. As medical bills go, that isn’t anything close to a disaster, but it’s still a big chunk of money when you consider that no tests were performed and no surgery was involved.
Yesterday we received the benefit summary from our health insurance company, and the news was shocking—as in shockingly good. Out of the $767 in total charges, the health provider (the clinic) had to eat $617! On the summary, that amount is listed as a “healthcare provider network discount”. The total liability after factoring in the discount is just $150, out of which the health insurance company paid $110. That left us with a net liability of just $40, and we already paid that as the co-payment.
That sounds like we have a great health insurance plan, doesn’t it? Or maybe we have a great healthcare provider network discount!
The healthcare provider network discount
Most health insurance companies have these networks as part of their plans. Since most people pay for most of their healthcare expenses through insurance, health providers—doctors, clinics, hospitals and medical labs—join these networks in order to attract the members of the various health plans to their practices.
As a result of joining the network, the provider is placed on the health insurance company’s list of approved providers. That helps to generate a steady flow of patients for the provider, and most providers participate in several networks. It’s a big part of how they get their business.
But In order to join those healthcare provider networks, heath providers must accept the network discounts. That keeps reimbursement costs down for the health insurance companies, and it’s the price the providers must pay in order to be part of the network.
In the case of our recent bill, the network discount chopped roughly 80% off the total bill. In more typical situations, the discount seems closer to 40-60%, but that’s still a big slice of the bill, and we’ll take it.
The healthcare provider network discount and catastrophic insurance
The network discount is a win-win for the insured—that’s us. Whether the service provided is paid by our health insurance company or not, if the services are provided within the network, the provider is still subject to the network discount.
For example, in our situation, if the charges incurred at the after-hours clinic were not paid by our insurance company—maybe as a deductible—our total liability would still have been limited to $150. That’s the benefit of the network provider discount!
In fact, as you can easily see from our bill, the biggest benefit of our health insurance plan wasn’t the $110 they paid on our behalf, which was only about 15% of the total charge. It was the discount that virtually eliminated 80% of the bill.
This is a compelling reason why catastrophic—or high deductible—health insurance is worth having, even if you have a deductible of $10,000 or more. Many people look at a deductible that’s that high and think that it won’t pay for anything. But think again.
Even if a catastrophic plan won’t pay for anything below $10,000, you’d still have the benefit of the healthcare provider network discount to cut the medical bills substantially. Yes, you’d have to pay those bills out of pocket, but only after the provider network discount cuts the bill down to size.
This is another strong argument in favor of catastrophic health insurance coverage. You’d be covered for heavyweight medical costs like major surgeries and extended hospitalizations, but even the lesser costs incurred within your deductible would be discounted under the healthcare provider network that your health insurance plan provides.
Those two benefits—paying for the big stuff and discounting the cost of the rest—make catastrophic insurance a good bit better than “better than nothing”.
When you get medical bills and health insurance benefit summaries, do you ever notice those network provider discounts?