by Third Way

Article by Nicholas Newsad, M.H.S.A.

I learned something new shortly after I published my last book in 2010 that I have looked forward to sharing. I was filing a complaint with the state insurance commissioner against a healthcare provider that was trying to collect an insurance company underpayment from a patient. In this state it was illegal for medical providers to go after patients for account balances remaining merely because the medical provider was unsuccessful in collecting the amount owed from an insurance company. This law was enforced by the state division of insurance. Recall that insurance companies are state-licensed business and that they are in fact regulated by the state governments. If you ever have an insurance-related issue, there is nearly always a process for filing a complaint with your state?s insurance commissioner.

What I learned in this situation was that because the patient?s health insurance benefits were ?fully funded? by his employer, it was not a true insurance plan and the state division of insurance had no jurisdiction to enforce the law as it applied to traditional health insurance. The idea that employees in self-insured health plans are not protected by the laws that govern traditional health insurance is a new concept to me and I find it fascinating.

?Self-insured? or ?fully funded? health plans are terms for an employer that has enough money to pay for their employees? healthcare costs directly and cut-out any extra money that an insurance company might make on their employees. What is special about self-insured companies is that they still usually hire a health insurance company to administer the health plan. When I say administer, I mean that the insurance company merely credential physicians, processes claims, and takes care of all the paperwork. In this arrangement, the health insurance company is merely a ?third party administrator? that processes employees? benefits. The insurance company is not ?at risk? and will not lose money if patients spend too much on the healthcare. The financial burden falls directly on the self-insured employer.

So employees at Company A and Company B could both think they have United Healthcare for their health insurance, but perhaps Company B is in fact fully funded by the employer which has hired United Healthcare as a third-party administrator. In this case, Company B is paying United a fixed fee to administer the plan. Company B is paying the actual costs of the employees? healthcare bills and United does not get to keep any extra money from premiums if employees are not using their benefits.

Fully-funded, self-insured health plans are very common at big corporations. What is unique about them is that the coverage determinations are ultimately going to be made by your employer, not the insurance company. I have not tried this, but I think it is more likely that you may be able to successfully appeal a medical issue to someone you will see at work every day than a complete stranger you will never meet. I would not expect them to change their policies for individuals, but I think it is realistic that with enough feedback from employees, an employer may be inclined to modify the plan based on employee preferences from year to year.

The downside to self-insurance that I pointed out at the beginning of this section is that the insurance laws regulated by your state?s insurance commission may have no jurisdiction if your employer is paying the bills. This scares me a little because it implies that companies that have enough money can do whatever they want. This is all the more reason to become acquainted with your benefit plan if your employer is self-insured. The contractual aspect of the benefit plan as a written agreement could be all you have to reason with in this situation.

About the Author

Nicholas Newsad, M.H.S.A., has been quoted and interviewed in the Today Show, L.A. Times, NY Daily News, and other newspapers, magazines, and radio shows as the author of Medical Bill Help and The Medical Bill Survival Guide.