Author Archives: bcobuzzi

The Insurances Companies have Created Two Classes of Insureds

I received an interesting email from one of my physicians in Manhattan NY.  I am copying and pasting it here.  I am making some modifications to protect the innocent.

I would like to first make a few comments before pasting the email.  It appears from this letter as well as an article that I read in the Washington Post a few weeks ago, the unwillingness of the insurance companies to learn how to work in a more competitive market, to become more efficient, more innovative because they have to be more price competitive is creating two classes of insureds.

The only way that insurance companies know how to deal with reduced premiums is to reduce what they pay to the facilities and providers of healthcare.  They don’t understand that another option is to find ways to reduce their costs of operations as others have been doing for the past 15 years as the insurance companies have continued to put downward pressure on the fees paid to doctors and the only cost doctors have had is to find ways to operate more efficiently and make less money.  They had no one to pass their reduced fees on to.

But insurance companies operate differently.  If their premiums are reduced, this time because of the increased competition that the Exchanges create for them, they in turn pass those reductions on to the facilities and the providers of healthcare.  But the reductions get too low at some point when the facilities and providers will finally say, no more, we refuse to accept your fee schedules.

And that has happened, as the Washington Post article has indicated, there are hospitals that are not included in exchange policies and now, I am finding out there are doctors groups selecting to not accept the reduced fee schedules being pushed on them by the insurance companies due to the Exchange competition forcing premium reductions.  These physician groups have said no and will not participate with these insurance plans because the fees offered by these insurance plans are too low.

So, the physicians and the hospitals participate with an insurance if it is not an exchange policy, but they do not participate with their exchange policies.  As a result, we have two classes of insured patients.  Those who have been lucky to have had insurance all along, usually through large employers, have the better class of insurance which more of the hospitals and doctors participate because the fee schedules, although not great, are more palatable.  Those who only have the choice to purchase their insurance via the Exchanges have a lower class of insurance and the same insurance companies are not considered participating plans with many of the same doctors and hospitals.  And these doctors and hospitals are the best and the brightest available to the population.  So, those purchasing in the exchanges are relegated to the second tier of hospitals and physicians, those who don’t have a choice but to accept the unacceptable low fees that these Exchange offer because they fear that they will not have enough patients to fill their schedules.

Here is the email I received from my specialist in Manhattan, part of the NYU Physician Group Independent Physician Association (Contracting arm for the physicians associated for the physicians):

Dear Patient

If you will be signing up for insurance through the New York State Health Insurance Exchange, there are some things you need to know.  I am currently in network with BCBS, Aetna, Cigna, United and Oxford.  For anyone with insurance that is a standard insurance plan, either obtained through your employer OR through the standard insurance market there will be NO CHANGE.  I WILL REMAIN IN NETWORK FOR THESE PLANS.  

BUT, if you purchase insurance through the NYS Exchange, the plans offered will be using a different network of providers.  That is, BCBS, Aetna, Cigna, and other insurers will have plans available but NYU Physicians have chosen to not accept to contract with those networks.  

On the other hand, I will be in network for Oxford and United insurances that are purchased on the NYS Exchange. 

If you will be insured under the NYS Exchange I will not be in network for any plans other than United/Oxford.

I will continue to accept commercial insurances as I have been and will remain in network for commercial non NYS Exchange plans in Oxford, United, Cigna, Aetna and BCBS.

Please feel free to contact me or my practice manager (Mary Jones, if you have any questions.

I think that we are going to still see things shaking out in the insurance company / provider of services relationships over the next year of so.  Part of the Affordable Care Act Law includes that the insurance companies have to sufficient quality care for the insureds.  If the remaining hospitals and physicians after fee schedule negotiations result in insufficient to support the number of patients needing care, there should be a basis for complaints to be filed against the insurance companies.  However, no one is sure what the process is for enforcing this provision at this time.

Insurance companies have had excessive operational waste because they have had no incentive to become efficient given the way their industry has worked.  All costs have been able to be passed on to their customers in the form of increased premiums (dollar inflow) as well as in reductions in fees to the providers of healthcare services (dollars outflow).

According to an article in the National Journal: ( )

Health insurance premiums rose by an average of 50 percent nationwide from 2003 to 2010, the Commonwealth Fund found in a report  (  released on November 17, 2011. And costs went up even more for people covered at work—employee contributions to annual premiums increased by 63 percent, the report found.

The average family health insurance plan cost an average of $13,871 a year in 2010, the report found. Annual premiums rose in every state over the seven years from 33 percent in Idaho to 70 percent in Mississippi.

Even though Insurance Companies do not show large profit margins on their income statements, they still pay their executives large salaries and give excessive bonuses.  This is accepted modus opererandi in the industry. One of the reasons the profit margins are reported at only 3-5% is that insurance companies use transfer pricing, moving services and assets between divisions to hide profit, reducing the bottom line. ( ) This is for two reasons.  They do not want to appear to be the wicked insurance company, taking advantage of the customer, so low profit margins support the image they want to portray.  The second reason is the best reason.  Lower profits lower income tax liabilities.

One of the reasons that insurance companies do not want to add to their efficiency is because of the income they get from float, being able to hold onto premium dollars while not paying it out for services provided.  According to Uwe E. Reinhardt, an economics professor at Princeton: ( )

About 1 percent of WellPoint’s total revenue came from a category simply called “other revenue.” For the most part this probably comes from interest earned on the “float.” An insurer’s “float” is the money temporarily on hand when premium payments come in earlier than the outlays for insurance claims covered by these premiums.

In times when interest rates are high, an insurer’s float can be a major source of revenue, which is why sometimes health insurers stand accused of deliberately dragging out claims processing, strictly to increase the size of the float at any point in time.

WellPoint Inc. was formed from the merger of two companies that were once known as Blue Cross and Blue Shield of Indiana (Now Anthem BCBS) and Blue Cross of California, both originally not-for-profit plans. It is now one of the nation’s largest commercial health insurers.

Those of us who have policies from the Exchanges can no longer just call a healthcare provider (physician, imaging facility, hospital, lab, etc) and ask if they participate with our insurance company.  We need to qualify our question and ask if they participate with our insurance company with plans that come from the ACA Exchanges.  We need to check this out before making an appointment to make sure that we are going to a provider that participates with our Exchange plan.

Our Exchange plan should also provide us with a director of providers, probably via an internet website.  So, if you are having problems finding a participating provider, check with your plan and find out where they have a list of participating providers. They may even have a help line to assist you in finding a participating provider.  Use the resources made available to you by your insurance company.

If your insurance company does not provide a sufficient breadth of options available to you in a reasonable geographical radius of quality providers, you should complain to the insurance company.  If they do not assist you in getting more providers available, ask for permission to see an out of network provider who will be paid their full fees.  If this is agreed to, because of a lack of available providers in the specialty you require in your geographical area, make sure you get this agreement in writing from your insurance company.  NEVER TRUST ANYTHING TOLD TO YOU OVER THE PHONE BY YOUR INSURER UNLESS YOU GET IT IN WRITING. 

If your insurer refuses to make any accommodations for you, contact HHS with a written complaint, outlining your requirements, needs, and what the offerings are from your insurance company and explain why those offerings are inadequate.  Explain in the letter to HHS that you requested accommodations to see an out of network physician and that the insurance refused your request.  Explain you understood that ACA requires that insurance companies are required to provide sufficient quality providers for participants in the ACA Exchanges and your insurer is not providing sufficient quality providers for the following reasons…1), 2), 3), etc.

Do not anticipate that this will deny you access to providers.  There should be providers who participate and accept the fee schedules and contract terms of the Exchange plans.  Just understand that the insurance companies have created a two tiered system for insured in the short term because they are not quite sure how to deal the stresses of the increased price competition in the Exchanges.

About the Authors: By: Barbara J. Cobuzzi, MBA, CPC, CPC-H, CPC-P, CPC-I, CENTC, CPCO and Lynne Smith, MSSW. Barbara is an industrial engineer with an MBA. She worked in the pharmaceutical industry for many years before moving into the healthcare industry where she had a company where she provided top quality coding, compliance and revenue cycle management services for physicians. She has since moved into full time consulting for physicians. Barbara is a nationally known expert known for her education, consulting and expert witness services. Lynne has dedicated her career to helping others. She has experience as a social worker in a rural county, an administrator in a large hospital network and as a College Professor. She uses the skills she developed over the years as an advocate in a variety of areas including her most recent venture serving as a Healthcare Advocate. Together, Lynne and Barbara own the ACA Healthcare Advocates consulting firm and are available to individuals, families and businesses to help them meet the requirements of the Affordable Care Act in order to meet the specific needs of the client while optimizing the fiscal considerations.  Please direct your questions and/or inquiries to


© Barbara J. Cobuzzi, MBA, CPC, CPC-H, CPC-P, CPC-I, CENTC, CPCO and Lynne Smith, MSSW, 2013. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Barbara J. Cobuzzi, MBA, CPC, CPC-H, CPC-P, CPC-I, CENTC, CPCO and Lynne Smith, MSSW,  and The Place for Facts: Not Rhetoric with appropriate and specific direction to the original content. Permission for more comprehensive use may be obtained by contacting the authors at