Payments to Out-of-Network Health Care Providers

Date Issued: 3/6/2012

The EmblemHealth companies — Group Health Incorporated (GHI), GHI HMO Select, Inc. (GHI HMO), HIP Health Plan of New York (HIP) and HIP Insurance Company of New York (HIPIC) — negotiate rates with doctors, dentists and other health care providers. These providers are called in-network and agree to accept our contracted rates.

Out-of-Network Coverage

Some of the health plans administered or insured by the EmblemHealth companies provide out-of-network health care coverage; some of our plans cover only out-of-network services for treatment of an emergency condition. Members with out-of-network benefits may use doctors and other health care providers who are not in the EmblemHealth network of participating providers. These providers are called out-of-network for elective services.

When our plan members with out-of-network benefits receive covered services from out-of-network providers, the EmblemHealth companies calculate the allowed amount for that service and pay based on the applicable fee schedule as stated in the member’s benefit plan. In some cases, the applicable fee schedule is one published by FAIR Health, Inc., an independent nonprofit organization selected by the Attorney General of the State of New York. This fee schedule is also used when a benefit plan refers to a usual or customary rate or other similar description.

In most cases, the EmblemHealth companies will pay for the amount that is the lower of:

  • the out-of-network provider’s actual charge billed to the member
  • the discounted charges if the out-of-network provider is in another network that has an arrangement with the EmblemHealth companies (wrap network) to give a discount off charges
  • the standard reimbursement rate in the member’s contract (This rate is established by the employer or health plan sponsor for out-of-network reimbursement and defined in the member’s Summary of Benefits or the attachment to the member’s Certificate of Coverage)
  • a published fee schedule, which may be the rates used by Medicare or a percentile of the FAIR Health fee schedule, referred to in the member’s Summary of Benefits or the attachment to the member’s Certificate of Coverage
  • “the reasonable and customary amount,” “the usual, customary and reasonable amount,” “the prevailing rate" or other similar terms that base payment on what other health care providers in a geographic area charge for their services (the U&C Rate)

Usual and Customary Rates (U&C Rate)

The terms “the reasonable and customary amount,” “the usual, customary and reasonable amount” and “the prevailing rate” appear in some health benefit plans to explain the amount paid when out-of-network providers are used. These terms do not apply to plans with payment based only on Medicare, Medicaid or other defined rates.

The U&C Rate for benefit plans administered or insured by the EmblemHealth companies is generally the 80th percentile of the FAIR Health fee schedule, unless the member’s Summary of Benefits or the attachment to the member’s Certificate of Coverage indicates another percentile. A payment calculated at the 80th percentile means that approximately 80 percent of providers who submit claims do so at the same or a lower calculated amount for that service in a particular ZIP code.

The FAIR Health Fee Schedule

If your health care plan requires payment using FAIR Health or similar language, the EmblemHealth companies refer to a fee schedule of provider charges created by FAIR Health, Inc., when deciding the maximum amount we will pay for such benefits.

FAIR Health publishes two databases called the Prevailing Healthcare Charges System (PHCS) database and the Medical Data Research (MDR) database. The information in these databases is updated and published by FAIR Health at scheduled times each year.

When the EmblemHealth companies refer to the provider charge information in these databases to decide payment, the payment made to members or providers will, at times, be less than the amount billed by a provider for a certain service. This affects the out-of-pocket cost that members must pay to their out-of-network provider because the member is responsible for paying the difference between the provider’s charge and the amount paid by the EmblemHealth companies.

To help members estimate their out-of-pocket expenses for out-of-network care, FAIR Health has developed an FH® Consumer Cost Lookup, available for free at www.fairhealthconsumer.org. Members can also find user-friendly educational materials at this site.

How FAIR Health Prepares the Databases

FAIR Health uses real provider charges — or when not enough information is on hand, fees based on an estimate using some charges and relative values. FAIR Health collects fee-for-service charges information from nationwide insurers. Before using the charges to create the databases, FAIR Health ensures that the information is accurate and complete . A team of experts works to identify and eliminate incorrect charges and reconcile negative or missing numbers.

Insurers that give information to FAIR Health get a discount on their license fees for the FAIR Health databases based on how much of their information is accepted and used. The EmblemHealth companies do not now nor have ever given information to FAIR Health.

How FAIR Health Determines Charges

The PHCS and MDR databases organize charges by medical procedure codes, known as CPT codes, and by geographic area (geozips).

# of charges in database What happens
For CPT code/geozip combinations with 9 or more actual charges. The PHCS database reports those charges at the 50th, 60th, 70th, 75th, 80th, 85th, 90th and 95th percentiles. For example, the 80th percentile is the amount equal to or greater than 80 percent of the charges in the database for that CPT code/geozip combination.
For CPT code/geozip combinations with less than 9 actual charges. The PHCS database reports derived charges in the percentile tables. To figure out derived charges, FAIR Health pools billed charges for similar services from the same geographic area. The charge data is standardized using relative values, which are numbers assigned to procedure codes based on a review of the difficulty and cost of the procedures. More complex and more costly procedures get higher relative values, while less complex and less costly procedures get lower relative values. The MDR database consists entirely of derived charges.