DFS Investigation Exposes Unexpected Medical Costs

Report Finds Overwhelming Need for More Transparency and Better Consumer Protections

The Department of Financial Services (DFS) is investigating unexpected out-of-network medical costs affecting New Yorkers across the state, many of whom cannot afford to pay out-of-pocket expenses. 

In addition, DFS released a report that finds an overwhelming need for increased transparency from insurers and medical service providers, and improved consumer protection measures to ensure that New Yorkers stop receiving unexpected bills.

The investigation was sparked by an overwhelming amount of consumer complaints. DFS found that unexpected out-of-network medical bills are one of the most common complaints received by the agency.

New Yorkers can read the report via the following link: http://www.governor.ny.gov/assets/documents/DFS%20Report.pdf

“The high cost of health insurance and health care are an enormous burden for most New Yorkers,” Governor Cuomo said. 

“Our investigation shows that too many people are being hit with medical bills that are too high when they thought their care was covered by their insurance. We can’t allow that to continue. We must work with the insurance companies and medical service providers to ensure that all New Yorkers fully understand and are aware of the terms of their healthcare contracts.”

Financial Services Superintendent Benjamin M. Lawsky said, “Our report shows that all too often people who try their hardest to stay in network still get stuck with the most unwelcome surprise -- a big out of network bill. We need to reform our system now to protect middle class New Yorkers who can least afford these additional burdensome costs."

"This is a widespread problem that particularly plagues cancer patients. New Yorkers who are dealing with the stress and anxiety of being treated for cancer should not have added burden of thinking about unexpected exorbitant costs that they cannot afford. I applaud Governor Cuomo and Superintendent Lawsky for their leadership on this issue and look forward to working with them on righting these wrongs," added Sherry Tomasky, Advocacy Director of the American Cancer Association.

Elisabeth Benjamin, of Health Care for All New York and Vice President of Health Initiatives at the Community Service Society of New York, stated, "HCFANY is delighted that the Department of Financial Services has conducted this important investigation of surprise out-of-network bills. For far too long, it is the patient who is snared in the inscrutable billing bureaucracy between providers and insurers. The Department’s investigation highlights this problem, and HCFANY stands ready to help come up with a real solution that works for New York’s patients.” 

The Department’s report produced the following findings:

Too many unexpected bills: DFS found many cases where a consumer does everything possible to use an in-network health care provider for non-emergency services, but nonetheless receives a bill from a specialist (often a radiologist, anesthesiologist, or lab) whom the consumer did not know or realize was out-of-network. 

One case involves a child who had open heart surgery. The child’s parents were not told an assistant surgeon would be involved in the procedure and that assistant surgeon was out-of-network. The family was forced to pay $5000 of that doctor’s $6400 bill.

Another case involves a patient who was sent an unexpected $1300 bill for what turned out to be an out-of-network anesthesiologist.

Emergency bills are too high: Too often out-of-network providers who provide emergency services -- a circumstance where consumers cannot be choosy about whether the provider is in network -- take advantage of the situation and charge fees well in excess of what Medicare or insurance would pay in network. 

In cases looked at by DFS investigators, the average emergency out-of-network bill was $7006. That is 14 times what Medicare would pay. The average out-of-network radiology charge was 33 times what Medicare pays. One neurosurgeon charged $159,000 for an emergency procedure for which Medicare pays $8500.

Insurers are paying less of the cost of out-of-network care: The investigation found that insurers are moving to a system that greatly increases how much it costs consumers when they are treated out-of-network. 

To determine what they would pay for out-of-network care, most insurers used to use what is known as the usual and customary rate (UCR), which is supposed to be an average of actual bills for a procedure in that region. But now most are using the Medicare rate, which decreases how much insurers pay by as much as half or more in some cases. 

Insurers make this change hard for consumers to understand, because some are told they are going from 80% of the usual and customary rate to 140% of Medicare, which sounds like an improvement, but is not. 

In one case, a patient was approved for a surgery using the usual and customary rate. The insurer said it would pay $31,978 of the $47,685 cost. Before the surgery could be done, the insurer changed to a Medicare Fee Schedule and the insurer would only pay $4,864.62.

Consumers can't comparison shop. Because health plans are now switching between different coverage rates for out of network doctors, consumers are left in an incredibly difficult position when they select plans. They simple can't compare apples to apples when, for example, one plan offers to cover 80 percent of UCR and another offers to cover 140 percent of the Medicare rate.

Another issue found during the investigation: even when consumers have no choice but to seek care out of network, most consumers must pay extra charges. Only consumers in HMOs are protected when they must go out of network.

Based on the findings of DFS's investigation, DFS proposed the following solutions: 

Increase disclosure from providers: In non-emergency situations, providers should disclose whether or not all services are in-network before such services are provided and how much they will charge, and insurers should disclose how much they will cover.

Increase disclosure from insurers: Insurers should enable consumers to conduct a meaningful "apples to apples" comparison regarding how much of the cost of out-of-network services will be covered when they are choosing a plan, whether the insurer uses UCR or the Medicare rate. 

Prohibit excessive fees: Out-of-network providers should be prohibited from charging excessive fees for emergency services.

Improve network protections: Improve network protections: Network adequacy protections must be improved. Consumers not in HMOs should be given the same network adequacy protections provided to consumers with HMO coverage. 

New Yorkers who have questions/complaints concerning their medical bill should visit www.dfs.ny.gov or go to http://www.dfs.ny.gov/consumer/fileacomplaint.htm.