Insurance Cuts, Costs: Who's Responsible?

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By Ralph W. Nobbe, CPO

I recently went through the rather painful process of reviewing our company health insurance benefits and obtaining quotes for replacement (cheaper/less expensive) policies. We just got hit with the third double-digit premium increase in the past 18 months. Several interesting things came to light during the process concerning the benefit changes being made by the insurance companies that will adversely impact our patients, clients, employees, and businesses.

All plans available and offered to us as a small group employer in California have an annual cap on the DME and O&P benefit. This cap is most frequently either $2,000 or $5,000 per annum with co-pays ranging from 20-50 percent. Our broker happens to be a good personal friend and has always been able to find us good competitive rates and benefits. He further researched this on my behalf. He found that major insurers--in the states where it is legal to do so--are limiting their DME/PO benefits in this manner. This is most common in the renewals for small group employer benefit packages. This seems to reek of some insurance collusion.

Unpleasant Surprises

At the time of writing this, we are currently in the "open renewal" season. Benefits and plan switches are being made by employees of large group employer policy holders. Since October 31, several established patients have come in who have had their benefits reduced to these same limits on their existing plans. They did not read the fine print prior to reenrollment. Several of these patients have gotten a very rude surprise when they were told they now had a VERY limited benefit--and that they have a significant financial responsibility. Previously many of these same patients had full coverage with a co-pay but no predetermined cap. Any costs over the cap are patients' responsibility, typically at your contracted, discounted rates.

Nationwide Trend

This trend appears to be occurring nationwide. It appears to be in direct response to the high unit cost of P&O devices (microprocessors, energy-storing feet, and vacuum suspension systems come to mind). These services are utilized by a VERY small percentage of the beneficiary populations, but the per-unit cost is very high. The recent trend by several private insurers to specifically exclude high-cost prosthetic systems (microprocessor-controlled knees) seems to run contrary to the idea of catastrophic insurance coverage. If amputation is not a catastrophic event in a person's life, health, and well-being, what is?

California Trends

There are numerous changes/reductions pending in MediCal, our state Medicaid system. In brief, MediCal has eliminated several benefit categories and has reduced reimbursements on the remaining categories by 5 percent, effective January 1, 2004--this despite an already low level of reimbursement. California's governor has proposed an additional 10 percent reduction to all provider categories. The California Orthotic and Prosthetic Association (COPA), in conjunction with other provider groups, has successfully prevented implementation of these cuts--for now. The possibility exists that California will eliminate all O&P benefits from MediCal.

There are several reimbursement areas where our "hard costs" are below the reimbursements. Most notably, MediCal reimburses less than our cost for upper-limb TDs, prosthetic stump socks, and suspension sleeves, to name a few. Can/should an O&P business continue to provide services/devices below hard costs?

Why Is This Happening?

My thoughts are:

1) The insurance industry has acted in a collusive manner to reduce costs of benefits. (Are you listening, AOPA?)

2) Cuts in coverage are targeting a population that has the most difficulty accessing care due to disability. (Are you listening, support groups, Barr Foundation, United Cerebral Palsy (UCP), and others? Seems discriminatory to me.

3) It is in direct response to the high unit costs of O&P. (Pay attention, manufacturers.)

4) This is a direct response to the abuse in DME.

My recommendation is that everyone pay attention and scrutinize the benefits you are being offered in your own health plans and the benefits available to you as a patient, employee, or employer. One has to consider whether or not there is any business value in continuing contracted discounted business agreements with insurance payers.

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Ralph W. Nobbe, CPO, is president of Nobbe Orthopedic Inc., Santa Barbara, California, and a board member of COPA. He also has served as president of Independent Orthotic and Prosthetic Provider Network (IOPPN).