When Prisma Health and UnitedHealthcare failed to reach a contract in January, thousands of patients had to switch health providers or pay out-of-network rates for their care.

Experts say that’s just one of the possible consequences when a provider and insurer can’t come to terms.

While these disputes crop up around the country, it’s hard to know just how often because they aren’t tracked and contracts between plans and providers are private, said Lovisa Gustafsson, vice president of The Commonwealth Fund, a private foundation that advocates for a strong health system.    

“But we have seen this periodically in many different states, with different providers and insurers,” she said. “And it seems like it’s coming up more often, although there are no hard and fast statistics on this.”

Dr. Georges Benjamin, executive director of the American Public Health Association, said that based on his experience, these disputes are not uncommon. 

“When I was health officer in Maryland, we dealt with this all the time,” he said. “In at least four of eight years, we had some (provider and insurer) have trouble negotiating a contract.”

One thing is clear, Gustafsson and Benjamin said – patients can get lost in the conflict. 

Prisma, the largest health care system in South Carolina with more than 1.5 million patients across the state, and UnitedHealthcare, with some 58,000 members using Prisma providers, had been negotiating for months when they came to an impasse and the contract expired on Jan. 1. 

UnitedHealthcare, in a statement, said that Prisma had demanded “outlandish price hikes” of nearly 20 percent over a year that would “increase health care costs by approximately $50 million for just our employer-sponsored commercial plans.”

In its statement, Prisma said it had sought a 10-percent increase over two years and that UHC failed to submit a “reasonable proposal … that reimburses us for the cost increases we have and continue to absorb for their health plan members.” It added that it had reached agreements with all other major insurers in the past year.

Prisma, which has 18 hospitals, 305 physician practices, and more than 5,200 clinicians, said that the last two years have been particularly challenging coming off the pandemic. It had to “adjust to an extremely tight labor market, and the steeply rising costs for medical supplies and equipment” that hit double digits. As a result, it said, the system “basically broke even posting a $500,000 loss from operations.”

UHC said Prisma’s proposal would increase costs to more than 15 self-funded employers by more than $300,000, and $800,000 or more to another four, over the next two years. It also said the increases would drive up premiums and out-of-pocket costs for people enrolled in fully insured plans, adding its members have access to other in-network providers in the Greenville and Columbia markets.

Aside from the dispute over rates, UHC and Prisma also said the other had been using hardball negotiating tactics for some issues – such as submission and payment of out-of-network claims and Continuity of Care benefits, which allow for temporary provision of services on an in-network basis for patients with certain serious medical conditions – that put patients in the middle. Each also said that statements made by the other were false.

Nonetheless, both parties said they were still open to further negotiations in February.

Gustafsson said that when the parties go public about these disputes, it not only signals an impasse or a lack of progress, but the hope that public pressure can be brought to bear to reach a deal.  

“The hope is that …it will lead to a good situation for everybody. Sometimes it doesn’t,” she said. “We do see a deadline might pass, but the parties continue to negotiate and come to a resolution, hopefully not too far down the road.”

Most disputes end up getting resolved, Benjamin said.

'Hardball negotiations'

“At some point, it’s just hardball negotiations, and they often will settle. The insurance company needs to have a place to send its patients. They also get pressure from physician providers because it causes disruption in their practices,” he said.

“The more of a monopoly a provider or an insurer has on a community,” he added, “the more likely they are to resolve it because otherwise everybody’s losing money.”

Gustafsson points to consolidation in the health care market as a factor, saying evidence shows it drives up costs because larger systems can demand higher rates based on the volume. 

“Usually when these things come to a head, it’s because the provider wants a higher reimbursement rate,” she said. “You want access to the providers and services patients need, but also if health insurance is too expensive, then no one can afford it. We hear a lot about patients not being able to buy insurance at all, and then not being able to afford care, because of the high deductibles and cost sharing.”

To contain costs, she said, insurers can exclude providers from the network. On the other hand, if they don’t have enough providers in network, patients can’t get care.

“If the balance is out of whack, patients are not able to get care - either not afford it or (find) a doctor,” she said. “So how are you ensuring that patients have access? If you have to drive one hour, that’s not OK. It’s a hard balance to make.”

Meanwhile, Benjamin said that when insurers have the upper hand, they often force deep discounts that hospitals can’t afford.

“Frequently, it’s negotiated to pay a fee below cost,” he said. “And particularly when the insurer has a large percentage of patients in a catchment area, it can make the business unsustainable.”

As a result, he said, hospitals can’t stay in business without raising costs elsewhere and sometimes end up cutting services that aren’t as profitable, such as the ER or clinic for the uninsured. 

“You can’t make this up on volume,” he said. “A widget that costs you more to build than to sell, you can’t sell your way out of that. It’s the same with care if there is more to deliver than you receive in reimbursement.”

Negotiating with other providers

An insurer can negotiate with another provider, but when there are only one or two hospitals in the community, it puts patients at a real disadvantage, he said. And when insurers and providers can’t come to an agreement, “patients end up paying out-of-network, often much higher rates.”

At the end of the day, he said, insurers are in the health care delivery business, “and unless they are willing to put themselves out of business, they need to negotiate a reasonable rate.”

“If you drive that hospital out of business, there is nobody to negotiate with next time,” he said. “We need tighter regulations, particularly when there’s a limited number of providers in the community, so patients don’t get caught in the lurch.”

Gustafsson said there are some patient protections in place. One requires that health plans provide reasonable access to providers in an area, although that doesn’t mean every provider, she said.

And while emergencies must always be covered at the in-network rate, “most care is not emergency care,” she said. 

Gustafsson said there have been a variety of policy proposals to address the issue, including more regulation of mergers.

Still, she said, though prices have been going up for decades, providers in general have been through a lot in recent years between the pandemic, worker burnout, and payment for traveling nurses. 

At the same time, Benjamin said, while the hospitals were crowded with patients during the pandemic, much of the routine care that is a hospital’s bread and butter did not occur, impacting their bottom line.

Hospitals also have to absorb the cost of employing special personnel to handle the coding and billing for many different insurers, Gustafsson said, adding that the prior authorization process insurers require also drives costs higher. 

In addition to the cost, these disputes can disrupt care, for example when a physician is credentialed at one hospital that is not in-network, Benjamin said. 

“If you’re … going to that facility for chronic care, it can totally disrupt where you go and can result in a sudden increase in costs even though you have insurance,” he said.

Moreover, he said, doctors often aren’t taking new patients. 

“This is terribly disruptive for patients,” Benjamin said. “People may see this as a simple negotiation between two businesses. But the human impact is enormous.”

Making a tradeoff 

Gustafsson said it’s a tradeoff. 

“If you want lower costs, you may need to forego some choice of providers,” she said.  

Susan Leiby of Greer says patients are caught in the shuffle.

She and her family have UHC insurance and Prisma providers, she said, noting that she’s grateful they’ve been healthy.

“I’m hoping no one gets sick,” she said. “We’ve been fortunate. But there are a lot of people out there who are diabetic or have heart disease or whatever. What are they supposed to do?”

Leiby is concerned about the costs, noting that their out-of-network deductible and out-of-pocket maximum are more than double what they are for in-network services.  

On the other hand, she said, it’s important to have trusted providers. 

“One of the most important factors in good preventive health care is having a doctor you trust and have a good rapport with,” she said. “To have to leave a doctor you’ve been with for years for an unknown is a little disconcerting.”

Also, she said, doctors who are accepting new patients often have long waiting lists.

“If you … have to switch to another provider, you may be stuck at the end of a waiting list,” she said, “and then what do you do in the interim?” 

In addition, there are some specialties that don’t exist in the Upstate outside of Prisma, she said, adding some people aren’t able to travel to find that care.

Meanwhile, Leiby said, people often find they are stuck in a place where premiums are unaffordable, but they earn too much to qualify for Obamacare.

“No (system) is going to be perfect,” she said, “But we need something better than what we’re doing right now.”

Benjamin said arguments have been made against the current system, noting that up to 40 percent of the bill is due to administrative costs, which could be streamlined in a single-payer system like Medicare.

The South Carolina Hospital Association declined comment, but the American Hospital Association issued a statement from Senior Associate Director for Health Insurance Coverage Michelle Millerick.

“We frequently hear from hospitals and health systems across the country about the increasing challenges they are facing with certain commercial insurers, including Medicare Advantage plans,” she said.

“We don’t track this systematically, but it’s clear that there is increasing tension about the growing administrative burdens associated with insurer policies, as well as delays and denials in approving and paying for patient care that should be covered,” she added. 

Occasionally, Benjamin said, a state insurance commissioner will step in to help the negotiation, particularly when it impacts care in a community.

AHIP, the national trade group for insurers, could not be reached for comment.

But Michael Wise, director of the South Carolina Department of Insurance, said in a statement that his agency has little control in these instances.

“The current situation is very frustrating for all parties involved, especially the affected consumers,” he said. “Unfortunately, the SC DOI does not have regulatory authority over contractual issues between insurance carriers and providers.”

Benjamin said these disputes illustrate that “this wild, wild west we have with payment doesn’t work in many cases,” and the nation needs to think about better alternatives. 

“If we’re serious about maintaining the health and welfare of our communities,” he said, “we have to figure out a better way.”

SOME HELP FOR CONSUMERS

The state Department of Insurance Office of Consumer Services may be able to answer questions and provide some resources during provider/insurer disputes.

Analysts are available weekdays from 8:30 a.m. to 5:00 p.m. at 1-800-768-3467 or at [email protected]. 

Consumers can also visit DOI’s website at www.doi.sc.gov/consumers, where they will find a link to an online complaint form. 

Source: SC Department of Insurance