When your insurance company and hospital can’t agree

Watching the news this morning they reported on the contract agreement between and a major insurance company and a hospital and physician organization. Previously it was reported that the organization was being dropped from the network and the insured were advised to use other network providers.

Patients interviewed for the report naturally did not want to switch doctors. The reporter and the patients made it quite clear the insurance company was the bad guy implying the needs of the health care providers should be met.

There is nothing new here. It happens all the time. I once had a well known hospital send letters to my employees stating their contract with our insurer was arbitrarily being cancelled and that patients should demand a new contract be signed. The letter was not only misleading, it was deceitful. Employees who used this facility called me and demanded I require our insurance company to sign a new contract. My attempts to explain the nature of the situation were for naught.

I knew that the letter was simply a negotiating ploy and called the person who signed the letter. After realizing I knew what I was talking about he admitted that the dispute was over payment levels. The hospital wanted higher fees, the insurer lower fees.

You see, hospitals and physicians know that in these negotiations the public will invariably support providers over the bad guy insurance companies. Hospitals routinely make it appear they are being forced from a network as if the insurance company is acting arbitrarily.

The truth is the insurance company seeks the lowest fees possible consistent with maintaining a viable network of providers. They are looking out for themselves and in doing so for their customers as well. Higher fees mean higher insurance premiums and higher premiums mean they are less competitive in attracting customers. At the same time insurers need adequate provider networks to attract and retain customers. There is no incentive to cancel contracts or demand unrealistic fee payment schedules.

Health care providers seek the highest possible fee consistent with running their business and making a profit. However, they depend on insurance companies to bring them patients and pay most of the bill.

The public tends to sympathize with whomever it feels is the underdog be it the local hospital or a striking public union. This is often misdirected sympathy and shortsighted. The cost of health care is the overwhelming driver of health insurance premiums just as costs associated with public employees are a significant driver of taxes.

Negotiating a fair and affordable agreement is in everyone’s best interest. Taking sides based on unrealistic sympathies and inaccurate perceptions is not.