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I'm not clear exactly how the relationship between health insurance providers and hospitals/MD's/labs and all the other myriad entities associated with health care work together.
A person gets cancer. Right away that is a million-dollar health bill to the insurance carrier for services rendered by a hospital and its personnel. Does Aetna groan that they have to pay out this million (because that's a million less they can give their shareholders)? Or do they just say, "Okay, a million out here, a raise in premiums across the board and we get two million back so that's a million in profits. That's a good thing."
How exactly does this tenuous relationship work. Is it symbiotic or are these two entities mortal enemies?
Insurance companies in most instance contract now for service either thru PPO or HOMO contracts. Generally most company pools are self insured and only carry what is called reinsurance if it goes over a certain amount. The insurance companies handle claims for 20% of claims .Now I see ACA is going to allow them 22% because of losses in rollout. So more claims the more they net allowed before expenses. If claims goes up then cost to cover goes up; plain and simple. Right now controlling cost is really important for ACA because this years cost is only a estimate and next year if out flows are high then premiums go up. Just the pool or exchange having to many older/sicker expensive people can drive up cost from estimated which is why they need young people who use less than paid for in premiums. All pols are the same in shared cost.Contract maitian cost by only allowing so much per code procedure that eyar.So no they are not in some comspiracy. If they were the ACA would be part of it also.
Insurance companies in most instance contract now for service either thru PPO or HOMO contracts. Generally most company pools are self insured and only carry what is called reinsurance if it goes over a certain amount. The insurance companies handle claims for 20% of claims .Now I see ACA is going to allow them 22% because of losses in rollout. So more claims the more they net allowed before expenses. If claims goes up then cost to cover goes up; plain and simple. Right now controlling cost is really important for ACA because this years cost is only a estimate and next year if out flows are high then premiums go up. Just the pool or exchange having to many older/sicker expensive people can drive up cost from estimated which is why they need young people who use less than paid for in premiums. All pols are the same in shared cost.Contract maitian cost by only allowing so much per code procedure that eyar.So no they are not in some comspiracy. If they were the ACA would be part of it also.
Thank you, gen and texdav. I use my elderly mother 94 as an example, though I think it can be applied to a person of any age.
She went into a non-provider hospital and in two days racked up a bill of $69K including an appendicitis operation.
Now Kaiser is presented with this bill by XYZ Hospital. What's their reaction? Anger? I mean they have to pay out 69K or a negotiated % for a person they would consider just useless baggage who could run up an even bigger charge the next time. What's Kaiser's feelings about facing a possible 100K charge from the same hospital the next time my mother has a crisis at 3AM, which could happen any moment due to her age and declining health? Dread? Terror? Or do they just feel it's no big deal--just business as usual?
For a younger person this most assuredly would result in a denial of coverage and certain termination of health insurance. So it seems to me ins. co's in general would say "69K for two days is ridiculous. The system has to change. We're not going to pay out these ridiculous charges of $200 for a g*ddam* bedpan made out of cheap plastic."
But nothing seems to change. Hospitals charge 200K for a 1-week stay and ins co's pay out a % of it, negotiate away the rest maybe, and then cancel the enrollee. Seems like a totally disfunctional system and I confess to not understanding it, but I cannot figure out if the two hate each other, or if they tolerate each other or if they're in cahoots with each other at the expense of the little guy.
In your scenario, Kaiser is not angry. It's part of the cost of doing business. You know all those premiums they have been collecting from your mother over the past 94 years? It adds up to way more than $69,000. The hospitals have already pre-negotiated all the payments/fees for probably EVERY SINGLE possible procedure with the insurance companies, medicare, medicaid, etc. They already know and have agreed to what the payment will be.
Here's some food for though, since it seems you aren't very familiar with insurance or how health care works in the U.S. Who do you think pays for all the people that go to the hospital with a some crazy life threatening problem WITHOUT ANY INSURANCE and then racks up (as you pointed out) some insane $200,000 bill for a one week stay?
Thank you, gen and texdav. I use my elderly mother 94 as an example, though I think it can be applied to a person of any age.
She went into a non-provider hospital and in two days racked up a bill of $69K including an appendicitis operation.
Now Kaiser is presented with this bill by XYZ Hospital. What's their reaction? Anger? I mean they have to pay out 69K or a negotiated % for a person they would consider just useless baggage who could run up an even bigger charge the next time. What's Kaiser's feelings about facing a possible 100K charge from the same hospital the next time my mother has a crisis at 3AM, which could happen any moment due to her age and declining health? Dread? Terror? Or do they just feel it's no big deal--just business as usual?
For a younger person this most assuredly would result in a denial of coverage and certain termination of health insurance. So it seems to me ins. co's in general would say "69K for two days is ridiculous. The system has to change. We're not going to pay out these ridiculous charges of $200 for a g*ddam* bedpan made out of cheap plastic."
But nothing seems to change. Hospitals charge 200K for a 1-week stay and ins co's pay out a % of it, negotiate away the rest maybe, and then cancel the enrollee. Seems like a totally disfunctional system and I confess to not understanding it, but I cannot figure out if the two hate each other, or if they tolerate each other or if they're in cahoots with each other at the expense of the little guy.
Hospital charges are way different than costs. And when the patient is Medicare, the amount paid is also way different, generally pre-set, and not directly related to all the hospital services rendered.
So when an elderly patient has a $96K bill, Medicare does not reimburse at that rate. They pay a set amount based on diagnosis (DRG system). And I would assume that a Medicare HMO has some contractual relationship with other hospitals. So Kaiser may have more of a loss than if she was at a Kaiser hospital, but I highly doubt anything like a $96K loss.
In your scenario, Kaiser is not angry. It's part of the cost of doing business. You know all those premiums they have been collecting from your mother over the past 94 years? It adds up to way more than $69,000. The hospitals have already pre-negotiated all the payments/fees for probably EVERY SINGLE possible procedure with the insurance companies, medicare, medicaid, etc. They already know and have agreed to what the payment will be.
Kaiser has only received premiums from her since she joined their HMO.
Kaiser has only received premiums from her since she joined their HMO.
Right.
In point of fact Kaiser has not received ANYTHING from her except for co-pays and deductibles since she only joined Kaiser as a Senior Advantage (Medicare Part C) when she turned 65. She's never paid any premiums to Kaiser, just whatever Medicare Part A deducts from her SS which is about $110/mo.
Senior Advantage under the setup she's under has an annual out-of-pocket ceiling of $5,900 for everything, including Paramedic service/transport which runs $1500/one-way. She pays $200 of that and that goes toward the $5,900, as does $210/day for 7 days per hospital stay. So she may stay continuously for 29 days as she did at Kaiser during this last crisis and the total out-of-pocket was $1470. She may have another crisis in June and stay another 30 days and the out-of-pocket will again be $1470 until $5,900 is accrued in 2014. Then the meter is set at 0 for 2015. But the total for Kaiser might be 300K for all this treatment in 2014 (hypothetical) and all Kaiser gets compensated for is the co-pays and whatever they get from Medicare. Seems to me they are losing money hand-over-fist for seniors like my mother who have strong staying power (this burst appendix would have killed a person half her age but she recovered nicely ).
I terrified Kaiser might double the out-of-pocket. I don't think they can cancel her, but if she had to go under traditional Medicare and didn't have the Medi-Gap her out-of-pocket could easily have been 30K for the remaining 20% since Medicare traditional only covers 80% and the individual pays the other 20%.
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