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Allan Schwartz, Ph.D.Allan Schwartz, Ph.D.
Dr. Schwartz's Weblog

The Amazing Maze of Health Insurance

Allan N. Schwartz, LCSW, Ph.D. Updated: Dec 17th 2006

A Brief Background of Health Insurance:

Are you confused about your health insurance, how it works, and what is covered? Well, join the crowd, so are millions of other people who struggle to understand how they can use the health insurance that they have. Of course, this presumes that you have health insurance. The fact is that millions of Americans are not covered by insurance, whether they are employed or not.

Among those who are not covered by any type of health insurance are waiters and waitresses, taxi drivers, and those who work for very small businesses. Everyone is allowed to purchase their own insurance if they wish. The problem is that insurance is very expensive and that’s why most prefer to use the insurance they get at work, if it’s provided.

Prior to the 1980's, most people who had insurance through work were covered by indemnity insurance. This meant that they could go to any Medical Doctor and receive reimbursement for all, or most, of the procedures that were done. The health coverage included mental health procedures provided by Psychiatrists, Psychologists and licensed Social Workers. Professionals charged fees according to what the market dictated and insurance companies usually complied with the reimbursement of those procedures. Another term for this system is "fee for service."

However, as the practice of medicine became more complicated due to new discoveries in technology such as the use of MRI's, and new and expensive prescription medications of all types, health costs soared to the point where the insurance companies were losing millions of dollars because they could not keep up with medical costs.

A Brief Description of Health Insurance:

In response to rising medical costs, new types of insurance organizations swept the country. These new insurance organizations came under the heading of "Managed Care." Managed care exists today and is the attempt to provide good medical services while keeping down costs for insurance carriers, patients, employers, and insurance companies. Under managed care, new insurance companies were born and old ones reorganized into what are now know as HMO's or Health Maintenance Organizations.

There are now both Closed End HMO's and Open End HMO's. A Closed End HMO is characterized by the fact that patients can only have their medical bills paid if they go to doctors who are part of that HMO's network. In fact, very often, the doctor’s offices are located in, and are part of the HMO's building. Open End HMO's mean that patients can go to doctors outside of the HMO network but usually must meet a deductible before the insurance will start to pay. A deductible refers to the fact that a patient has to have accumulated and paid, out of their own pocket, an amount of money pre determined by the insurance company plan. Deductibles can range from $300 to $3000 dollars in medical costs before the HMO will begin to pay bills.

Even in Closed End HMO's, patients must pay a Co-Pay fee. This co-pay can vary from $5 to $30 dollars per visit. Patients are charged the same co-pay regardless of the purpose of the visit to the MD. In fact this is what is referred to as Capitation. Capitation means that everyone pays the same amount of money to have the insurance. The cost of the insurance is paid either by the company for whom the patient works or by individuals who want to have their own insurance because they have no other way to be covered. Today, many corporations are asking that their employees pay part of the premium for being covered by the insurance. Regardless, all pay the same co-pay when they go to their HMO doctor.

A major feature of Managed Care is that Doctors must request pre approval from the insurance company before they can proceed with testing, treatment, or admission to the hospital. Therefore, an MD must request pre certification before he can perform surgery. If the surgery or other procedure is done without the insurance certification, there is a risk that they will not pay. The purpose of pre certification is to reduce the number of procedures that are considered to be unnecessary and, therefore, too expensive. Even in emergency situations, it may be necessary for a medical team to get immediate permission from the HMO to continue, unless the emergency is extremely dire.

Presently, there are types of health insurance coverages that include more flexible and open ended approaches to patients who prefer to see their own doctors rather than those in the HMO. Some of these are called PPO's or Preferred Practitioner Organizations. To repeat, they are similar to HMO's, but allow for much greater flexibility in seeing medical professionals outside of the health plan.

Mental Health Practice and Insurance

In many respects, the practice of Mental Health has been adversely affected by managed care. The reason for this is that HMO's have placed severe limits on the number of practitioners they allow in their organizations and severely limit the number of visits they will pay for patients. Among the professional practitioners in HMO's are Psychiatrists, Psychologists, and Social Workers. It is necessary to get pre certification from the HMO before they will reimburse for mental health visits. The over all number of visits allowed per year varies from ten to thirty, depending on the contract the employer has with the HMO.

I often hear patients complain that this or that HMO is really good or really bad. This judgment is made according to whether or not they have been successful in getting their treatments (medical or mental health) approved. In actuality, is really not the insurance company that people experience as frustrating but the type of contract the employer has with the HMO. The more expensive the contract, the better and the more comprehensive the services available. In addition, rising health costs have caused many HMO's to raise deductibles. Of course, the deductible is the cost that the patient will have to pay per year before the insurance company will reimburse.

What to Do If the HMO Refuses to Approve Treatment:

All HMO's make an appeal process available to doctors and patients where they will review decisions and reconsider if they believe they were incorrect in refusing a treatment. Doctors can be very helpful in this appeal process by clarifying the need for the service. However, if a service is not part of the contract made with the employer, then they will not approve. For instance, if the contract reads that only twenty mental health visits are approved per year then nothing can be done to extend the number of visits. Naturally, any provider (doctor) can decide to see a patient at a reduced fee. However, this is at the discretion of the doctor because it has nothing to do with the insurance company. At the start of the next year, the insurance will begin again. However, the certification process must begin again and approval is not automatic.

Something to Consider:

Many patients I see decide they would rather not use their HMO because they do not want a record of their psychotherapy to be in the healthcare computer system and, therefore, available to whomever may wish to investigate their activities. Many people are concerned that their private psychiatric information could be available to the Human Resources departments of the companies for whom they work. Other people fear that their information could fall into the wrong hands in the future and be used against them in finding a new job or receiving a promotion.

It is important to know that the United States government has put safe guards into place to protect the privacy of patients using any type of health provider. These protections come under the HIPPA laws and prevent the transmission of private data over telephones or computers except as provided with specific internet protections. In addition, no one is allowed to transmit private medical data without the written consent of the individual patient.

Despite these protections, some people remain concerned about their privacy. There is a tired old psychiatric joke that goes something like this: "just because you are paranoid, it does not mean they are not out to get you." Once information is in the computer system of big insurance corporations it is available for possible misuse in the future. Given the nature of psychotherapy and the fact that information can be extremely private and sensitive, there is concern about further protecting privacy by preventing anything from getting out.

This caution does not apply to other forms of medical treatment, with the possible exception HIV and AIDS, because they do they do not carry the potential stigma that psychiatric treatment carries.

This is a very individual decision that I do not interfere with one way or the other when patients first see me for a consultation. There are those who have no problem with using their insurance and that is fine. There are other patients who immediately inform me that they do not wish to use their insurance and will pay the therapy bills on their own and this is fine as well.

Let's hear your adventures with health insurance.

Allan Schwartz, LCSW, Ph.D.

Readers who live in the Boulder, Colorado metro area, or in Southwest Florida may contact Dr. Schwartz for face-to-face consultation. He is also available for psychotherapy through Skype video for those who are not in Florida or Colorado. He can be reached via email at dransphd@aol.com for details.

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