Health Insurance Companies Take Advantage of Doctors, Part IV

By J.C., on October 10th, 2008

I previously posted about insurance companies and the EOB. I’ve been thinking more and more about this issue and have come to the conclusion that physicians must band together and file class action lawsuits against insurance companies in order to collect the reimbursements that they legally deserve. If you take a closer look at the dynamic between insurance companies and physicians, you will find that it is heavily skewed in favor of the insurance company.

Here is typically what happens. A patient sees a physician who has an agreement in place with an insurance company. The physician sends the bill or claim to the insurance company, and the insurance company remits payment along with an EOB. One hundred percent of the time, the insurance company does not pay the full amount of the bill. The physician typically accepts the payment and does not bother with trying to collect more. When the insurance company denies the claim, the physician may try to collect payment and resubmit the claim. But typically there is a huge loss by the physician who does not have expertise in collecting payment.

If you look closely at this you will find that essentially the insurance company short changes the doctor and does not pay the full bill. In any other consumer-vendor interaction, it would be a violation of payment contract. This would be equivalent to going out to dinner and then paying half the bill instead of the whole thing. I’ve never thought of doing that, and I doubt many readers have. In those situations, it would clearly be unacceptable. We know it, and the restaurant would know it.

What makes it any different if a doctor is not paid the amount of his bill? One could argue that doctors provide a community service, and that, if a patient is getting a free ride by the doctor, that is not such a bad thing. However, the reality is that it is the insurance company getting a free ride, not the patient.

What is going to change the system? Class action lawsuits. In my next post I will highlight some examples of how this could all work.

One could argue that taking such action would essentially bankrupt insurance companies and break the healthcare system. If I had to choose between squeezing doctors or insurance companies, you know who I would choose.



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Credit Crunch Hits Consumer Credit Cards with American Express’ New Policy

By Evelyn Black, on October 10th, 2008

On October 7, American Express revealed that they will begin limiting their customers’ access to credit based on both where they shop and which bank holds their primary mortgage. While there is nothing in the law that prevents American Express (or any other credit card company) from doing this, the announcement is noteworthy coming from what many assume to be the creme de la creme of unsecured personal credit lines.

The credit crunch is about to hit the consumer pocketbook in a big and personal way, starting with credit card companies looking for ways to limit or freeze personal credit lines. The reasons for the lowered limits are not always obvious, and they may or may not have anything to do with the customer’s financial balance sheet. American Express would not reveal the stores or banks that they considered “risky,” but if you happen to have an association with one of them, however tenuous, look to see your credit limit lowered or arbitrarily frozen very soon.

According to the consulting firm Innovest StrategicValue Advisors, banks will charge off nearly $96 billion in delinquent credit card debit in 2009, nearly twice the amount charged off in 2008. Many customers who very recently had access to home equity lines of credit, business lines of credit, or unsecured bank loans are now seeing these sources dry up due to the credit crunch. As a result, they are leaning on the option of last resort: credit cards. Credit card issuers are falling all over themselves trying to get ahead of the problem.

In a worst case scenario, a good customer (as in, a customer who pays on time and has been doing so for years) could see his or her credit limit arbitrarily lowered and then exceeded before even realizing that had happened. Sometimes, just the interest accruing on a large balance will exceed a lowered credit limit before a customer has any time to do anything about it. Once the limit is exceeded, the credit card issuer can and will hike the interest to 32%, charge over-limit fees, and push the customer even closer to default.

Why would credit card companies do this?

Because credit card companies can’t just close an open line and demand payment in full; what they are doing instead is encouraging customers to transfer their large balances elsewhere. Look for balance transfer fees to jump dramatically as well in coming months (or weeks) as banks and other financial firms look to discourage these balances from hopping aboard their own sinking ships.

According to Carol Kaplan of the American Bankers Association,

(Banks) have suffered a lot of losses and they are doing whatever they can to reduce risk. They have people that work all day and all night who try to come up with new formulas to assess risk.

These risk assessment formulas are getting much stiffer and much more conservative almost overnight. Anyone with a credit card balance that is in excess of 30% of the limit will likely see changes to the limit itself and the rate and fee structure in the very near future, and some analysts are recommending that customers carry a balance of no more that 10% of the limit in order to avoid punitive fees and rate hikes.

What this means for consumers who, since 2006, have had to rely ever more on their credit cards to pay for basic services, food, and taxes is that the last well of credit is about to run dry, leaving them with only their inadequate incomes to cover costs this winter and Christmas season. Add this to the fact that home heating oil and natural gas are expected to increase by double digits this winter and the fact that many people still haven’t paid off last year’s heating bills yet, and you have a recipe for disaster.

The Federal Reserve, Congress, and the U.S. Treasury are still intently focused on simply stabilizing Wall Street right now. The $700 billion bail-out package is looking ever more anemic in the face of a world market crisis, the credit crunch has not abated at all at the interbank level (the LIBOR rate is still rising, and commercial paper is still impossible). Understandably, the systemic cardiac arrest is getting the first response, inadequate though it may be at the moment.

But not too far down the road, the same financial credit stroke is about to hit American households one by one, right at the beginning of winter and the start of a holiday season that promises to be one of the most dismal on record.

Let’s hope something works. Soon.



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