Trigon Blue Cross/Blue Shield (Copayments)

When most people are told they owe a coinsurance payment on a medical bill, they simply grimace and write a check; not Gerald Haeckel, a retiree from Richmond, Virginia. He wanted proof that he was not paying more than the 20 percent portion that his health insurance policy required. When his insurer, Trigon Blue Cross/Blue Shield, balked, the retiree besieged state and federal officials with demands for an investigation.

Gerald’s problem with the insurer-provider negotiated discounts began when he became confused by a bill sent by Trigon Blue Cross/Blue Shield. The bill was for Gerald’s wife’s lumpectomy, which is an outpatient surgery to remove a tiny breast tumor. Trigon’s benefits- explanation form stated that the surgery had cost $950, that Trigon paid 80 percent, or $760, and that Gerald owed a 20 percent copayment of $190. But then Gerald received a list of charges from the surgery center indicating that Trigon’s share of the bill had been more than halved to $374 because of a “contractual adjustment.” Gerald assumed that a mistake was made in the surgery center’s statement because if it were correct his $190 copayment would exceed a third of actual cost, instead of the 20 percent called for in his insurance policy.

Ultimately, Gerald’s scrutiny of the $950 surgery bill led to a surprising discovery. Although insurance companies frequently complain about being duped by fraudulent policyholders and providers, Trigon and dozens of other health insurers and managed care companies stand accused of a scheme to siphon off millions of dollars from their policyholders. How does the alleged scheme work? For surgery priced at $1,000, the typical plan might call for the insurer to pay 80 percent, or $800, which leaves the patient with a $200 copayment. But if the insurer has negotiated a 50 percent discount from the provider and does not pass any of it along to its policyholders, the patient’s $200 copayment becomes 40 percent of the $500 actual bill, and the insurer’s portion drops to only $300.

Trigon’s responses to Gerald’s queries stirred up more questions than they answered. Norwood H. Davis, Trigon’s CEO, assured Gerald that he did indeed owe the $190, and added that the details of any Trigon’s provider discounts were “proprietary.” In another letter, Norwood made a distinction between Trigon actually paying its $760 share of the bill and “discharging” it. Norwood added that although Trigon might try to persuade a provider to accept less than its $760 portion of the bill, a policyholder, such as Gerald, was free to try to persuade the provider to accept something less than the required $190 copayment. Gerald, who by that point was incensed, replied “suggesting that an individual policyholder negotiate with a provider for price concessions borders on the insulting!” and he threatened to take the matter up with state regulators.

At a time when consumers are expected to take more responsibility for their own healthcare, undisclosed discounts raise questions about the accuracy and honesty of information provided by the insurers and employers. Indeed, providers often are contractually prohibited from disclosing discounts. The insurance industry argues that hiding discounts is not widespread. The Chicago-based Blue Cross/Shield Association notes that no court has ruled for plaintiffs in a discounts-related case. It adds that none of its affiliates that settled such cases admitted to wrongdoing. Furthermore, Blue Cross/Shield executives argue that the discounts benefit policyholders by reducing premiums. In some situations, they add, employers who share in the savings ask that discounts not be disclosed to their own employees. “We’re not lining our pockets with anything because there is nothing to line our pockets with,” said Joel Gimpel, a Blue Cross/Shield Association attorney.