The Hidden Costs of Marketplace Insurance

The Toyota Camry has been the best-selling car in the United States for 19 years. It is a reasonable, reliable car: good gas mileage, a variety of options, and Toyota dealerships are everywhere should one need parts or repairs.

Camry models sold in the United States are built in Georgetown, Kentucky.

Let us imagine that the State of Kentucky tries to stimulate its economy by incentivizing Camry sales. The manufacturer’s suggested retail price (MSRP) for a 2016 Camry is $23,070. But perhaps one could now purchase a Camry from a special Kentucky web site, and the cost would only be $22,070. A thousand extra dollars seems worth it. It is still a Camry but with a generous discount.

But the brakes malfunction. Something seems soft about the stopping power, and one would prefer to avoid an accident. A phone call to the local Toyota dealership: “Sure! Bring it in!”

At the dealership, a service representative comes back with a sullen face. “You must have purchased the Camry from the Kentucky web site with the discount?” Correct. “We cannot repair those. The closest dealership is 38 miles away, and their next appointment is in three months. Sorry.”


You might try another Toyota dealership, where you are informed that they also do not fix a Camry purchased from the web site because Toyota does not pay them adequately for repairs for cars that are under warranty. “We only fix regular Camry models here.” Doesn’t your car look and drive just like the others?

Sigh. You take your new pristine Camry, still under warranty, to a private repair shop and foot the $1,600 for new brakes. The $1,000 savings from the special web site just cost an extra $600 and significant inconvenience.

Consumers would revolt if this happens. There were no warnings that the special discount web site carried so many hidden restrictions. Camry sales would plummet.


This is  the scenario that has evolved with “marketplace” health insurance plans.

My own insurance is troublesome, and I like to think of myself as an informed consumer. I looked at the web sites for various insurance companies, but also paid a visit to, the showcase of the Affordable Care Act.

I was delighted to see that similar plans were available to my previous insurance, but there was about a $15 to $30 per month savings. It seemed so simple. I purchased a plan from a large private insurer, assuming that—like the Camry—there would be nothing untoward.

In fact, the web site never suggest that there might be special restrictions:

If my previous healthcare providers were covered under the same insurance company, why would I assume that the new marketplace plan would be different?

The Affordable Care Act provides substantial discounts on health insurance to those with low incomes, but it also reduces insurance premiums for those above the threshold. In fact many of my patients are like me: we chose the discounted Camry to save $15 per month.


Marketplace insurance plans are significantly different from commercial plans.

Insurers have drastically limited the networks available to consumers who purchased marketplace plans. Only a small percentage of their regularly contracted providers are selected to accept marketplace insurance.

In my case, I am surrounded by healthcare providers. But my marketplace plan limits me to a federally-funded community health center about 25 miles from where I live. The wait time for a new patient appointment is three months. The wait time for a new patient visit in my own office is one to two business days.

Like the brakes on the Camry, I have health insurance that looks like my previous plan, but—without warning—it works (or does not work) in a completely different way. I now pay “out of network” costs to see providers who are actually available to see me.


Impact on Medical Practices

Several patients with new marketplace insurance have come to see me. In two instances, my office staff called the insurance company to be certain that the service would be covered at my office. Indeed, a phone representative at an overseas call center in the Philippines assured my staff that the patient could see me without restrictions. My staff diligently noted the call reference number, the time, the date, and the name of the representative.

But when we submitted a claim to the insurer, we got a note that we would receive no reimbursement at all, and the patient would be on the hook for several hundred dollars. A colleague called and said, “But we have a recorded phone call, a reference number, everything.” Too bad. They just won’t pick up the tab.

As a practice, we had no choice but to cringe and say, “I am sorry.”

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Had those patients purchased insurance directly from the insure, their visits would have been paid with no out-of-pocket charge to the patient. Again, I speak of patients who could have afforded plans purchased directly from the insurer, but appeared to offer a better deal.

The health insurers explained that they are not accepting any new providers into their networks for marketplace plans. Consequently, we have to “we are sorry that we cannot help you.”

Other providers are happy to wish these patients farewell. The insurers reimburse poorly for marketplace plans, so some are pleased to say, “We do not accept that insurance.”


Perils of a Narrow Network

Health insurers have little interest in expanding the number of providers who accept marketplace plans. There is no national data, but a study of five states conducted last year showed that marketplace plans include only two thirds of of the regular commercial plans. That figure, however, indicates the percentage of providers who can accept marketplace plans, not those who will.

Specialty care is particularly problematic. A study from April 2015 of 18 plans in nine states found that there were no specialists within a 100-mile specialist, 19 lacked specialists within a 50-mile radius. The most limited specialties were endocrinology, rheumatology, and psychiatry. Again, those are providers who could accept a marketplace plan, that does not include if the provider will accept the plan, or how long the wait time will be.

This is troublesome for a patient with type I diabetes, multiple sclerosis, a suicidal plan. His or her network does not include a specialist either within 50 or 100 miles, or perhaps there is no specialist at all.

The insulin-dependent or suicidal consumer, or the consumer with painful rheumatoid arthritis has no choice but to go “out of network” and pay substantially more for the healthcare that he or she needs. At no point did the insurance company warn him or her that this was she “special Camry” that could not get new brakes at just any shop.


Insurers’ Rationale

Insurers have argued that narrow networks reduce cost, and this savings can be passed on to consumers. A narrow network could mean that primary care providers, specialists, and hospitals are all working together, thereby reducing expenditures. But healthcare economists disagree. Alexander “Sander” Domaszewics MBA, a senior consultant at Mercer Health and Benefits Services explained it succinctly: “It’s no good making a narrow network that nobody can get in to see.”

Anthem Blue Cross Blue Shield argued that its narrow networks save 12 to 25 percent—savings that are useless if the patient lacks appropriate or timely access to quality care. And those are savings to the insurer, not necessarily savings to the patients.


The Provider You Never Chose and Never Met

Narrow networks can incur substantial “surprise bills,” particularly for patients in narrow networks.

Michael Schwartz MD, a pediatrician, took his daughter to emergency department in 2010. He chose an “in network” hospital, where she was monitored. The hospital and the emergency department physician were “in network,” but the physician who monitored the little girl’s cardiovascular status was “out of network.” Dr. Schwartz never chose this cardiologist for his daughter; in fact, he never met him or her. Schwartz, a particularly educated consumer, baked at the $2000 bill (his insurance paid $800, leaving the “patient responsibility” at $1200.) Dr. Schwartz even attempted to negotiate with the cardiology group to now avail.

Karen Pollitz MPP, a senior fellow at the Kaiser Family Foundation, explained that patients often get burned with out of network charges because the providers they see work in the hospital, not for the hospital. For example, a patient might undergo surgery at an “in network” hospital with an in network surgeon. But the patient does not chose the anesthesia provider (nurse anesthetist or anesthesiologist) nor the pathologist. A careful consumer could ensure that he or she going to an in network hospital, but the out of network bills could accumulate.


Many insurers and states permit “balance billing” for out of network providers. In network providers usually have contracts with insurers that dictate exactly how much the provider will receive for a given service. Although my “regular and customary” charge for a simple skin biopsy might be $200, my contract with the insurer states that they will only pay $125. I cannot bill the patient for the extra $75.

As an out of network provider, many states allow a claim to be submitted to the insurance company, and the patient must pay for all of the charges. There is no negotiated rate or discount.

Although any patient is vulnerable to out of network charges, the risk is most extreme to marketplace consumers with narrow networks.


High Deductibles

High deductible insurance plans (HDHPs) predated the Affordable Care Act. Consumers had the option of choosing inexpensive plans with extraordinarily high deductibles, generally up to about $6,350 per individual per year. But that $6,350 is only for in network care.


High deductible plans are a hallmark of marketplace plans. Although lower deductible plans exist, first displays the least expensive plan. Consumers are enticed by low monthly premiums. The site emphasizes cost savings:, and it never mentions out of network costs. (The out of network deductible can often far exceed the in network deductible.)


When Patients Receive a Bill

Patients with high deductibles are often flummoxed that they owe such high amounts for routine medical visits. Perhaps the patient misunderstood the nature of his or her deductible, or perhaps he or she assumed that medical visits cost less than they do.

Consequently, patients are not paying their bills. In one month, my office sent out sixty statements. Two patients responded and paid their bills. Exasperated by their high deductibles and lack of choice in healthcare providers, patients just declined to pay their share. Although my practice would have the option of dismissing a patient, we would rather offer a payment plan. Sending the unpaid charges to a collection agency only results in about a 19 percent return, and can be damaging to a patient’s credit.

A medical practice has little—if any—leverage if a patient does not pay his or her portion of the bill. The service has already been rendered.

Since insurance companies vary so widely in the types of plans they offer, it is almost impossible for us to know exactly what the patient’s responsibility will be at the time that service is rendered. We have the burden of submitting the claim, waiting to see how much the insurer will pay, and then sending a statement later.

Unlike the Camry, we cannot just repossess the car.


Are There Any Benefits to These Plans?

Yes.  I remain a strong supporter of the Affordable Care Act due to the “out of pocket maximum.” Although this may vary from in network and out of network coverage, this cap can preserve a consumer’s financial livelihood.

A former neighbor of mine went without insurance for one month between jobs. He had the misfortune of getting hit by a truck while crossing the street. His hospital bill—with discounts—was $250,000. He is unable to afford it. Due to his debt, he struggles with very poor credit, which hampers his ability to own real estate, rent an apartment, buy or lease a car, and so forth.

If he was under any health insurance—even with a very high deductible—his out of pocket maximum may have been enormous: perhaps $10,000. But that is one 25th of what he owes now (excluding interest.)


Potential Solutions

  • Narrow networks are deceptive. I have nine years of post-secondary education in the health sciences and twelve years of practice. I was blind to the fact that my own insurance would be so limiting. The marketplace web site,, needs to make it repeatedly and abundantly clear that marketplace plans have narrower networks than the brand names attached to them.
  • State legislators and regulators need to be aggressive about “network integrity.” Insurers rely on providers to update their “demographic status:” clinic location, accepting new patients, etc. In the past seven months,
    • I have contacted one insurer monthly to provide accurate information, but the insurer never updated their system. They still have the wrong address, phone number, and email address.
    • For this reason, insurer directories are notoriously filled with false or outdated information. Consequently, it can appear that an insurer has more providers in its network than there are in reality.
  • If a patient has no choice in the provider, such as a consultant, pathologist, anesthesia provider, etc. the “in network” terms should apply.
  • States should enact and enforce “any willing provider” legislation, which would allow any capable and interested provider to accept their insurance plan—marketplace or other. This would widen the network and offer greatly improved timely access to care.
  • Insurers and need to be much clearer about the nature of a deductible and what this means in terms of billing. Patients should be unsurprised to see a bill in the mail from their healthcare provider(s).
  • If an insurer’s call center representative or web site unequivocally state that a service will be covered, and the patient does not vary from his or her contract with the insurer, the insurer should pay for the service.
  • Health insurers have grumbled about costs associated with marketplace plans. This is dumfounding since so many patients have limited access to care. Even if they did lose money, it was not very much in light of their massive increases in revenue from other sources.UnitedHealth Group, the nation’s largest private insurer, reported a 20 percent rise in revenue in 2015 to $157 billion. The company complained that it lost $425 million from marketplace plans. That’s one 369th of their earnings.


Bernard TS. Out of network, not by choice, and facing huge health bills. The New York Times. 18 October 2013.

Hancock J. Narrow networks trigger push-back from state officials. Kaiser Health News. 25 November 2013.

Leonard K. Doctors, hospitals say ‘no’ to Obamacare plans. U.S. News and World Report. 4 November 2015.

Rosenthal E. Costs can go up fast when ER is in network but doctor are not. The New York Times. 28 September 2014.

Seaman AW. Specialized healthcare may be lacking under Obamacare plans. Reuters. 27 October 2015.

Whitman E. After protesting losses under Obamacare, Insurer UnitedHealth reports rising revenue in 2015. IB Times. 19 January 2016.


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