What If Your Health Insurer Won't Pay?

The smartest tactic might be to hire a "medical billing advocate" to do battle for you.

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Timothy Stewart (right) found relief from the hit he took from stepson Tom's hospital bill.

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Timothy Stewart's health insurance nightmare began in June of last year, when Tom, his 17-year-old stepson, complained of pain in his left leg. Doctors found a chondromyxoid fibroma, a rare benign tumor, on a bone of his lower leg. At the physicians' urging, Stewart, who manages an RV park near Grand Teton National Park, took Tom from their home in Thayne, Wyo., to Primary Children's Medical Center in Salt Lake City for care. Treatment was successful, generating a bill of roughly $13,000 for surgery and a one-night stay.

But the hospital was not in the network of Stewart's healthcare insurer—which he doesn't want to name because it still covers his family. The insurer paid the hospital only about $2,600 of the bill, asserting that this amount was the "reasonable and customary" charge. That left Stewart, 53, on the hook for more than $10,000. His formal appeal to the healthcare insurer was denied. The Wyoming insurance commissioner's office offered only sympathy.

"I was at my wits' end," says Stewart. "I didn't know what to do." Turning to the Internet, he unearthed Trudy Whitehead, founder of Advantage Medical Bill Review in Salt Lake City and one of dozens of paid "medical billing advocates" who negotiate with healthcare providers and insurance companies to lower consumers' medical bills. Drawing on her extensive knowledge of hospital and insurance billing practices, Whitehead went to bat for Stewart to negotiate a better deal.

Drilling down. Billing advocates have several lines of attack they can follow. They often uncover errors such as services that were billed but never delivered and single procedures billed multiple times, says Nora Johnson, vice president of Medical Billing Advocates of America in Salem, Va. They also have tools to determine typical payments to hospitals and physicians by Medicare and private insurers, which are lower than the amounts charged to out-of-network patients and even lower than the charges levied on patients with little or no insurance. And they can drill down to a hospital's bottom-line cost for specific services, which tells them just how much wiggle room there is for jawboning inflated charges lower.

In Stewart's case, the insurance company had told him that the $2,600 payment to Primary Children's was double what Medicare typically would have paid for the procedure and therefore was a reasonable reimbursement for an out-of-state, out-of-network procedure. But Whitehead knew that was wrong. Medicare reimbursement for pediatric care depends, among other things, on the hospital where the diagnosis or treatment is provided. If it is a children's hospital, payment is based on the hospital's costs plus a reasonable profit margin. If it is a community hospital, payment is a set amount for the particular procedure. The $2,600 payment was based on the community-hospital approach and was invalid. The insurer ultimately agreed and last month consented to pay the entire bill.

"You give them your documentation from the government, and they will turn around," Whitehead says. "I've never found one where the hospital or insurer will not come to a resolution."

By the time the case was resolved, Stewart had paid the hospital about $2,700. The hospital said it would refund his money, which neatly covers Whitehead's fee of 25 percent of the amount she recovered, or about $2,400. Stewart is more than satisfied. "She was wonderful, pleasant, professional," he says. "She had the expertise. I wouldn't even have begun to know how to fight."

Billing advocates have various arrangements for payment. Sometimes it is by the clock—Whitehead says that she can finish many cases in three to five hours at $50 to $100 per hour. Or they may take a case on a contingency basis, as she did with Stewart, with the fee based on a percentage of the amount representing the client's savings.

Gerard Anderson, an expert in hospital finance at the Johns Hopkins University Bloomberg School of Public Health, says that billing advocates "make the most sense for somebody who is out of network or is uninsured." Insurance companies negotiate reimbursement rates with hospitals and doctors in their networks, but "if your insurance company doesn't have a negotiated rate with a doctor or hospital," he says, "they can charge you whatever they want to."