Utah Medical Insurance claim processing error


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I had a medical claim applied to out-of-network which should have been in-network. Obviously this means my reimbursement is much lower than it should be. I was able to get the insurance company to correct it after numerous phone calls. However, I wonder if this is a systemic issue for the insurance company that is causing losses to everyone they insure. Would it be worth considering a class-action lawsuit?

I had visited the same doctor multiple times for the same reason every time. All of my bills were processed as in-network except one.

What was strange is that the EOB I received showed out-of-network, however it also showed a provider-negotiated discount. My understanding is that an in-network contract would have to be signed in order for the insurance company to negotiate a discount. out-of-network means no contract has been signed, thus the insurance company can't influence the doctor's billing practices.

Is this a correct assessment?

Either the customer service reps don't understand this explanation or don't agree with it.

The issue was resolved by comparing all the information between the claims. We found that with the out-of-network claim the provider had used the wrong billing address on the claim. The insurance company takes the NPI & TaxID from the claim & looks it up in their database, it then compares the billing address in their database to the billing address on the claim. If everything doesn't match up, it gets applied as out-of-network.

It is easy for a mistake like this to happen because medical providers work out of multiple offices and they bill under multiple IDs. Sometimes they bill under their personal IDs & sometimes they bill under the hospital or offices group ID that is shared by all doctors at the facility.

In this situation it's hard to argue who is responsible for the mistake. It could be argued that the insurance database comparison is too strict, that the provider made a mistake, or that the patient should have requested that the claim be submitted in a certain way. This is unfortunate, but there's nothing inherently fraudulent in it, it's simply due to the complexity of the system. It's up to the patient or doctor to understand this and work out the best billing practice ahead of time, if they desire to save money.

However, it seems obvious that the insurance company is doing something fraudulent. They appear to be telling the doctor that the claim is being treating in-network, while at the same time telling the patient that the claim is being treated out-of-network.

I believe the insurance company is doing this to maximize their profitability. They want to reduce how much they pay directly to doctors via provider-negotiated-discounts (which I believe can only be done for in-network claims), while at the same time reducing how much they pay to patients by reimbursing at a lower rate (out-of-network claims). How can the insurance company treat the same claim as in-network to one party and out-of-network to another party? If the claim is truly out-of-network, why is the doctor agreeing to a negotiated discount?

I assume the doctor doesn't fight the insurance company on this because they believe they are being treated as in-network.

Am I misunderstanding this? Is there a legitimate reason an insurance company could have a provider-negotiated discount with an out-of-network provider?
Yes they do. I explained that due to the complexity of the billing process, clerical errors are common. However, in this case I believe the insurance company is also committing fraud (possibly unintentionally).

The issue is that the exact same clerical error on the exact same claim is treated differently when they communicate it to each party. They tell the doctor it's in-network, they tell the patient it's out-of-network. In both case the clerical error benefits the insurance company while hurting the other party.

I do not believe it's truly a clerical error. I believe the insurance company knows it's supposed to be in-network, because otherwise they wouldn't be sending a provider-negotiated discount to the doctor. I believe their automated claims processing system handles the reimbursement incorrectly when there is a clerical error. Because this happens frequently, patients are losing money that should be reimbursed. Even if this is an unintentional bug in their system, it still appears to be a violation of their contracts and probably has resulted in significant $ owed to a majority of their patients which will never be reimbursed or corrected.
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I have some 35+ years working on all sides of the desk (employer, employee, third party administrator) of insurance companies. There is very little you can tell me about the way they work. You are going to need far, far more than this single instance, particularly since the claim was eventually paid as in-network, to support any kind of legal claim, let alone a class action.
Thank you. I appreciate your answer.

Can you educate me on one more thing I'm unsure about?

Is it possible for the insurance company to have a provider-negotiated-discount while at the same time being considered out-of-network?
You can't have a class action with a class of one. Your hunch that there is a bigger underlying issue would get nowhere.

Occam's Razor.... Clerical error.
I can think of a couple of situations in which showing a provider-negotiated discount and an out-of-network provider would not be incompatible with each other. So yes, it is possible that it might have appeared on your EOB that way and still been accurate.
Ok. Then obviously I don't understand the subject very well :)

I'm glad to have your 35+ years experience.

Would you mind explaining one of those situations, just so I can understand?


Let's say that Dr. Jones is a member of a group practice, ABC Medical Associates. ABC Medical Associates is in-network, but Dr. Jones has chosen not to participate (or possibly is a new member of the group practice and has not yet been included in the network. Paperwork pending, possibly. But for whatever reason, Dr. Jones is out of network even though the overall group practice is in-network. Depending on how the billing is submitted and how the contract is written, it is possible that while Dr. Jones is not in-network, the in-network negotiated rate can be applied on behalf of the overall practice to some or all of the charges. (As much as you, I and the insurance carrier all would like it to be different, no given provider can be required to participate in any given network. It is POSSIBLE, depending on the contract between the practice and the provider, that the practice might be able to require participation in all their networks, but the insurance carrier cannot and most practices do not.)

I have also seen instances where the EOB, as a matter of full disclosure, showed what the in-network rate would have been, had the provider been in network.