Does Your Insurer “Steer” You to a Preferred List of Doctors?

The Practice:

In such “tiered,” or “limited,” network setups, consumers may get lower out-of-pocket charges if they see a doctor in a preferred ranking.  Patients would typically pay more out of pocket to see doctors who are ranked lower. At the most extreme, consumers may have to pay the full cost of seeing a physician who doesn’t make the favorable list.

What Can Go Wrong:

Recent research from Rand Corp. showed that the health plan rankings are unreliable. They highlighted a study published in March in the New England Journal of Medicine that used claims data from four health plans in Massachusetts. It found that a two-tiered rating based on costs would incorrectly classify an estimated 22 percent of doctors.

Full article on insurers and preferred physicians.

Comments (10)

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  1. Stephen C. says:

    It doesn’t surprise me that the list is unreliable. I suspect that costs were far more important than quality in the construction of these networks.

  2. Joe S. says:

    All this is so unnecessary. Using Goodman’s casualty model of insurance, the third parties could pledge a sum sufficent to cover the cost in most places. Then let patients choose their own doctors and pay the difference (if there is any) out of pocket.

  3. Tom H. says:

    This is what happens if you completely suppress the market for a professional service. The third parties are trying to do what the providers would naturally do if they were competing on price and quality. That the insurers do a poor job of it is no surprise to me.

  4. Linda Gorman says:

    Data from health plans in Massachusetts. I’m sure those data, and the metrics used to measure quality and service, are representative of the nation as a whole.

  5. Devon Herrick says:

    I like HealthMarkets approach where patients are free to choose their own doctor, but have to pay the difference between what the insurer will reimburse and what the various doctors each charge.

    I am somewhat surprised that more insurers don’t selectively contract with vendors for some of the routine services. For instance, the price of an MRI can vary from $500 to $3000 depending upon where it is performed. It’s not uncommon for two imagining centers to be a few feet away from each other yet one charges $600 while another charges $1600 for the same scan. Insurers often pay either price without doing anything to induce enrollees to choose the lower-cost center. Until patients have an incentive to choose the lower-cost facility, health prices will continue to rise at rates that exceed inflation.

  6. Virginia says:

    I agree with Devon. Why not take standard procedures and tests and publicize the pricing? Insurers seem like they should have an incentive to get providers to lower prices.

  7. artk says:

    Devon, is there any way to know if an insurance company pays one in network imaging center $600 and another $1600 for the same scan? I understand they consider their in network reimbursement schedules confidential. Given the negotiation aggressiveness of a large insurance company, how is it possible they would allow that much of a discrepancy?

    The other issue of insurance companies tiered ratings. If it comes down to quality of care and cost of care, I defy you to find an insurance company picking quality of care. I know one data point. In New York City, United Health Care doesn’t include Memorial Sloan-Kettering Cancer Center in network. Given they are arguably one of the top 5 or 10 cancer centers on the eastern seaboard, and clearly the best cancer center in NYC, it’s obvious that quality of care is the least of their concerns.

  8. Devon Herrick says:


    I agree it can be a hassle, but the results are worth the effort. If all patients asked the price and acted on the information, it wouldn’t be too long before providers made it easier to discover the price.
    I work near Medical City (a large hospital in Dallas). I’ve compared experiences people who have literally had to call area imaging centers and demand to know the cash (upfront) price and the BlueCross price. On facility near my office would cut a much better deal than BlueCross pays for cash-paying customers. Another facility would perform the scan for about the same price (~$600) and bill BlueCross. I once asked an executive from Humana why they would pay $1000 more for a scan at one facility compared to another nearby and was told “patient preference”.

  9. artk says:

    Devon sez: “patient preference”

    What on earth does a patient know about the quality of an imaging center beyond the comfort of the chairs and the magazines in the waiting room? Do they ever evaluate the education and training of the radiologists. Do they know the different operating characteristics of the various makes, models and revision levels of MRI machines? I could see an insurance company having enough information to make that sort of judgement, but a patient?

  10. John Goodman says:

    In bureaucratic systems, consumers often are in the dark. In real markets, imaging centers that want to charge more would have to convince the buyer the extra price is worth it in terms of quality. In the international medical tourism market (about which Devon has written quite a lot), there is price and quality competition of this sort — certainly among hospital facilities.