The Truth About Covered California's PPO

What you need to know before November 15

Posted Nov 14, 2014

It is not “breaking news” that there is significant consumer dissatisfaction with Covered California's PPO plans due to diminished network inclusion. However, there is a critical new issue with Covered California's PPO plans that has yet to be revealed.

As a CEO of a leading adolescent treatment center for addiction and mental health in Los Angeles, it is crucial that I stay informed of Covered California’s coverage for HMO, PPO, and EPO plans. I need to be well informed of the premiums, deductibles, co-payments, exclusions, out-of-pocket maximums, prior-authorization requirements, in-network and out-of-network reimbursements, the list goes on.

Since open enrollment for 2015 health insurance plans through Covered California begins November 15, 2014 and ends February 15, 2015, I want my clients to clearly understand what purchasing a silver, gold, or platinum-tier" health plan with Covered California means. Many families are struggling to find affordable, quality PPO healthcare coverage that allows them both flexibility and higher reimbursements (once deductibles have been met) for out-of-network providers. Knowing the facts can help individuals and families make an informed decision regarding plan enrollment.

In 2013, many Covered California plans did not disclose their reimbursement benchmarks during the open enrollment period. Thus, consumers who thought they could purchase PPO plans to seek out-of-network providers were in for a rude awaking.

Not only did they not know that carriers like Blue Shield would only reimburse out-of-network claims at the “Allowed Amount” for in-network services (until the actual insurance documents entitled "Evidence of Coverage" were made available to them well AFTER open enrollment) but moreover, these “comprehensive” insurance documents entirely failed to disclose the benchmark for calculating the “Allowed Amount.”

Historically, insurance plans have expressly noted their reimbursement benchmarks based on both “reasonable and customary” rates (Fair Database) or on a percent of Medicare schedule.

Not the case with many plans such as Blue Shield's Covered California PPO plans, which say nothing about tying their reimbursement to Medicaid (in the non-Medicaid ACA exchange market) until out-of-network claims are paid pennies on the dollar. This leaves patients and their families (as well as many well meaning providers) to deduce that Medicaid benchmarks must be applied to their plans.

While consumers can inquire about reimbursement prior to receiving any out-of-network services, no insurer will answer such questions (let alone acknowledge their general benchmark) prior to plan enrollment. Consumers are being induced to join without access to essential information.

If you peruse the Covered California website for 2015 enrollment, once again it does not appear that there is a single Certificate/Evidence of Coverage (the controlling, legal plan document) posted for any exchange-based plan (for either 2014 or 2015). The most you will find are plan-specific documents called "Summary of Benefits and Coverage," like the one for Blue Shield’s “Ultimate PPO.

A material term of coverage is missing, however, from the “Summary of Benefits and Coverage” — the insurers’ reimbursement benchmark for both in- and out-of-network services — such that anyone hoping to rely on PPOs for out-of-network benefits is in the dark about what they are buying.

Furthermore, consumers don’t understand that an “out-of-pocket” maximum of $7000 for out-of-network PPO claims, for example, is not really an out-of-pocket maximum of $7000. Since insurers like Blue Shield have tied their reimbursement benchmarks to Medicaid (or some percentage thereof), they only consider their “Allowed Amount” as creditable toward the out-of-pocket maximums.

Thus, if an out-of-network facility bills at $1000 / day and Blue Shield determines that the Allowed Amount (based on its currently undisclosed benchmark) is $150 / day and that the patient’s co-pay is therefore $15 /day for a (“Platinum” or 90%) PPO plan, the insured’s remaining liability of $850 DOES NOT count toward their out-of-pocket maximum. Only the $15 / day counts toward their out-of-pocket amount.

In other words, it is almost inconceivable that any out-of-network, out-of-pocket annual maximum could ever be satisfied before an insurer starts to pay at 100% — and even then only at 100% of the “Allowed Amount.”

So, effectively, consumers have no way of knowing that they would be purchasing “silver, gold, or platinum-tier" health plans at "diamond" prices only to receive inferior coverage that leaves them with a tremendous amount of debt and expense.

In my professional opinion, consumers should be strongly cautioned about PPOs in the Covered California exchange, since they are essentially commanding a premium for the allure of benefits that consumers will never recover.

While there is no current solution to this issue, I strongly recommend contacting "Covered California" and the insurance providers to request transparency regarding coverage for the plans you consider purchasing. You are the consumer and your health, or that of a loved one, should not be put at risk.