Last winter, I came down with a particular bad case of the flu with a cough that lingered and lingered -- I finally decided to go to the doctor. Having only recently moved to San Francisco, I did an online search for doctors in my area and found One Medical Group nearby.
The decor of the office was very modern, almost didn't feel like a doctor's office. The doctor, John Nienow, saw me briefly, for about 5 minutes, asked a few questions, and prescribed some medication.
The medication didn't seem to work. I felt worse, so scheduled a follow up appointment. The same doctor wasn't available, so I was seen by another doctor. Again I was prescribed some medication. Again I didn't feel better, and returned for a third visit.
At each visit, I noticed a sign on the receiptionist's desk stating that the rate without insurance was $150. Since I had insurance, I didn't think twice about not using it.
Only after the third visit did the bills start coming in. $450 for the first visit, $350 for the second, and $350 for the third. Why was I paying $1150 with insurance when without insurance I would have paid $450? This made no sense.
Turns out, I had not met my $2000 insurance 'deductible' for the year, therefore was responsible for 100% of the charges. But why is the provider billing the insurance $450 while offering the same services for $150 to patients without insurance? Turns out, the provider actually billed $650 for the 5 minute visit, or around $7,800 per hour. However, under contractual agreement with the insurer, the provider could not charge more than $450 for this service.
This maximum rate that an insurer allows a provider to charge for a service is considered a trade secret by the insurer -- the provider does not know the amount. If the provider guesses low, they leave money on the table. If they guess high, they get capped to the max. Hence the provider is incentivzed to charge well above what they believe the cap to be.
As the patient, I didn't know this rate either. I called my insurer to ask what the max rate for a service was -- they would not tell me. I then asked what I would pay for the service, assuming I had not met my deductible. Again, they couldn't tell me, because they did not know what the provider would charge.
Essentially, the patient has no way of knowing the cost of medical services at the time of service, which is fundamentally flawed and unfair. After repeating this point for an hour on the phone with One Medical first-tier customer support, I was redirected to a manager, who agreed to reduce the charges to $450, matching the cash rate. A small win for the little guy in a flawed system in need of reform.