SUBJECT: Physician's Limiting Charge - Medicare Supplement Insurance
DATE: Janaury 3, 1992
The Insurance Department recently has become aware that some insurers are failing to meet their obligations to Medicare beneficiaries under the Medicare supplement insurance contracts in the area of excess physician charges (sometimes called balance billing).
Many Medicare supplement insurance policies provide coverage for some or all of the difference between the amount Medicare recognizes as allowable and the amount the physician actually bills the patient. In the Omnibus Budget Reconciliation Act of 1989 (OBRA 1989), Congress established new limits on physician balance billing in conjunction with Medicare physician payment reform, called "Limiting Charges". Thses charge limitations phase-in between 1991 and 1993. In 1991, the Limiting Charge is calculated separately for each physician for each service. By 1993, when the Medicare fee schedule will be in effect, the Limiting Charge will be more easily calculable as a specified percentage in excess of the amount determined by the schedule.
Unfortunately, some insurers are attempting to restrict their liability for excess charges through erroneous interpretations of the new Medicare charge limitations. The following is a list of practices in this area that the Department has determined to be improper:
The Insurance Department believes that insurers should not be using the Limiting Charge to limit payment for excess physician charge unless the insurance policy makes specific reference to the Limiting Charge. The practices listed above not only have the untenable consequence of placing Medicare beneficiaries in the middle of a technical dispute between their insurer and their physician about federal law, but in many instances deny beneficiaries of benefits promised in their policies.
These practices appear to constitute unfair claims settlement practices and/or unfair trade practices under the state insurance codes. The Insurance Department is directing insurers to cease these practices in this state. Insurers that have erroneously relied on the Medicare Limiting Charge to restrict reimbursement are directed to search their claims files and correct and errors in past claims.
Insurers with questions about this bulletin should contact Manuel Montelongo, (402) 471-2201.
WILLIAM H. MCCARTNEY
Director of Insurance