If you find yourself at a hospital, you’ll usually have to sign a bunch of paperwork before you receive care. Buried in that paperwork, you are likely agreeing to something called “assignment of benefits.” But, what is ”assignment of benefits?” Which benefits? To whom are you assigning them? Let’s break it down.
An Assignment of Benefits (AOB) is an agreement that, once signed, transfers the insurance claims rights and benefits of the policy from the member (that’s you) to a third party (e.g., a hospital). An AOB gives that third party the authority to file a claim, collect insurance payments, and even file lawsuits without the involvement or awareness of the policyholder and patient.
You may think that signing off on an AOB means you’re handing over the headache of your insurance to the experts, but surprise! Your headaches could just be starting.
Let’s say your provider is not in your insurer’s network (out of network or OON). That means your insurer has not negotiated a discounted rate for the care you receive and the provider can charge whatever they want.
WHATEVER. THEY. WANT.
If you assign your benefits, this OON provider can claim payment from your insurer, but in most cases the insurer will only pay what they think is the proper amount. Blue Cross Blue Shield of Michigan gives a good example:
- In-network: You go to a doctor and the total charge is $250. You get a discount of $75 because you went to an in-network doctor and our negotiated rate with them is lower. We pay $140. You pay what’s left, which is $35.
- Out-of-network: You go to a doctor and the total charge is $250. You won’t get a discount because the doctor is out-of-network. We still pay $140, but you’ll be responsible for what’s left, which is $110 in balance billing.
Even if you assign your benefits, you’re still going to be hit with a bill known as a balance bill or surprise bill - potentially a very big one.
If you hadn’t assigned your benefits, instead of the provider receiving payment from your insurer, that check would have come directly to you. Having that check in your hand gives you potential leverage and negotiating power when it comes to surprise bills and out-of-network scenarios. By choosing to assign your benefits, you take yourself out of the equation and become an audience member rather than a backstage crew member who has a better view of things going on behind the scenes.
Basically, when you agree to an AOB, you sign away your rights and put your financial fate in the hands of someone whose interests may not align with yours.
OK. Deep breath. If you’re in NC today this isn’t a problem. Your contract with your insurer almost definitely has language making it impossible for providers to receive your benefits, so even if you signed an AOB, it would be moot. But, North Carolina is likely to see legislation introduced that would require insurers allow AOB in the future.
The impact of AOB legislation
- Takes away patients’ negotiating power: When hospitals and providers are out-of-network (OON), they can charge patients any amount of money they want without being limited by a contract negotiated with the insurer. When an insurer pays the patient directly, the patient holding the money has the negotiation power to request that the provider reduce or remove excessive charges as a condition of the payment. When the OON provider is paid directly under an AOB, the patient has no leverage and will likely get hit with a balance or surprise bill.
- Erodes provider networks: Assigning patients’ insurance rights to hospitals and providers makes it easier for hospitals to go OON.
- Increases the cost of care and undermines consumer protections: The aforementioned scenario takes away consumers’ benefits of contracted network discounts. The result? You pay more out-of-pocket. You may also be hit with unnecessary fees, tests, and procedures as certain requirements that providers get prior authorization on behalf of patients go away.
- Endanger quality of care: In addition to negotiating costs, insurers enforce quality of care standards for in-network providers. OON providers are not beholden to these standards.
- Encourages more lawsuits: With an AOB, a patient transfers certain rights to hospitals and providers. This includes the right to sue. But now the provider can sue the patient’s employer and/or insurer without the patient’s knowledge. Individual patients can unwillingly become entangled in lawsuits brought by large and well-lawyered hospitals. Patients lose their rights to contest a bill, mediate a claim or challenge inaccurate charges.
- Can result in financially burdensome surprise bills: An AOB allows OON hospitals/providers to collect some money directly from the insurer, but also invoice the patient for the remainder of the “list price” for services provided. This is called a “balance bill” or “surprise bill,” which is often thousands of dollars.
- Businesses suffer: When healthcare costs go up and lawsuits increase, businesses pay more. This limits the amount of money employers can invest in their businesses and can result in shifting healthcare costs to employees.
AOBs, frankly, are bad news for you — the consumer. Around here, we’re dedicated to fighting high healthcare costs and that means opposing AOB legislation, which would help providers win big, while everyone else loses. Have thoughts? Let us know in the comments or share them with us on Facebook.