The Everlane of Straight Teeth: Episode 2!

On Episode 1 of The Everlane of Straight Teeth, we discussed how orthodontists look at pricing. On Episode 2, we are going to look at how insurance companies break down pricing.

Insurance Pricing Breakdown

You may think, “Why would there be two different episodes? The pricing is the pricing – especially if you are trying to be transparent.” The reality is that the same pricing can be explained in different ways. Just like a jewel is trimmed and has differently shaped sides called facets.  You can look at one facet and say – this looks like a triangle, then look at a different facet and say it looks like a square.  In reality it’s the same jewel, but it can be viewed from different angles and appear different to observers.

In this episode, I am going to attempt to explain how the insurance companies break pricing out and how that is a different “facet” than the facet seen by a practitioner that is analyzing costs, even though both facets address pricing an orthodontic case.  In this episode, we are only going to talk about doctors that are “in-network”.

Side note:  HMO’s or DHMO’s or Medicaid or government do not reimburse “out-of-network” providers claims.  To use these insurances, the provider must be “in-network” and many time the claim is denied based on the insurance program’s point system to determine the necessity of orthodontic treatment.  The doctor must fill out a sheet on the difficulty and provide proof of each item they mark, then the insurance reviews it to decide if braces are needed or not, and will either reimburse the case at a lower rate than PPO (the usual case) or not pay anything at all.  The thing is, it has to be a very complicated case to get reimbursement, yet it is the smallest reimbursement by insurance.  This is why most orthodontists do not take these programs – if the case is approved, they lose money.  The rest of the time there is a bunch of paperwork (i.e. time, money & effort) to end with a disappointed patient that is not approved for their insurance reimbursement. A small minority of these cases actually have insurance money go towards the case.  Most of the time, if you have one of these insurance programs, you end up having to pay the fee out-of-pocket without any relief from the insurance company.

If a doctor is “in-network” or a “preferred provider” of an insurance company, then that doctor has signed an agreement with the insurance company to give policy holders a certain price – usually a lower price – than those providers who accept assignment of the benefits of the insurance company but are outside of the network.  Providers who “accept assignment” of insurance can either be in or out-of-network.  Providers who do not “accept assignment” of insurance benefits are always out-of-network.

If a doctor is “out-of-network” then, for PPO’s the doctor can still get 50% of the case fee specified, up to the lifetime maximum.  Or the patient can file insurance on their own and get the reimbursement from insurance.  For example, if an orthodontic case is $5000, then the doctor may be able to collect from insurance (and the patient can avoid out-of-pocket costs on) up to $2500, as long as the lifetime maximum is $2500 or more.

We’ve outline three scenarios below. In all three cases, the total case fee is $5000 and insurance will cover up to 50% of the total case fee. The only variable that changes what the patient pays is the maximum lifetime amount of insurance available. This maximum lifetime insurance amount might be lower or higher depending on the type of insurance. Or it might change if the patient has already used some of the insurance amount (e.g., if the patient tried treatment with a different doctor and used insurance to cover some of the cost).

Scenario 1 – $5000 case fee, with insurance lifetime maximum of $2500

Scenario 2 – $5000 case fee, with insurance lifetime maximum of $1000

Scenario 3 – $5000 case fee, with insurance lifetime maximum of $3500

Throughout the rest of the blog, we’ll discuss scenarios including doctors that are “in-network” with PPO’s. Then, we will circle back and go over doctors that are “out-of-network” with PPO’s.

Insurance Code D8080 or D8090

• Price of supplies: Insurance companies have priced very inexpensive metal brackets and made the assumption that every doctor will use the cheapest supplies available as the “standard of care”.
  • If any other supply is used that is still a “metal bracket”, it cuts into the profit margin. If there is a more predictable metal bracket or the doctor prefers self-ligating gates or pre-pasted brackets, then that cost is not accounted for as “extra” therefore it cannot be charged for as a miscellaneous D8999.
  • If the doctor is “in-network” and has agreed to the fixed, usually lower, negotiated price then the doctor must choose the less expensive supply or absorb the cost.
• Any additional price increase in supplies is not included in the first code: This means clear brackets, Invisalign, lingual brackets, custom wires, any additional appliance other than brackets and wires is not included and must be placed in a D8999 miscellaneous code, which 90% of the time the insurance company will send an EOB letter to the patient and orthodontist saying nothing but brackets and wires are “in network” and that justification for an appliance must be presented; This then means that the office must write a narrative to “defend” to the insurance company why the treatment chosen by the doctor is better than the bare bones of brackets and non-custom wires they want to reimburse. Sometimes it goes back and forth several times creating more cost for the practice to spend time communicating to the insurance company.  If the insurance company will not accept it, then they request that the doctor decrease their fees to the standard fee and have no compensation for the extra appliance that they – without having seen the patient or even having an actual orthodontist evaluate the records – have deemed unnecessary.  The doctor must then decrease the fee for the patient and absorb the cost of anything already done or not give the patient the care they believe is necessary.  The other option is that the patient elects to pay for the appliance separately from their insurance case.
• Records: Insurance companies have a price they have placed on getting an x-ray. These prices were set with film x-rays and have not changed much.  They do not care if the x-ray machine emits higher than normal radiation (older technology) or lower than normal radiation (newer technology).   They do not care how much the machine costs or how accurate the machine is or if the films are actually diagnostic.  They simply have a price for a film.  They have a price for impressions – no matter what material it is or if its digital.  They have a price for photographs – no matter how many there are or how diagnostic they are.  Some insurance companies will not even pay out for records separately with orthodontics.  They simply “bundle” the records with the D8080 or D8090 and then tell the patient they have been overcharged if it is billed separately.

• Preparation time: not accounted for in negotiated insurance fee

• Paperwork time to deal with insurance and get the patient’s deserved insurance payment: not accounted for in negotiated insurance fee

• Labor: insurance has calculated the cheapest labor (ie: minimum wage labor) with the least number of appointments and placed that into their “in-network” reimbursement. This assumes that there are no issues with the case and it goes ideally.  If anything goes outside the bounds of ideal or addition is needed, it is not accounted for in the original pricing given to the patient.  There are two ways this is handled in offices.  One is to ask the patient for additional funds either in bulk or on several occasions that are not included in the orthodontic case fee.  The other is that the patient then begins to be pushed off by the office.  Instead of issues getting addressed and discussed, these patients go into the endless cycle of appointments months apart and their case really never finishes for an extended period of time because the doctor cannot do what they need to, and the limitations placed by the limitation in funds leaks over into a limitation of the tools or effort or appointment time the doctor or office is willing to supply.  If there is a compliance issue (ie: poor oral hygiene or excessive broken bracket breakage) then instead of dealing with it by having extra appointments dedicated to these issues, the office will deal with the issues the best they can at appointments that should be for adjustments, ending up in excessive treatment time for these patients.

• Fixed cost: Insurance assumes low rates for your fixed costs. It does not take into account what part of town you are in, what the rent is, if you live in San Francisco or a small town in middle America; whether you use paper charts or electronic health records.

• Basically, the insurance company does not care how many appointments it takes or how cheap the supplies are nor the quality of care. The way insurance codes orthodontics leads patients to believe that orthodontic pricing is only about the supplies.  Then as the price is only listed out with a basic case and “add-ons” the patient thinks all “add-ons” are equal.  Clear brackets vs metal brackets is an esthetic choice – it should not affect the treatment with the clear brackets on the market today.  Having an appliance like an expander can make a skeletal change that braces cannot do on their own and is a clinical decision that is not only esthetic but changes the outcome of the case.  Not all miscellaneous items that are coded as D8999 are equal, yet the insurance companies propagate the misconception that they are with the way they itemize cases.  It also leads the patient to believe that they can negotiate out all the D8999 codes in their case and get a cheaper price without understanding that some of those will really compromise the outcome.  I think there are a few orthodontists frustrated enough with this type of negotiating, who, if you push them, would let you buy the supplies from them wholesale and tell you to figure out how to use them on your own, if you wanted the cost of their supplies itemized and you only wanted to pay for the supplies.

The insurance pricing structure was set almost 15 years ago, yet insurance has not increased the price of their negotiated case fee.  Some have actually decreased their contracted price for cases for “in-network” providers.  Even though insurance may have been viable a few years ago, the climate of steady insurance reimbursement with inflation, increased labor costs, increased rent makes it harder and harder for providers to give quality care at the rates insurance contracts.  Let’s look at some examples…

Example 1: Insurance Itemization for Basic Case with Metal Braces

Example PPO Insurance “In-Network” Breakdown

Example PPO Insurance “Out-of-Network” Breakdown

Example 2: Insurance Itemization for Clear Aligner Case (+Appliance)

Example PPO Insurance “In-Network” Breakdown

Example PPO Insurance “Out-of-Network” Breakdown

*All orthodontist’s contracts will have varying specifics on broken bracket fees, missed appointment fees, broken or lost retainer fees, etc.