The "lesser of" provision is a clause often found in healthcare payer contracts with providers, including those applying to self-directed health plans. It means that the insurance company will pay the lesser amount between the provider's billed charges and the negotiated rate specified in the contract.
Why it's important to understand:
Cost Management: Understanding the "lesser of" provision helps you manage costs for your self-directed health plan. It ensures you're aware of potential discrepancies between billed charges and the actual amount reimbursed by the insurance company. This knowledge empowers you to make informed decisions about healthcare services. Additionally, “lesser of” may be in a provider’s contract, but not properly configured in the carrier’s claims processing system.
Budgeting: The "lesser of" provision directly impacts your healthcare budget. Knowing how this clause works allows you to anticipate potential out-of-pocket expenses and plan your finances accordingly. As a fiduciary, it is important to know if you are paying more than billed charges.
Transparency: Understanding this provision promotes transparency in your healthcare transactions. It helps you avoid unexpected bills and ensures you're fully aware of the costs associated with your chosen healthcare services.
Provider Selection: Knowing the "lesser of" provision can influence your choice of healthcare providers. You can choose providers who offer competitive rates and are willing to negotiate to ensure you receive the maximum benefits from your self-directed health plan.
Example:
If a provider bills $200 for a service, but your self-directed health plan's negotiated rate for that service is $150, the insurance company will only reimburse $150 under the "lesser of" provision. You would then be responsible for the remaining $50.
By understanding the "lesser of" provision, you can take proactive steps to manage costs, negotiate effectively with providers, and make informed decisions about your healthcare, ultimately maximizing the value of your self-directed health plan.