Surgical Expense Benefits

Surgical expense coverage provides benefits for physicians' charges associated with surgical procedures. While one tends to think of a surgical procedure as involving cutting, insurance contracts typically define the term broadly to include such procedures as suturing, electrocauterization, removal of a stone or foreign body by endoscopic means, and the treatment of fractures or dislocations.

Even though surgical expense coverage is frequently sold in connection with hospital expense coverage, surgical expense coverage normally provides benefits for surgery performed not only for patients in the hospital (either as inpatients or outpatients) but also for outpatients in a free-standing (that is, separate from a hospital) ambulatory surgical center and in a physician's office. To discourage unnecessary hospitalization, some surgical expense benefit contracts actually provide larger benefits if a procedure is performed as outpatient surgery.

Outpatient surgery also results in charges for medical supplies, nurses and the use of facilities. As mentioned, these charges are often covered if surgery is performed on an outpatient basis in a hospital or outpatient surgical facility.

Benefits
Surgical expense coverage traditionally provided benefits only for the fee of the primary surgeon. However, newer contracts often provide separate benefits for assistant surgeons and anesthesiologists as well. Because both hospital expense coverage and surgical expense coverage often cover anesthesia, it is important that an overall medical expense plan be properly designed to make sure this benefit is neither omitted nor overlapping. The major difficulty in this regard occurs when different providers are used for the hospital and surgical benefits.

In providing basic surgical expense benefits, some insurance companies and some Blue Shield plans use a surgical fee schedule in which charges are paid up to the maximum amounts specified in the schedule of surgical procedures in the master contract. However, the majority of surgical expense plans follow the approach used in major medical contracts and provide benefits to the extent that surgical charges are reasonable and customary. Unfortunately, the precise meaning of these terms in insurance contracts is vague, and each company determines what it considers reasonable and customary. In general, reasonable-and-customary charges (sometimes referred to as usual, customary, and reasonable charges or prevailing charges) are considered to be those that fall within the range of fees normally charged for a given procedure by physicians of similar training and experience within a geographic region.

The usual practice of insurance companies is to pay charges in full as long as they do not exceed some percentile (usually ranging from the 85th to the 95th) of the range of charges for a specific surgical procedure within a certain geographic region. For example, if an insurance company uses the 90th percentile and if for a certain procedure 90 percent of the charges are $300 or less, this is the maximum amount that is paid. The covered person is required to absorb any additional charges if he or she uses a more expensive physician. Through the use of computers, insurance companies now have statistics that categorize expenses by geographic regions that are as small as the ZIP codes of medical-care providers. Thus, while $300 may be the maximum reasonable-and-customary amount in one part of a metropolitan area, $350 may be considered reasonable and customary in another part of the same metropolitan area.

Blue Shield plans often use a somewhat modified approach in determining the maximum amount that is paid. Each year, physicians file their charges for the coming year with the Blue Shield plan, and during that year the plan pays charges in full up to some percentile of these filed charges. Under some plans, the physicians agree not to charge Blue Shield patients amounts in excess of their filed fees. Participating physicians in other Blue Shield plans agree to accept any Blue Shield payment as payment in full, particularly for employees with an income level below a certain amount, such as $10,000 for an individual and $15,000 for a family.

Second Surgical Opinions
In an attempt to control medical costs by eliminating unnecessary surgery, many medical expense plans, both traditional and managed care, provide benefits for second surgical opinions. While such opinions undoubtedly cause some patients to decide against surgery, it is still unclear whether the cost savings of second surgical opinions are illusory. For example, surgery may still be required at a later date, or long-term costs for alternative treatment may be incurred.

A voluntary approach for obtaining second surgical opinions is often used. If a physician or surgeon recommends surgery, a covered person can seek a second opinion and the cost is borne by the medical expense plan. In some instances the benefit is limited to a specific maximum, but in most cases the costs of the second opinion, including X-rays and diagnostic tests, are paid in full. Some plans also pay for a third opinion if the first two opinions disagree. When there are divergent opinions, the final choice is up to the patient, and the plan's regular benefits are usually paid for any resulting surgery. As an incentive to encourage second opinions, some plans actually provide larger benefits for a covered person who has obtained a second opinion, even if it does not agree with the first opinion.

In the last few years, it has become increasingly common for medical expense plans to require mandatory second opinions, which may apply to any elective and nonemergency surgery but frequently apply only to a specified list of procedures. In most cases, a surgeon selected by the insurance company or other provider of benefits must give the second opinion. If conflicting opinions arise, a third opinion may be obtained. The costs of the second and third opinions are paid in full. In contrast to voluntary provisions, mandatory provisions generally specify that benefits are paid at a reduced level if surgery is performed either without a second opinion or contrary to the final opinion.

The trend toward mandatory second opinions has had an interesting result. Because many employers felt money was being saved under their voluntary programs, wouldn't it be logical to save more money by making the program mandatory? Unfortunately, the opposite situation has often been the case: people who voluntarily seek a second opinion are frequently looking for an alternative to surgery, while those who obtain a second opinion only because it is required are more likely to accept surgery as the best alternative. Employers have also found that a second opinion by a surgeon is still likely to call for surgery. As a result, there seems to be a growing feeling that the cost of mandatory second opinions may exceed any decrease in surgical benefits paid. Consequently, some employers have returned to voluntary programs or stopped providing coverage for second opinions altogether.

Exclusions
As with hospital expense coverage and virtually all other types of medical expense coverage, exclusions exist under basic surgical expense contracts for occupational injuries or disease, certain services provided by government agencies, and cosmetic surgery. All surgical expense contracts have an exclusion for certain types of dental surgery. However, the extent of the exclusion varies and care must be taken to properly integrate any dental coverage with other basic coverages. At one extreme, some contracts exclude virtually any procedures associated with the teeth or disease of the surrounding tissue or bone structure. At the other extreme, a more common exclusion eliminates coverage for most dental procedures but does provide surgical benefits if a covered person is hospitalized for the removal of impacted teeth or for surgery of the gums or bone structure surrounding the teeth. It is interesting to note that although benefits for oral surgery may not be paid even if a covered person is hospitalized, the hospital expenses are often covered under hospital expense contracts.