Are Exclusive Insurance Contracts Consumer Abuse?
Medtronic has the market power to create exclusives with insurance firms, UnitedHealthcare most notable; How one T1D fought for better choice
A cabin in the middle of nowhere is the last place any diabetic wants to suffer a hypoglycemic emergency. But Tim, a 40-year T1D veteran, had no reason to be concerned when he laid down to sleep on the old, sagging cabin mattress. He was well in control of his diabetes and was an old pro at managing the condition on camping trips, during travel, and any other environment you could throw at him.
But Tim’s expertise was about to be put to the test.
That night, he awoke suddenly to the sound of his Dexcom alarm. His blood sugar was dropping rapidly. He assumed his CGM was acting up but decided to double-check it with his meter anyway.
On the way to get it, he glanced at his pump. According to his Medtronic pump, he had about 15 units of insulin on board. His initial thought was that his pump must be acting up, too. Fifteen units was an unreasonable amount of insulin for him for any time of day, but it was especially unbelievable for the middle of the night.
Groggily, he scrolled through his bolus history. According to his pump, not long before his Dexcom had alarmed, he had received a massive bolus of insulin. Tim, suddenly very awake, didn’t bother taking the time to understand how it had happened. Instead, he ran straight for the kitchen and began chugging root beers and feverishly eating cookies to offset the flood of insulin now coursing through his veins.
By the time he got around to pricking his finger and testing himself with his meter, his blood sugar was dangerously low but slowly rising.
The veteran diabetic had managed to stave off a serious emergency and live to see another day.
Medtronic’s outrageous explanation of the event, however, truly left its mark on Tim and started him on a fifteen-month-long battle with his insurance company.
Looking for a Better Option
When Tim returned to civilization, his first phone call was to Medtronic to tell them what had happened.
He realized, through some expert detective work of his own, that somehow he had managed to roll over onto his pump in the middle of the night. The pressure from being pinned between him and the sagging cabin mattress was enough to trigger the right pattern of buttons to input a 300 carb meal and deliver his maximum insulin bolus while he slept.
As hard as the explanation was to believe, the response from Medtronic was even harder: They knew that this flaw existed in their firmware. In fact, they had fixed the issue in their newest pump model. But Tim, like so many others still waiting for their warranty to expire, was stuck with the older, defective pump.
It was this experience that convinced Tim to look into other pump options after his warranty was finally up. He decided he wanted to switch to a Tandem pump. Not only were the newer Tandem pumps generally well-liked by users and compatible with his Dexcom CGM, but they had one important feature that Medtronic pumps do not.
Tandem’s firmware can be updated straight to the device similar to how cell phone firmware is updated.
For Tim, this was everything.
By restricting updates to new models, Medtronic and other manufacturers force their users to use outdated products.
Diabetes tech advances in waves, with huge innovations hitting the market at least every two years. But the average pump warranty is four years long. Meaning that Medtronic users will be stuck with outdated tech for at least two years before insurance will cover an update. And Tim had seen firsthand how this issue can cause serious problems.
The UHC Appeals Process
There was just one problem. Tim had UnitedHealthcare insurance through his employer, and UHC had an exclusive contract with Medtronic to only provide their pumps to members.
If Tim wanted a Tandem pump, he was going to have to get it through an appeals process with UHC.
In October 2018, Tim requested an exception and asked that he receive a Tandem pump covered at an in-network rate by his health insurance. He used his near-death experience with the Medtronic pump and Tandem’s ability to update their firmware in the field as his reasons for the switch.
Months later, he received a letter from UHC letting him know his request did not qualify as an appeal, but he never received an explanation as to why.
Eventually, he learned that his UHC insurance did not accept appeals of any form for durable medical equipment (DME) which includes insulin pumps. He spent hours on the phone with UHC looking for an explanation for this policy but never got one. In June 2019, he did, however, receive approval from UHC to file another appeal to get a Tandem pump.
Not surprisingly, this appeal ended in denial. This time, they did provide an explanation, stating that they could not say for certain that his current pump couldn’t be repaired and that his doctor failed to provide proof that a new Medtronic pump would not work for him.
The problem was, Medtronic, like many pump companies, does not, for liability avoidance purposes, repair pumps beyond sending replacement battery caps and reservoir rings. As for his doctor not providing enough information, his appeal letter had requested a peer to peer review be completed with his doctor, but no one from UHC ever talked to Tim’s doctor.
Armed with these arguments, Tim began the escalated appeals process only to receive another denial in January of 2020 with no reason given. He immediately requested an independent review of his appeal. But, not long after, he received a phone call telling him this appeal was also denied.
Finally (Some) Success
With an out-of-country trip upcoming and exhausted by the fifteen-month process, Tim decided to take matters into his own hands. He called Tandem and asked to buy a pump with cash without involving insurance. They told him it would cost $4,995 dollars to pay out of pocket or that he could use his insurance prescription coverage to order a Tandem pump through ExpressRx that would be fully covered.
At about the same time, Tim received a letter from UHC. Apparently, his independent review had been successful after all and Byram Healthcare, who handles many of UHC’s DME orders, would be sending him a new Tandem pump for the in-network price.
Jaded by his year-plus long battle, Tim decided to go through with both orders, assuming at least one would end up being rejected by UHC in another sudden reversal of position.
But, to his surprise, both pumps arrived at his door within a day of each other. Unfortunately, and less surprisingly, Tim also received an explanation of benefits from UHC saying they would not cover the pump they approved through his appeals process. And now, the pump that would have cost him $4,995 if he paid Tandem directly in cash, would cost him $8,322 according to the UHC letter, a 66% upcharge by UHC.
The Problem with Exclusive Contracts
While his fight with UnitedHealthcare is far from over, Tim has already learned an extraordinary amount about the flaws in today’s healthcare system, especially with exclusive contracts.
Because UHC and Medtronic have an exclusive contract, members like Tim are stuck without the ability to choose the medical devices that their doctors believe will work the best for them. And because UHC is one of the largest providers of medical coverage in the US, Tim is not alone. Millions of Americans are stuck without the ability to choose their doctors, drugs, and devices–the supposed hallmark of the free market system.
When it comes to diabetes tech, a field that is advancing at an extremely rapid pace, forcing members to patronize a single company is forcing them to choose tech that may not be the most advanced or the right fit for their lifestyles.
UHC’s restricting choice is especially difficult now because Medtronic is clearly behind Tandem and Dexcom in its technology.
So why, if exclusive contracts are so bad for members, do insurance companies enter into them? Tim’s experience with trying to buy his new pump out of pocket sheds a little light on this subject.
- The cash price for his new pump from Tandem was significantly less than the price charged by UHC for the same pump. And this isn’t unusual.
- Insurance firms negotiate higher prices with suppliers of products and drugs that have bundled rebates to make up the difference later on.
- The consumer, supposedly the customer of UHC, does not see any benefit and is often the victim of this double-dipping.
If your plan dictates you pay a 20% copay for a DME like an insulin pump, then you will pay 20% of the inflated price of the product, not the true price after the rebate is factored in. In this case, the $3,327 UHC upcharge ($8,322 – $4,995) would mean that a 20% co-pay is actually a 33% co-pay on the true price.
When insurance companies enter into exclusive provider deals, such as the one UHC has with Medtronic, they are typically not interested in partnering with companies that offer the lowest cost to the consumer. In fact, it is more profitable for UHC to partner with companies that will charge more upfront and then reimburse UHC with higher rebates later on.
Both Medtronic and UHC win while members get stuck paying much higher copays or out of network costs than they should.
Even outside of the cost to the consumer, these types of contracts can easily stifle innovation within the medical field by forcing patients to buy from larger rather than more innovative companies. Meanwhile, smaller companies with better tech don’t have access to enough consumers to continue to develop newer, better products.
Fighting for Your Right to Choose
Despite the rather large bill Tim expects to receive from Byram, he did manage, in the end, to get one Tanden pump covered by his insurance. And he did so using a workaround that allows some pumps, like Tandems and Omnipods, to be purchased through prescription benefits instead of DME.
For others who are looking to shop for diabetes equipment outside of what is normally covered by their provider, Tim has these tips.
- “It is worth looking at the prescription workaround by talking to the pump manufacturer. The company can usually tell you if this trick will work with your particular plan and their particular product.
- “File an appeal, making sure you record all case numbers, names of people you’ve talked to and dates calls took place.” He also recommends asking for direct phone numbers and writing down the exact words and phrases your insurance company wants you to include in your appeal letters.
- “Be prepared for an extended battle that will include a lot of time on hold and trying to track down the right people to talk to.
- “Don’t get discouraged. The more of us who are willing to push back against these exclusive policies, the more attention they will start to receive. And hopefully, someday, these policies will be thrown out in favor of ones that are actually meant to benefit the consumer.”