I’ve been limping badly now for over a month. I’ve started physical therapy, which, along with the daily exercises my therapist has given me, has helped somewhat. But I would like to know more about what’s going on with my left leg. So I met with my doctor earlier this week to see if he could order an MRI. His nurse called me the next day to say that my insurer had said yes but wanted me to use a local provider that is, presumably, in my insurer’s network. The alternative was the provider that my doctor usually refers people to.

So I called my insurer and found out that when I use an in-network provider, the insurer will pay 90% of the approved part of the charge, whereas if I use an out-of-network provider, the insurer will pay only 75% of the approved part of the charge.

Start with the assumption that the in-network provider’s charge is the same as the out-of-network provider’s charge. (I know that assumption is almost certain to be wrong; I’ll relax it later in this post.) Also assume that the insurer approves the same part of the charge, whether or not the provider is in-network or out-of-network.(Again, I bet this assumption is wrong.)

Let’s say the charge is about $1,400 and that the approved part is $1,400. Then I would pay $350 out of network or $140 in network. So I would save $210 by going in network.

Now relax the assumption. Say the insurer approves $1,000 for out-of-network and the same $1,000 for in-network, but has negotiated an in-network price with the provider of $1,000, whereas the out-of-network charges $1,400. Then I would pay $250 + $400 = $650 for out of network, but only $100 for in-network.

This might be rational pricing. The insurer has found a provider that is more efficient and willing to share some of the efficiency gains with the insurer. So it tilts me in that direction. It’s also possible that I’ll get in to get the MRI later if I use the in-network rather than the out-of-network. Which means that I’m paying more for the convenience of quicker out-of-network service. Also rational pricing.

Stay tuned.

Postscript: I told my doctor about the North Dakota MRI provider that charges between $400 and $690 for an MRI and targets Canadians who would be paying out of pocket and don’t want to wait in Canada’s queues. He suggested that the prices are so low because they aren’t out to maximize profits. I responded that I thought the reason is that they are trying to maximize profits, but have to compete for customers who are paying out of their own pockets, unsubsidized by insurance.