Why Upcoding and Surprise Billing Matter to Benefits Brokers 1

Why Upcoding and Surprise Billing Matter to Benefits Brokers

Upcoding and surprise billing remain serious problems within our nation’s healthcare payment system. Both are issues that have gotten the attention of politicians in recent years. Both are a big problem for consumers, too. But guess what? Even benefits brokers should be concerned by upcoding and surprise billing. It directly affects their livelihoods.

Benefits brokers are insurance experts whose specialty is helping employers craft ideal benefits packages for their workers. And because health benefits consume a good portion of every benefits package, what happens in the health insurance market matters. Every time prices increase, brokers have a harder time finding plans their clients can afford.


The Upcoding Problem

Upcoding is a billing strategy through which medical providers bill insurance companies for services and procedures that are more expensive than what a patient receives. Research shows that increased healthcare spending in the U.S. directly correlates with the increase in upcoding.

For example, spending on emergency department services increased from 3.9% of the total healthcare spending in 2006 to 5% in 2016. Researchers looked at data from five states between 2012 and 2019 to see if there were any links between increased expenditure and upcoding. What they learned was surprising.

Medicare updated its group payment schedules in 1998 and again in 2007 to provide more coverage for severely ill patients. As a result, research data indicates that hospitals and other providers assigned more patients to higher-paying groups commensurate with the Medicare changes. In addition, geographic areas with a higher number of Medicare Advantage enrollees witnessed a higher percentage of more aggressive upcoding.

The Surprise Billing Problem

Surprise billing occurs when a patient receives services that are not covered by their health insurance plan. The patient receives a surprise bill in the mail. That bill needs to either be paid or disputed. The problem for many patients is that they do not understand medical bills. They do not know what they are dealing with, even if they want to fight.

Washington took steps during the Trump administration to minimize surprise billing, yet the practice continues. Surprise billing is an ongoing problem because our healthcare payment system remains too complex and convoluted. Few people thoroughly understand that cheating the system is easy.

The Benefits Broker’s Perspective

So, how does all this tie into what a benefits broker does? BenefitMall, a brokerage general agency that makes more than a hundred carriers available to thousands of brokers, says brokers constantly fight to find affordable health plans for their clients. The best among them leave no stone unturned in the attempt to help clients get the best benefits they can.

Upcoding and surprise billing directly affect benefit brokers in several ways. First, as the research indicates, upcoding and surprise billing add to healthcare service costs. Providers engage in the two practices because insurance companies are willing to pay the bills. However, insurance companies are only passing those costs on to subscribers.

Second, insurance carriers suffer harm to their reputations whenever news about upcoding or surprise billing surfaces. Whether a carrier’s reputation hit is deserved or not, negative perceptions make it more difficult for benefits brokers to sell their products.

Upcoding and surprise billing are bad practices all the way around. They have no place in our healthcare payment system. The two approaches hurt consumers the most, breaking employers and benefits brokers. And who gains? Hospitals and other healthcare providers.


I am a writer, financial consultant, husband, father, and avid surfer. I am also a long-time entrepreneur, investor, and trader. For almost two decades, I have worked in the financial sector, and now I focus on making money through investing in stock trading.