Why isn't this insurance fraud? If I got into a car accident and the mechanic told me it would be $7k with insurance or $4k in cash, isn't that fraud? (Note: I know mechanics do this, just curious why it's legal)
Doing what you've described would probably be insurance fraud, or at least a contract violation.
To expand on your example, the insurance company contract with the mechanic says that the insurance company will be billed the lowest advertised price. Of course, that contract also says that they will only pay $3k for the services required. The cash customer still hands to be billed the full $7k, however, or risk getting in trouble with the insurance company. That's why it's always a cash discount, and the bill will be for $7k even if they will take less (if you know to ask).
These numbers seem extreme, but they're not that far off - take a detailed look at an EOB sometime.
I'm convinced this is at least partly responsible for the rapidly increasing health care costs in the US.
To expand on your example, the insurance company contract with the mechanic says that the insurance company will be billed the lowest advertised price. Of course, that contract also says that they will only pay $3k for the services required. The cash customer still hands to be billed the full $7k, however, or risk getting in trouble with the insurance company. That's why it's always a cash discount, and the bill will be for $7k even if they will take less (if you know to ask).
These numbers seem extreme, but they're not that far off - take a detailed look at an EOB sometime.
I'm convinced this is at least partly responsible for the rapidly increasing health care costs in the US.