Why Doctors Bill Insurance Companies at 200%?

I recently reviewed an insurance settlement of a claim my friend received. The claim says, Doctor billed the Insurance company for $4500. Insurance company adjustments/discounts were shown as $2400.  Finally insurance company paid the doctor $2100. I don't understand. I went back and reviewed all the claims I have. The original claim is always more than 200% of the amount that insurance company actually paid.

Does all insurance companies get this hefty discount from the doctors? How does this claim work? Quite baffled at the numbers and the way finally everybody gets settled.

I looked it up on Google and found a page on wiki that almost explained why that insurance company received such a benefit. The PPO.

The idea of a preferred provider organization is that the providers will provide the insured members of the group a substantial discount below their regularly-charged rates. This will be mutually beneficial in theory, as the insurer will be billed at a reduced rate when its insured utilize the services of the "preferred" provider and the provider will see an increase in its business as almost all insureds in the organization will use only providers who are members. Even the insured should benefit, as lower costs to the insurer should result in lower rates of increase in premiums. Preferred provider organizations themselves earn money by charging an access fee to the insurance company for the use of their network. They negotiate with providers to set fee schedules, and handle disputes between insurers and providers. PPOs can also contract with one another to strengthen their position in certain geographic areas without forming new relationships directly with providers.

But isn't almost 50% discount a very hefty discount? I am wondering who had to pay the full amounts billed to them!!


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