Little known fact: for more than a decade, I worked for a company that provides medical billing services to physicians. I never actually did medical billing, but that’s a story for another day. Besides a paycheck and a reason to get out of bed each day and many wonderful friendships, that job also gave me a behind the scenes look at the financial side of the healthcare industry, from the copay you make at the office to the explanation of benefits you receive from your insurance company to the unexpected bill you just received from the doctor’s office.
Since that company is now one of my clients and I continue to spend hours each day reading about the details of the healthcare industry, I feel like I know a thing or two about what happens after you go to the doctor or have a surgery. Also, since I have been a patient myself, I know how confusing the process can be once the bills start rolling in. Finally, since more and more stories are showing up in the national media about the confusion of medical bills and since only four percent of responders answered all ten questions correctly in a survey about health insurance terms and concepts, I thought I would make an unprecedented move here and combine my previous work experience with my current blog audience. So, I offer five words to help you understand your medical bills.
WARNING: This post is long and potentially boring, and since you are healthy, you might decide to skip it. I get it. I do. And if you already have a handle on this process, then you have my permission. But much of this information is important to know before you get sick or end up in the hospital. And I wrote it as succinctly and simply as I could. So, might I suggest you print it out or pull it up on your tablet, pour yourself a nice glass of lemonade or ice tea, and go sit on the porch and read this? I think it’s important.
- Premium. Since having health insurance is now mandated in the United States under the Patient Protection and Affordable Care Act, the first word most people need to know about healthcare and insurance coverage is premium. Simply, the premium is the amount of money you pay to the insurance company to provide you with insurance coverage. A few things to keep in mind:
- Not all insurance plans are the same. Read the fine print to find out what coverage you really have.
- If you are employed and receive insurance through your employer, chances are your employer picks up at least part of that cost. Remember that if you ever decide to change jobs or start your own business. The amount you pay may not be the full amount of the premium.
- Also, if the premiums feel overwhelming for your budget, you may be eligible for a subsidy from the federal government. However, those subsidies are available only if you are not offered “affordable” (according the the federal government’s definition) insurance by your employer and if you purchase insurance through a state or federal exchange (by the way, these premium subsidies were at the heart of the recent Supreme Court decision in King v Burwell). Try this Health Insurance Marketplace calculator from the Kaiser Foundation to see if you are eligible.
- If you are very young, very poor, disabled, or aged 65 or older you may qualify for CHIP, Medicaid, or Medicare, which are government-sponsored health insurance programs for these specific groups. Start at Healthcare.gov to see if you qualify for one of these programs.
- Co-pay/Co-insurance. Many insurance plans offer a set payment amount for certain types services. Co-pays are often first-dollar expenses you pay when you have a visit to the doctor or purchase a prescription. Once you pay the co-pay, the insurance company will pay the rest of the charges to the doctor, hospital, or pharmacist. Similarly, co-insurance often works out as a percentage of the charge for services when there isn’t a co-pay. For instance, if you have an xray or a lab test, your insurance may agree to pay 80 percent of the charge, and you have to pay 20 percent. That 20 percent is your co-insurance.
- Deductible/Out-of-Pocket Maximum. The deductible generally is the amount you are required to pay each year before the co-insurance kicks in. For instance, if you injure your ankle and go to the doctor’s office, you will pay the co-pay for the doctor’s visit, but if you have an xray and have not met your deductible, you will have to pay 100 percent of the xray charges or up to the deductible amount. Once the deductible is met, the coinsurance will kick in, and you will have to pay only 20 percent. Most plans also have an out-of-pocket maximum. Depending on the plan, that maximum may be in addition to any co-pays established by the plan, and it may or may not include the deductible. Essentially, the out-of-pocket maximum is the total amount of co-insurance you will have to pay for the year. Keep in mind that many people now have high deductible health plans (HDHP). That means even if you have health insurance, your coverage will not kick in until you spend $1,000, $2,500, or as much as $5,000 of your own money, depending on your plan. While co-pays may apply before the deductible, the cost of any lab tests, xrays, or other procedures must be paid for by you before your insurance even applies. While HDHPs generally offer lower premiums, they can really put patients in a financial bind if they don’t plan ahead and save for the cost of the deductible in the event of a health emergency.
- Network-in or out? This is the most difficult part of the health coverage process. First, most insurance companies are part of a larger insurance “network” that connects you and a whole group of patients to a group of “preferred” doctors. The reason the doctors are “preferred” is not because they have special medical credentials but because they have agreed to accept a discounted rate for their services. This is why insurance companies either force or strongly encourage you to receive services only from their “in-network” or “preferred” providers. However, because healthcare professionals often are acting as independent contractors, when you receive medical care, even at an “in-network” facility, not all the providers you see may be in network. Each provider or provider group can negotiate with the insurance company individually. As a result, many patients often receive what are known as “surprise” bills from out-of-network medical providers because the insurance company paid nothing for the services. This is called balance-billing and is legal in most situations. A few things to note:
- All the information above about co-pays, co-insurance, deductibles, and out-of-pocket maximums? That typically only applies to services by in-network providers. Some insurance plans have separate co-pays, co-insurance, deductibles, and out-of-pocket maximums for out-of-network providers or often don’t cover services by out-of-network providers at all.
- When you are choosing a primary care provider or arranging for a planned medical service, do your homework beforehand to find in-network providers. Remember, don’t just ask the hospital if they are in-network for your insurance. Talk to the laboratory, find out which radiologists the hospital uses, call the surgeon’s office, and talk to the anesthesiologist. If you will receive physical therapy, find out if they are in network. Also call the pharmacy, the home health agency, the medical equipment provider—anyone who will be providing and billing for medical care. It’s a lot of work, but it could save you thousands of dollars.
- Just in case, do the same research about the emergency departments in your area. Again, don’t just talk to the hospital. Find out if the emergency physicians (whom will bill you separately) also are in-network with your insurance.
- If you receive a surprise medical bill, appeal it, especially if it was for an emergency service that could not have been planned for. The Consumer Reports’ Consumers Union offers an interactive tool to help patients know how to stand up against surprise medical bills in each state.
- You may also need to talk with your provider’s office about negotiating a lower fee and/or setting up a payment plan for your bills, especially the surprise kind. But remember, there’s no one guilty party in these situations. The doctor did provide a service and does deserve to be paid, too. Often, physicians do not become in-network or preferred providers with an insurance company because the discounted rate they are offered is unfair.
- EOB. That piece of paper the insurance company sends you that says “this is not a bill” may hold the secret to successfully navigating the medical billing landscape. Anytime you receive a medical service and provide your insurance information for billing, you should receive an explanation of benefits (some insurance companies only provide online EOBs). On the EOB, you will see several important pieces of information.
- The provider. This could be a place (like the hospital) or a person (like a radiologist or surgeon). Remember, there may be people performing services for you whom you never see (like the radiologist or a laboratory or an anesthesiologist). If you don’t know who the provider is, call and find out.
- Date of service. This is the day you had the service. Confirm that you had a service on the date in question. If it’s wrong, call the insurance company and your doctor’s office and get it changed. Wrong dates of service can result in denied claims by the insurance company.
- Service provided. This will be a code which will mean nothing to you. It’s called a CPT (Current Procedural Terminology—usually all numeric or beginning with an “E”) or HCPCS (Healthcare Common Procedure Coding System—usually beginning with a letter other than “E”) code. You can look up what your code means at the American Medical Association website or at the Medicare website (note that the charge and allowed amounts listed on the Medicare site are for Medicare patients only).
- Charge amount. This is the amount billed to the insurance company by your medical provider. This is their standard charge for all patients.
- Allowed amount. This is the amount that your provider agreed to accept if she is in-network with your insurance plan.
- Discount. This is the difference between the charge amount and the allowed amount for in-network providers. You do not owe this amount, and the provider has agreed to write off this portion off your balance if he is in-work.
- Co-pay. This is the set rate co-pay established for the service. You owe this amount to the healthcare provider and possibly already paid it at time of service.
- Co-insurance. This is the percentage rate co-insurance established for the service multiplied against the allowed amount (i.e. if your co-insurance rate is 20 percent, then this would be 20 percent of the allowed amount.) Keep in mind that if you are close to meeting your deductible, the amount may be more or less than the percentage rate depending on the amount listed in the deductible column. You owe this amount to the healthcare provider.
- Deductible. This is the portion of the allowed amount applied to your deductible. You owe this amount to the healthcare provider.
- Amount paid to provider. This is the amount the insurance company paid or will pay to your provider. You do not owe this amount.
- Amount owed. This is a combination of the co-pay, co-insurance, and deductible you owe to the provider who will send you a statement for payment.
- UCR. This stands for usual, customary, and reasonable. When providers are out-of-network, insurance companies can respond in several ways. They may pay nothing if you don’t have out-of-network benefits. They may apply the entire bill to an out-of-network deductible, which is usually separate and larger than the in-network deductible. Or they may pay at a reduced rate according to what they call a UCR, which is essentially their own determination of what the service is worth. Usually, the provider will turn around and bill you for the UCR (the balance-billing we spoke of above).
In short, educate yourself. It’s a complicated system, and it’s only going to get more complicated. But if you are unfortunate enough to need healthcare, you are fortunate enough to live in a country where the care is pretty good most of the time for a lot of people. Make sure the headache of billing isn’t the most unfortunate part of the process.