Understanding Health Insurance

Health insurance is a necessity that many struggle to fully understand.  It is important to understand what our patient’s insurance coverage allows and how the insurance billing process works.  This is a discussion that happens daily in the clinic, because many people do not understand what their insurance benefits really mean.  A better understanding of health insurance will allow patients to make more informed decision and help to reduce some of the anxiety that comes along with receiving medical services.

The Deductible

Most health insurances have a deductible. I typically explain that the deductible is your “buy in” for health insurance.  Until the deductible is met, the patient is responsible for the full contract rate allowed by their health plan.  It is not uncommon for deductibles to be in the realm of $5,000 per year.  This means that the patient may be responsible for the first $5,000 of your health costs prior to their insurance “kicking in”.  That being said, the contracted rate for most health is often a significant reduction from the amount billed.  Providers will often have to process their billing before being able to quote specific contracted rates, as these vary among different health plans.  Having the deductible discussion prior to initiating treatments can help reduce some of the angst that can come with patients receiving statements in the mail.

Share of Cost

Once a patient has met their deductible, their health insurance will then begin to offer coverage for all or part of their healthcare costs.  Health plans will typically quote you a percentage that is covered, whether that percent is 40% or 100% covered.  Many health plans will offer an 80% coverage after deductible, meaning that your patient would have a 20% share of the cost or “co-insurance”.  This is again in reference to the contract rate that the health plan has established with your facility.  In this example, the patient would be responsible to pay 20% of the contract rate for any service that your health insurance has set for the remainder of the year after deductible.

Out of Pocket Maximum

Many health plans will have a maximum amount that the patient is responsible to pay in a given year, this is the “out of pocket max” or “stop loss”.  Typically every dollar that is spent by the patient on healthcare in a given year is applied to this out of pocket maximum.  This usually includes: payment towards deductible, share of cost payments, and copay amounts.  Once your patient has reached the out of pocket maximum, they are typically covered at 100% for the remainder of the year.  This means that they would not be responsible to pay share of cost or co-insurance for services until their health plan renews.  The deductible and out of pocket max both start over at the beginning of your plan year.

Copayment

A copay is an amount that has been set by the patient’s health plan.  This amount is charged each time that the patient sees certain types of providers.  If the patient has a copay of $45 dollars to see a specialist, this amount will be charged with each visit that they have with this provider.  This copay amount will often vary by different types of provider.  This means that patietns may have a different copay amount for primary or for seeing a physical therapist.  In addition to copay, the patient may also still have a share of cost amount that is due after the billing process has been complete.  This means that even though a copay is collected, the patient may still get a bill for services rendered once the billing cycle has been completed.  The copay amount is often deducted from the insurance contract rate, so opting out of collecting copays is really not a good practice.

The best bit of advice that I can give about health insurance is to call the health plan.  They ultimately make the final decision on coverage and benefits.  Verifying insurance benefits is done as a courtesy to our patients, but it does help to ease some of the concerns and avoid a more uncomfortable conversation after services have been rendered.  Helping your patients to have a better understanding of their health benefits can make all of the difference in the billing process and timely payments..