Have you ever received a bill from you doctor’s office or hospital with charges on it you thought were covered by your health insurance plan? If you are like me, the answer is a resounding, yes!
When this happens, obviously someone’s made a mistake. The questions is, was it an error made by your insurance company or by you.
Sometimes it’s a tough call, so the first thing you should do to get to the root of the problem is to review your health insurance plan and make sure you fully understand what and how it pays. It’s always a good idea to rule out mistakes you might have made before you call someone else to tell them they’ve made one. This is a lesson I’ve learned the hard way.
To avoid misunderstandings, let’s start by defining 6 basic insurance terms:
- Premium – This is the payment paid to the insurance company each month (quarterly, or yearly) to keep your health insurance coverage active.
If you miss payments—your coverage can and will be terminated.
- Deductible – the amount you must pay, each year, for medical care or services before your insurance will begin to pay for your coverage.
Let’s say you go to the doctor and she tells you that you need to have a procedure that is covered by your insurance. After the procedure, you look at the $1800 bill and are furious your insurance company didn’t pay anything. You think this can’t be right—especially since you’ve been paying those awful premiums every month so you’d have coverage when you needed it. The thing is, if you have a $2000 deductible, you are responsible for paying the first $2000 for covered medical services before the insurance company will pay. The bill is correct, you are responsible for the entire $1800.
- Copayment (copay) – is a fixed amount you must pay for a covered service. Copays can vary depending on factors such as primary care physicians vs. specialists or generic medications vs brand-name drugs—things like that.
If your plan has a $30 copay for primary care doctor visits, you are required to pay $30 for each visit—usually due at time of service. Do not confuse copays with coinsurance, they are very different.
- Coinsurance – you are agreeing to share the cost of medical care with the insurance company. If your coinsurance is 20%, you will be responsible for 20% of the cost. Coinsurance does not get paid until you’ve paid your deductible.
You go back to the doctor (and pay your $30 copay) because you are now having problems with your feet. This time the doctor thinks you would benefit from orthotic inserts for your shoes. You both check your plan, and yes orthotics are covered—great. They are delivered to you two weeks later, along with a bill. The cost of the orthotics is $600. Can you calculate how much you would owe? Don’t forget, you need to pay your remaining deductible of $200 before the insurance company will pay anything, then your coinsurance will kick in. You and your insurance company will split the remaining cost—they’ll pay 80% and you’ll be responsible for the remaining 20%.
- Annual out-of-pocket maximum/limit: This tells you the most you would have to pay—during a given year—before your health insurance company would start to pay 100% for covered health benefits. Premiums are not included when calculating total out-of pocket maximum.
This number used to be confusing because sometimes key elements like copays or deductibles could be excluded. Now, according to HealthCare.gov this limit must include deductibles, coinsurance, copayments, or similar charges and any other expenditure required of an individual which is a qualified medical expense for essential health benefits.
- In-network / Out-of-network: Insurance companies negotiate discounted rates and enter into contracts with certain doctors, hospitals, pharmacies, and labs. The providers who agree to these terms are listed as in-network. Providers who do not have similar arrangements are listed as out-of-network.
It is important to know whether a provider you choose is in-network or out-of-network. Your costs will generally be less when using in-network providers since these providers have already agreed to a discounted rate. Plus, out-of-network providers are sometimes subject to larger copays, larger coinsurance, and bigger deductibles. It’s also important to note that out-of-network cost-sharing is not included when calculating out-of-pocket maximum/limits.
Understanding the many elements of health insurance and how they relate to one another within a plan can be confusing, especially when there is so much to consider. The best way to get a handle on your health insurance coverage is to first look at the Summary of Benefits and Coverage. This is a brief document insurance companies are required to provide to consumers. Does your plan require a referral to see a specialist? You can find the answer to this and other questions in this document. It will tell you everything you need to know about your plan by summarizing the key features such as: covered benefits, cost-sharing requirements, and coverage limitations—all in an easy to read format. It’s also a great resource to use to make cost comparisons when choosing a new plan
We all know insurance companies delay and deny payment on submitted claims all the time. Take the time to understand your health insurance so the next time you receive an Explanation of Benefits (EOB) you can read it and confidently understand whether it is correct or not.
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