Insurance

Do you know what your insurance coverage is?  Have you ever read the details of your policy?  It’s almost as clear as reading the IRS instruction book.

Insurance, like any other field, has its own vocabulary.

Premium The amount of money paid to buy an insurance policy.  This can be paid either by the individual, or by the employer (or, I suppose by anyone feeling both wealthy and altruistic).

People who purchase private insurance pay their own premium.  Some people who have insurance through an employer also pay their own premium – or their employer might pick up part of the cost.  Things can get complicated when tax laws come into play; in some instances, the employer is prohibited from paying a particular employee’s premium (and it really sucks to know that the company is paying for most people’s insurance and is willing to pay for yours, but the IRS says you have to pay for your own).

BenefitWhat the insurance policy will pay toward a person’s medical bills.

When insurance pays 100% of the cost of preventive care, that is a benefit.  When labs and x-rays are covered at 80%, that is a benefit.  PPO plans pay a higher benefit to “in network” doctors and hospitals than to “out-of-network”  providers.  For instance, I can go online and look at the list of hospitals that have agreed to accept whatever amount the insurer decides to pay.  If I obtain care there, insurance will pay a 70% benefit and I will owe 30% of the bill.  If I go to someone who isn’t on the list, insurance will only pay a 50% benefit and I will owe the remaining 50%.

The catch is that the benefit doesn’t usually cover everything.  Patients must usually pay a certain amount out-of-pocket before any benefit will be paid.  This brings us to the…

DeductibleAmount that the insured person must pay annually before receiving a benefit

When my son hurt his arm, he needed an x-ray, which cost $352.03.  At the time, our deductible was $200, which we had to pay before any insurance benefits were available.  Deduct $200 from $352.03, to see that the insurance benefit was paid on $152.03 of the x-ray bill.

Whatever your deductible is, you must pay that much for medical care before insurance benefits are available.*  This resets at the beginning of every year.  It’s an annual deductible.

Money-saving tip:  Check your policy.  Many policies have a nifty little clause stating that if someone didn’t meet their annual deductible, any amount paid toward the deductible in the final quarter of a year would be credited to the following year’s deductible.  When you know about it ahead of time, you can make plans accordingly.  It’s a great way to save a little money if your medical expenses aren’t extreme.

Co-InsuranceAfter the deductible is met, the remaining amount owed after the insurance benefit is paid.

Taking the previous example, first we paid a $200 deductible.  Insurance paid an 80% benefit on the remaining $152.03, leaving the remaining 20% ($30.41) as the co-insurance amount for us to either pay or submit to secondary insurance.

For another example, if I have a $1,500 annual deductible (which I now do), and my $3,000 MRI is covered at 80%, the insurer will apply the first $1,500 to my deductible.  Then the insurer will pay 80% of the remaining $1,500 (which is $1200), leaving a co-insurance amount of $300 for me to pay (or submit to secondary insurance if I had a second policy).**

Primary InsuranceThe insurance policy that gets billed (spell-check thinks this should be “build”) first.
Secondary InsuranceFor a person who is covered under two different insurance policies, the insurance that gets billed second (after the primary policy has paid).

Some employer-based policies cover both the employee and a spouse.  If my husband’s employer-provided insurance covers me, and my employer-provided insurance covers him, then for me: my policy is primary and his is secondary.  My medical bills would all be submitted to the insurance carrier provided by my employer (my primary coverage); after that insurance has processed a claim, the remaining amount owed would be sent to the insurance provided by my husband’s employer (my secondary coverage).  On the other hand, my husband’s primary coverage is through his employer and my primary insurance would be his secondary.  This isn’t as common as it used to be.  Since insurance has gotten so expensive, employers are dropping family coverage unless the employee specifically requests it.

With children covered by two policies, there is usually a clause in the contracts defining which policy is primary and which is secondary.

Negotiated DiscountAmount that the insurer refuses to allow the provider to charge.  This saves the patient and the insurer money, and presumes to assure that the provider that it won’t get stiffed by a patient who doesn’t have the money to pay for care.

In reality, the preceding MRI example isn’t quite so straightforward.  The insurer looks at the $3,000 fee and says, “That’s too much to charge for an MRI.  The price is now $1500.  The diagnostic imaging center has to write-off the other $1500.  People who don’t have insurance are stuck paying the full $3000 if they don’t know to arrange a discount in advance.  The insurer will apply $1500 to the deductible, then pay 80% of the remaining $500.

Likewise, my son’s x-ray charge was $352.03, but the insurance company negotiated an $80.17 discount.  $200 went toward the deductible, insurance paid 80% of the remaining $71, I paid 20% of the $71 (plus my deductible), and the hospital had to eat the other $80.

  • My doctor charges $100, but insurance “negotiated” a $13.26 discount, so the doctor really only gets $86.74
  • The lab charges $190 every six weeks, but insurance only pays them $32; I pay $8 and the lab has to write-off the remaining $150
  • My rheumatologist charges $385, but insurance knocks $95.66 off that amount
  • An $85 tetanus boost is reduced to $65.71
  • A $219 charge for having the radiologist read my MRI was reduced to $128.02
  • A $134 visit to the physical therapist is reduced by $58 (at twice a week, that adds up in a hurry)

Co-Payment (aka co-pay)Flat fee that the insured patient must pay for some services before receiving any insurance benefit.

If your insurance plan says you need to pay $30 (or $20, or $40, or any specific dollar amount) when you visit the doctor, that is a co-payment.  The idea is that insurance keeps the cost of care down for patients, but we need to have a little skin in the game so that we don’t view medical care as “free” and will contemplate whether an appointment is truly needed.

After patients pay their co-pay, the insurance benefit will be available to pay toward the remainder of the bill.  This is completely separate from the deductible.  For instance, if I go to the emergency room, I pay a $75 co-pay just for walking in the door.  After that, I owe my annual deductible (if I haven’t met it yet), and after that, insurance will pay an 80% benefit.

Money-saving tip:  Some policies have a little-known clause saying that patients only owe one co-payment per day.  If I see my PCP on Monday, my podiatrist on Wednesday, and my rheumatologist on Friday, I will owe three separate co-pays.  However, if I can schedule things carefully so that I see all three doctors on Monday, I’ll only owe one co-pay.  Insurance will cover the rest.  Check the details of your policy to see if you can take advantage of a similar benefit.

Balance BillingWhen a medical provider charges you the difference between what insurance covers and what he charges.

Some insurance policies prohibit balance billing.  The insurance company “negotiates” a fee they’re willing to pay, and doctors must write-off the balance.  Other policies, however, allow the doctor to bill patients for the balance.

I’m accustomed to this at my kids’ dentist, where insurance will pay $165 of the $180 fee, and the dentist balance-bills us for the remaining $15.

  • On my new insurance policy, prefered providers will be covered at 100%, balance billing prohibited.  If the doctor bills $100 and insurance negotiates down to $80, the insurer will pay the doctor $80 and that’s all he gets.
  • Participating providers will be covered at 50%, balance billing prohibited.  If the doctor bills $100 and insurance negotiates down to $80, the insurer will pay the doctor $40 and I will pay the doctor $40, and he writes off the other $20.
  • Non-participating providers will be covered at 50%, balance billing permitted.  The doctor can charge me $100 and I’d get $40 back from the insurance company.

Ineligible Charges:  Things not covered by insurance.

Occasionally, insurance companies will say that something isn’t covered at all – either because the policy excludes it (like my orthotics), or because it was coded incorrectly.  The patient is stuck paying this amount, unless it’s possible to talk someone at the doctor’s office into resubmitting the claim with different coding.  If it was me being asked to do extra work for no pay so that you can save money, I suspect I wouldn’t be too happy about it.  When someone goes out of their way to resubmit a claim, it pays to let them know you’re thankful for their help.

_________________________
*Some benefits might specifically waive the deductible.  For instance, many policies waive the deductible on office visits, so the patient pays only a co-pay while the insurance benefit covers the remainder of the doctor’s fee.

**In this example, I’d owe the $1,500 deductible plus the $300 co-insurance, so I’d write a check for $1,800.

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2 thoughts on “Insurance

  1. Agreed. I’m very bad at this whole insurance thing (having spent the better part of last week sifting through disability and life insurance plans), and you just broke it down very clearly for me. Thanks!

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