On Health Insurance, part 2

6 Mar

Right, so, since I have nothing else to write about today, guess what time it is? That’s right, time for more insurance terminology!

This week we’ve got a little piece I’m calling: What do you mean, ‘patient responsibility’?

So, you’ve got your shiny fancy HMPPO with your PCP designated and your ROFL engaged. You’re paying your premiums on time and stuff, so what the heck are all these other charges that keep coming up as you make your way through the magical world of healthcare*?

Deductible: Your plan may have one of these, especially if it’s a PPO. A deductible for a health plan works the same way as a deductible for any insurance plan: it’s the amount that you pay straight up out of pocket each year before any of your benefits kick in; a nice little cushion against liability for the insurance company. That means if you’ve got a $2000 deductible that you haven’t met, and your doctor prescribes a $500 test? That’s right, you’re paying every cent.

Well, kinda.

There’s a few “well yes buts” involved here. So your doctor prescribes that $500 test, but he uses an in-network lab. They’re contracted with your insurance, so maybe it only actually costs you $200. That means you’ve only satisfied $200 of your deductible, so $1800 still to go, but hey, you only had to pay $200 on this visit! Also, if that test and doctor visit are preventative care–you go in for your annual physical, have some routine blood work done, for example–chances are pretty good your plan covers this even when you haven’t met your deductible. Insurances love it when you do preventative care, because that staves off bigger bills for them down the line, at least in theory. So check your documentation for preventative care being covered regardless of deductible status.

Another important note about deductibles: Family vs. individual. Your plan might say it has a $2000 individual deductible and a $4000 family deductible. So if it’s you and one dependent on the plan, and you get sick and meet that $2000 deductible, do your benefits kick in? Nnnno, sorry. That individual amount only counts if you’re the only one on the plan. Otherwise, it’s the full family deductible or GTFO.

Copay: This sort of thing is more common on HMO plans, though some parts of some PPOs may also employ them. A copay is a flat rate fee that you pay for a specific type of service. You’ll have something like $25 for every office visit, or $40 to refill any prescription. Your copay won’t change based on what the actual price of the service is; whether your prescription is $50 or $500 to your insurance, it’s only $40 to you under this sort of system. Unlike other types of patient responsibility, however, it’s due up front, where a deductible or coinsurance is more likely to be billed to you later.

Coinsurance: This can get confusing, because it sounds and looks a lot like copay. And, really, it’s the same basic thing: It’s a per-service fee that you have to pay in order to let your insurance have some cushion. But where a copay is a flat fee, a coinsurance is a percentage. This sort of buffer is usually used on your PPO plans, where you’ll have one rate (maybe 20%) that you have to pay at in-network providers, and another (maybe 50%) at out-of-network providers. As always, check your documentation for specific rates. Also note that, particularly for in-network providers, it’s not 20% of what the doctor bills; it’s 20% of the contracted rate, which is probably considerably lower.

It’s important to note about these charges–your copays, coinsurances, and deductibles–that they are contractual obligations. You have to pay them. You have a legally binding contract with your insurance that says you are personally responsible for that amount of money, and your health care provider cannot legally waive that amount and still get paid. Confused? Well here. Say you’re on Medicare–yes, pretend it still exists when you’re old enough for it–and you’ve got a $500 deductible. You have a medical service that costs $2000 under the provider’s contract with Medicare. You’d be responsible for the first $500, and then for 20% of the remaining $1500–Medicare has a 20% coinsurance. Your total is $800, and Medicare dishes out $1200.

Now, you might have a supplemental insurance that will cover that amount. But if you don’t, your doctor is not legally allowed to be nice and say “oh, the $1200 is more than enough, you don’t have to pay your part!” No. Because that means that the total billing was only $1200 now, and according to your contract, Medicare is only responsible for 80% of billed charges, and only after you’ve paid $500! What does that mean? It means they are well within their rights to demand a refund of $640 from your doctor– the $500 you should have paid plus 20% of the remainder. Yes, they can do that! And they will, if they find out that you and your physician conspired to defraud them. What? You say it wasn’t fraud, your doctor was just being charitable? No, my friend, they’re being charitable in only requesting a refund rather than suing both your asses for breach of contract and Medicare fraud.

So remember, when you have a massive bill, don’t blame your doctor for billing you even after they’ve been paid by the insurance. They have to. It is the law.

Two more things and I’m done, promise.

Out-of-pocket maximum: It’s fairly common for a health plan to have one of these. But what is it? Well, let’s say your out-of-pocket max is $10,000. So you pay your deductible. You pay a bunch of coinsurances. You pay a few copays. Once all of those add up to ten thousand dollars, your insurance should cover everything at a hundred percent for in-network providers. That’s right. No more coinsurances, no more copays. That’s your protection against permanently damaging financial loss should you fall terribly, horribly ill. It’s a nice thing to have, and it’s federally mandated on high deductible health plans. These limits reset with each plan year, of course, but they’re still a huge help.

Benefit maximum: This is a favorite of some plans, and you will hate it, because it’s like the out-of-pocket maximum in reverse. Your cheapy, limited plans may only cover a certain amount per year, or maybe only a certain amount of lab fees or something; that’s extremely common with dental plans, for instance; my dental plan, for example, only covers $1500 a year. If I have to get serious work done, I’m going to be on my own. But your plan may also have a lifetime benefit maximum. Let’s say you have fifteen types of cancer, for example, and your plan has a one million dollar lifetime benefit maximum. Once your plan has paid out a million dollars in chemo, hospital stays, and ambulance bills, they’re done. They don’t have to pay another dime, and you’re stuck with full bills–depending on the plan, they may not even be reduced by contract anymore. It’s a lifetime limit, so it doesn’t reset at the beginning of the year, or ever, really, until you die. If you’re lucky, you might be able to change insurance companies without it following you, but chances are you aren’t lucky.

Now, not all plans have a lifetime benefit maximum, but if you’re insured through your employer, chances are high that your plan does. It’s just something to keep in mind.

A last note regarding your responsibility: If you end up with large medical bills, it’s important not to panic. Call the facility, doctor, or whatever, and see what they can offer in terms of payment plans or financial hardship applications. At my company, for example, we’ll take twenty dollars a month, even if your bill is several thousand dollars. Just so long as you’re making some effort to pay. And if you really have no money, we work something out. It can never hurt to ask.

Just don’t cry. We hate it when you cry.

*not actually magical.

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