One of our biggest expenses are those payments we make to cover our medical bills. By thoroughly understanding our health insurance and health care statements, we stand a better chance of saving quite a bit of money.
It’s likely that you’re paying thousands of dollars per year for your health insurance coverage. Unfortunately, a lot of people don’t have a very good grasp on what is covered by their policy. If you spent the same amount of money on a big screen TV, would you do some research to understand exactly what you are getting? Of course. So don’t be afraid to delve into the details of your policy.
1. Understand the limitations of your coverage.
A number of items are likely to be excluded from your policy. Dental and vision expenses are typically excluded, forcing those who want coverage to purchase specific policies for dental or vision. A caveat here is that while routine vision exams are often not included, doctor visits related to problems with eyes (pink eye, for example) often are covered by health insurance.
Experimental treatments are sometimes excluded, or only partially covered, due to high costs and low success rates. If you’re having a treatment that is relatively new, you may want to verify coverage with your insurance company beforehand. If it’s a life and death issue, you may opt for the uncovered experimental treatment anyway (and be forced to pay out of pocket), but sometimes there are covered treatments that are an effective alternative.
Many insurance plans have in-network and out-of-network providers. Out-of-network providers are often covered at a lower rate – or not at all. If your in-network doctor refers you to an out-of-network specialist, it’s possible that this is fully covered — but nonetheless, it’s a good idea to check.
Then, of course, there’s the issue of pre-existing conditions. These conditions are generally excluded for a period of time after the issuance of the policy. Often, group insurance plans do NOT exclude pre-existing conditions. It’s typical for the group plans to take all members, warts and all, as a condition of their contract with the group.
Why exclude pre-existing conditions? Exclusion of pre-existing conditions has long been controversial. Health insurance is prone to what is called adverse selection. That means that the least profitable customers are the most likely to purchase the insurance, and the most profitable are the least likely. Without limitations for pre-existing conditions, there would be nothing to prevent a customer from signing up for insurance the day before they began cancer treatments and then dropping the coverage the day they were informed that the cancer is in remission. The end result would be that health insurers would only have sick people as their customers.
2. Understand the Explanation of Benefits (EOB).
You should periodically receive an explanation of benefits (EOB) from your health insurance provider. Let’s take a moment to familiarize ourselves with the EOB. Here are some of the terms you may see:
Amount billed — This is the gross amount of charges. Your insurance company will almost always negotiate a discount from this rate.
Not covered — Many times, this is simply the amount that is discounted. The medical provider then writes off this amount per a contractual agreement. If a claim is denied for lack of coverage (a vision exam, for example), the entire amount often appears in this column.
Amount covered — This is simply the amount billed minus the amount not covered.
Benefits approved — This is the amount covered, reduced by your deductible and co-payment. If a claim is denied for reasons other than lack of coverage, you may see a $0 in this column even if there is a figure in the “amount covered” column.
Patient responsibility — This is what YOU will owe the medical provider. This will include your deductible and co-payment. If a claim is denied, that amount will also be included.
Let’s look at a real-world example and go over an Explanation of Benefits statement for Wynetha Pugh.
What’s going on here? The visit to Dr. Pepper is pretty straightforward. His standard fee for an office visit is $400, but his contract with the insurance company allows them to discount this rate to $220. Wynetha’s co-insurance (co-payment) is 10%, meaning that she pays Dr. Pepper $22 and the insurance company pays $198.
Wynetha’s visit to Dr. Harper, a chiropractor, is a different situation. This claim is being denied. Why? Well, we take a look at the notes and see that the reason is “maximum number of visits exceeded”. Wynetha realizes that her policy allows a maximum of 12 chiropractic visits per year — and her visit to Dr. Harper was the 13th. There’s still a silver lining, however — instead of being on the hook for Dr. Harper’s $145 gross charge, she needs to only pay $75, Harper’s contracted rate with the insurance company.
3. Understand your medical bill.
The EOB is only half the story, of course. If you are responsible for any charges, you’ll also receive a bill from your medical provider. Incredibly, some of these can be more difficult to understand than an EOB! Let’s take a look at Wynetha’s bill from Dr. Pepper.
We see that Wynetha had an unpaid balance of $18 with Dr. Pepper. Add this to the $400 charge for the visit and deduct the insurance adjustment (reduction due to contract with insurance company) of $180 and an insurance payment of $198, and this puts Wynetha’s balance at $40 — the $18 previous balance plus the $22 co-pay for the current visit.
It’s important to reconcile EOBs against the medical bills. This will help you spot errors that cause you to be incorrectly billed. For example, let’s say Wynetha’s bill looks like this instead:
When Wynetha reconciles the bill against her EOB, she immediately spots the problem — she is not being credited for the insurance adjustment. Dr. Pepper’s office forgot to reduce the gross charge to the contracted amount. Wynetha makes a quick call to the doctor’s office, and her account is credited the $180, leaving her with a $40 balance.
Give your insurance policy the attention it deserves. Becoming a knowledgeable insurance consumer can save you a lot of money in the long run.
Created October 31, 2007. Updated August 5, 2011. Copyright © 2011 The Digerati Life. All Rights Reserved.