3 Important Tips For Understanding Health Insurance Details

by Kosmo on 2011-08-055

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.

  Insured: Wynetha Pugh
Information Date Amount Billed Amount Not Covered Amount Covered Benefits Approved Patient Responsibility
Robert Pepper, M.D.
Medical visit
07-19-2011 $400 $1801 $220 $198 $22
A. Harper, D.C.
Chiropractic Adjustment
07-22-2011 $145 $701 $75 $02 $75
Total $545 $250 $295 $198 $97

1 Amount exceeds allowable charge. You will not be billed for the amount not covered.

2 Maximum number of visits exceeded.

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.

Patient: Wynetha Pugh
Previous balance $18
Dr. Robert Pepper, M.D.
Office visit
Insurance Adjustment $-180
Insurance Payment -$198
Balance – please pay $40

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:

Patient: Wynetha Pugh
Previous balance $18
Dr. Robert Pepper, M.D.
Office visit
Insurance Payment -$198
Balance – please pay $220

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.

Kosmo has been employed in the insurance industry since 1997. In his spare time, he runs The Soap Boxers. He is also the author of Mountains, Meadows, and Chasms, a collection of short stories.

Created October 31, 2007. Updated August 5, 2011. Copyright © 2011 The Digerati Life. All Rights Reserved.

{ 5 comments… read them below or add one }

Andre August 5, 2011 at 6:25 pm

Perhaps someone knows:

What happens if the doctor won’t credit the “not allowed” amount?

The wife had a dentist a few years back that did quite a bit of work on her. Each appointment had a “you’ll need to pay xxx dollars”, which we did – typically an amount over 200. When the EOBs showed up and I compared them against the receipts from the dentist, I found about 400 dollars on the receipt that the EOBs called “not allowed”.

When I asked the receptionist-billing person about the charges, her response was along the lines of “the insurance wants to tell us what we can and can’t charge, but they can’t make us”.

I called the insurance and they confirmed that the charges weren’t permitted per the contract between the dentist and the insurance and they’d have a “talk” with them about what they could charge. Back to the dentist, and they reiterated that they were going to charge what they wanted and the insurance couldn’t stop them.

So between the two, I ended up lost in the middle. All we could really do is not go back to that dentist; neither the dentist nor the insurance seemed particularly interested in helping us.

Was there somewhere else we should have turned? We’ve changed providers since then so I don’t imagine we could go back and get any money back out of anyone, but knowing what the next step should have been would have helped.

Silicon Valley Blogger August 5, 2011 at 6:56 pm

Thanks Andre — just want to point out that this post is a brand new one and so the information here is quite relevant to all of us who carry health insurance.

At any rate, here are some of my thoughts regarding your question. I think that you’re bringing up an issue that many consumers face — that we pretty much are caught in the middle whenever it comes to dealing with health care costs. It’s really hard to find any recourse when it comes to bringing up complaints against insurance companies or the industry. Most people simply vote with their wallets. Another article that Kosmo has written before discussed the possibility of having policyholders have influence over a mutual insurance company’s governing body (board of directors, etc).

From my experience though, it’s not easy to address billing issues with insurance and your health care provider. Some companies may drag their feet on processing your claims and are counting on you to give up pursuing your case with them. Consumers are pretty much out on their own when battling these giants (I’ve read enough horror stories in the news to know that it’s quite expensive to fall ill in America). So, given how much of our dollars will eventually be spent on health and medical expenses, it becomes all the more important to select providers in this field that have a good bedside manner and that can be sympathetic to our issues.

One more thing: when it comes to dealing with insurance, there are a few things that you absolutely need to have — patience and time. If you go with health care providers that are “out of network”, be prepared to spend not just more money but also more time in getting your billing transactions squared away.

If there’s anyone else who wants to chime in on insurance billing issues like this, we’d love to hear from you!

Kosmo August 5, 2011 at 9:04 pm

Just to make sure we’re on the same page … you’re not talking about an amount in excess of “usual and customary” charges, are you? Dental insurance often uses a usual and customary fee schedule to set reimbursement rates for dental work. If the U&C fee for a particular procedure is $300, and your dentist charges $375, you’d be responsible for the $75 excess plus any co-pay on the $300. The dentist is certainly within their rights to charge fees that exceed U&C, and the policies generally say the the policyholder is responsible for the excess. I bump against this every time I get a filling (although the excess is probably close to $20).

This would result in the charge being “not covered”, but the EOB really shouldn’t use the term “not allowed” in this case. These are two different terms, with “not covered” being more broad than “not allowed”.

But if your EOB actually said “not allowed”, then one of two situations occured
1) The wording on the EOB is inaccurate
2) The dentist is in breach of a contract

From your description, it sounds like #2 occurred. If this is the case, then nothing you did was going to get the insurance company to pay the extra, since they don’t owe it. They could sever ties with the dentist, but short of that, I’m not sure there’s much they could do to prevent you from actually being billed.

At that point, the insurance company would pretty much be out of the fight. You could try lodging a complaint with your state’s dental association. You could also refuse to pay the bill and wait to be sued in small claims court, although that could impact your credit report.

I’m afraid I can’t give a better answer without seeing the policy and the EOB.

Voting with your wallet by choosing a different provider was probably a smart choice – especially if you chatted with other people and found this to be a common problem with the dentist.

Definitely take good notes in these situations so that you can give exact quotes to the dentist and insurance company regarding what the other party says. Get a few words wrong and you can alter the meaning pretty substantially.

Silicon Valley Blogger August 10, 2011 at 3:50 pm

Thanks for the comprehensive response Kosmo. The main feeling I get when insurance and medical providers collude is that there is nothing much that can be done. There was a time when I had all the time in the world to chase down patient billing matters but I’ve since found that if I don’t get my desired response in a few days, then I shouldn’t get my hopes up about resolving much of anything. Plus, it was just not a good use of my time to continue arguing with my insurance company. What I did realize is that they are particularly fussy about documentation and if you’re not organized, then you’ll end up “paying” for it (in terms of denied claims).

On my end, it’s easier for me to switch dentists and doctors. There are a ton of them, where I’m from!

Shirley March 24, 2012 at 6:06 am

What happens if the doctor’s office gives you the wrong information about your insurance coverage? Am I responsible for the balance?

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