I have had an exorbitant amount of patients come seeking Physical Therapy who have very little to no knowledge of exactly how their health insurance plan works. Sometimes they are surprised when they find out how little their insurance plans actually cover and or are upset by the patient responsibility portions of their bills after receiving their services. For this reason, I thought it was necessary to write about the basics of Health Insurance to educate and empower you.
Health insurance is a product that covers your medical expenses. Like auto insurance covers your car if you get into an accident, health insurance covers you if you get sick or injured. Health insurance also covers preventative care– i.e., annual doctors visits and tests before you get sick.
Health insurance doesn’t always cover 100% of your costs. In fact, it’s designed to share costs with you up until a certain point, called the “out-of-pocket max”. After you hit the out-of-pocket limit, health insurance will pay 100% of your healthcare costs.
There are a few ways that health insurance companies might share costs with you, and they make up major features of your health insurance plan that you need to be aware of: your premium, deductible, copayment, coinsurance, and your out-of-pocket limit.
It’s easy to think of your premium as your monthly bill. Every month, you pay a premium to a health insurance company in order to access a health insurance plan. As we’ll get into in a second, while your monthly premium may be how much you pay for health insurance, it’s not equivalent to how much you pay on healthcare services. In fact, choosing a plan with lower premiums will likely mean that you’ll pay more out-of-pocket if you need to see a doctor. Keep in mind that depending on your employer and healthcare plan you choose, you may or may not have any premiums if your employers pays all of it for you.
A deductible is how much you need to pay for healthcare services out-of-pocket before your health insurance kicks in. In most plans, once you pay your deductible, your health insurance company will still use copayments and coinsurance to split costs with you (up to the out-of-pocket max, after which the plan pays for 100% of services). Plans with lower premiums tend to have higher deductibles. Deductibles will restart generally every year starting in January for most healthcare plans.
A copayment, often shortened to just “copay,” is a fixed amount that you pay for a specific service or prescription medication. Copayments are one of the ways that health insurers will split costs with you after you hit your deductible. In addition to that, you may have copayments on specific services before you hit your deductible. For example, many health insurance plans will have copayments for doctor’s visits and prescription drugs before you hit your deductible. You will pay copayments until you hit your maximum out-of-pocket amount.
Coinsurance is another way that health insurers will split costs with you. Unlike a copayment, coinsurance isn’t a fixed cost – it’s a percentage of the cost that you pay for covered services. For example, if you have a coinsurance of 20%, you’ll pay 20% of the cost of covered services until you reach your out-of-pocket maximum. Depending on whether you are receiving services at an In-Network facility/provider or at an Out-of-Network facility/provider, your coinsurance may vary up to 50% for consumers. It is your responsibility to make sure you are aware of this prior to receiving services.
Maximum out-of-pocket amount
The maximum out-of-pocket amount, also called the out-of-pocket limit, is the most you’d ever have to pay for covered healthcare services in a year. Payments made towards your deductible, as well as any copayments and coinsurance payments, go toward your out-of-pocket limit. Monthly premiums do not count. The maximum out-of-pocket limit for 2020 is $8,200 for individual plans and $16,400 for family plans; plans with higher premiums tend to have lower out-of-pocket limits. Note that the maximum out-of-pocket is a consumer protection enacted under the Affordable Care Act (ACA); previously plans didn’t have to cap what a person would be required to spend on healthcare services. This often meant that insured people who had to undergo very expensive treatments (e.g., for cancer or lifesaving surgery) could face unlimited medical bills.
Whatever health insurance plan you decide to go with, you are ultimately the responsible party for your health insurance plan. Meaning, you need to know what services your health insurance plan covers, how much your coverage is, what limitations/restrictions or caps they have on the services you are trying to utilize, and ultimately what your responsibility is for payment at the time of service.
Some health care providers offer courtesy insurance verifications to help you with your insurance benefit coverages. However, that information may not be completely accurate. It is still your ultimate responsibility to validate the information you are receiving from your health care provider.
As healthcare continues to evolve and limit access to healthcare and reimbursements for services rendered and to minimize having to send people to collections for small amounts owed, most healthcare providers are asking patients to pay their portions (usually the coinsurance) of services rendered at the time of service instead of waiting for 30/60/90 days for the insurance companies to pay their portions and then another 30+ days for you to pay your portions. This is often called the “Good Faith Estimates”. Don’t be surprised if you are being asked to pay this portion upfront these days. If you end up paying more than you should have, the healthcare providers will generally reimburse you back what you overpaid or leave a credit on your account for future services. If you ended up underpaying, you will still get a bill for your portions to be paid.
Whatever type of health insurance plan you decide to purchase, keep in mind that you are ultimately the responsible party for all of your medical costs and therefore you should have full knowledge of what you are getting into. Kintsugi Physical Therapy can help you better understand these insurances nuances prior to receiving any services.