In my fifteen years working in the healthcare side of dealing with insurance, many Americans come to me often confused on how their insurance coverage really works. So here are a few basic definitions that that will help you understand the insurance process and how it applies to your healthcare and budget needs.
What is a premium?
A premium is the amount you pay the insurance company for a particular plan. What’s important to know is that many plans have exclusions for certain services. Some plans also have arbitration clauses; which basically means you forfeit any suits against the insurance company for any reason, and it requires you to seek arbitration and pay a portion of the cost. Currently there are 11 States that don’t allow arbitration clauses. Also some insurance companies act as third party administrators, many retiree plans for example act in this way.
Also beware that some plans have set limits to the amount they pay out, which basically means services are capped after the amount has been reached and you are responsible for anything after that amount. Some plans also have limited services. Like possibly allowing only 3 office visits a year, or possibly allowing only up to $1500.00 in testing per year.
Some Plans allow (HSA) accounts. Health Savings Account, which are usually accounts with high deductibles that offer pre-tax savings accounts to be applied to your cost as needed. Often employees and employers contribute to this account.
What is a deductible?
A deductible is an amount assigned by your insurance company for that particular plan that must be met (usually) before certain services are paid. Labs, diagnostic and surgery are often all things that apply to deductibles. In most cases office visits are excluded from deductibles. Under ObamaCare certain preventative services aren’t subject to the deductible and covered 100% by the insurance.
What does out of pocket maximum mean?
Out of pocket maximum; basically is an amount set by a particular plan that defines a limit of expenses you must pay for your healthcare to providers for that year before benefits start paying at 100% by your insurance company for the rest of the year Typical out of pocket maximums run between $2000.00 and $5000.00 dollars, this usually does not include deductibles and in some plans co-pays
What kind of plans are there?
There are several different plans that do different things; most plans are based more on control of cost. The following is a short definition of plans.
EPO stands for Exclusive Provider Organization. It’s a managed care system, which requires you to select a primary care physician which directs referrals to in network providers only.
PPO stands for Preferred Provider Organization. It allows members to go anywhere, however you get better benefits staying with the preferred network and higher deductibles and out of pocket cost for out of network. A prime example would be seeing a specialist in network would cost $30.00 but seeing an out of network provider might be subject to your deductible and coverage at 70%.
HMO stands for Health Maintenance Organization. It has no out of network benefits. You are required to have a primary care physician. All referrals to specialist must be in network and most must have a time frame and a specific amount of visits that they can be seen. Although they save the patient and insurance money, they tend to increase administration cost for healthcare providers.
POS stands for Point Of Service. It requires a primary care provider. Providers will almost always attempt to refer only to in network providers on this plan, however many providers are limited. It has a limited network so that you can get discounted cost, however if you choose to go outside the network, you must pay the provider directly and send in the bill to the insurance that will reimburse you at a much lower rate.
How does pre-authorization and medical necessity work and if I want a procedure or a doctor wants me to have a procedure, can’t I just have it done regardless?
The answer is usually “No”. There are a few exceptions. Insurance companies have a list of procedures that require pre-authorization (which can change often), if the procedure is not on that list, it still must meet the insurance terms of medical necessity defined by the insurance company. This will usually be determined by your insurance after they receive the bill. They will either request notes or send an auditing company to the office. Also if you go through the Emergency Department procedures usually don’t require authorization (but not always), and once again they are subject to medical necessity. It’s becoming a little more difficult for providers, because insurance companies are changing their prior authorization list monthly in order to reduce cost. Many procedures for example might not require prior authorization on the 7th of the month, but on the 8th it does. It gets even more complicated that many companies have hired third party administrators for their authorization process. Companies like Med-Solutions, American Imaging Management and Innovative care just to name a few.
Urgent procedures are often given up to 72 hours for a decision. Routine request under ObamaCare is allowed 14 days, sadly though insurance companies can deny coverage on day 14 and it can take another 45 days to get authorization through the appeal process.
So who defines medical necessity for the insurance companies?
Most insurance companies hire nurses and internal medicine physicians to review requested procedures and compare them to the guidelines the insurance company sets. There has been a lot of questions about many of those reviewing these on behalf of the insurance company not being specialist or having had spent any actual time with the patient, but maybe the most controversy is allowing bonuses based on denials.
Can you explain what a CPT and Diagnosis Code are and what they are used for?
Every procedure and diagnosis has a code assigned to it, based on these codes are assigned values within a price index for that specific code between your provider and your insurance company. The term reasonable and customary is used to define its value. For example, chest pain is defined with 786.50. It’s also known has a symptom code. Let’s for example say you are having an Angiogram (93458) done to evaluate your chest pain for possible Coronary Artery disease (414.01). The code 93458 would have certain price listed, however your insurance company would also have a price that would be different based on the contract with the provider that performed the Angiogram. This is called the allowable rate. The contracted provider must adjust and write off the difference between thee charged amount and what the insurance company has allowed under the contracted amount. Another example might be a typical office visit billed at $346.00; however the allowable rate might be only $111.86. The insurance company than would pay $81.86, the patient $30.00 for the co pay amount with a $234.14 provider adjustment.
How do providers become part of a network through contracting?
Most insurance companies have contracts with providers in order to get reduced rates for their members. Part of the agreement may not allow providers to waive co-pays or discount the patient. The theory is by making the patient pay some of cost of treatment; the patient will become a better healthcare consumer and will not seek treatment not needed.
Most contracts with providers are plan specific, so it’s possible that a provider can have a specific contract for a PPO plan, but not have a contract for a HMO within the same insurance. Typically contracts are made by insurance companies and agreed and signed by providers.
There are usually two ways contracts get started. One way is the physician contacts the insurance companies provider rep and inquires about becoming an in network provider. The second way is that the insurance company is looking for certain providers within an area and seeks out the physician for a contract. Every year providers and insurance companies review contracts to see if they want to renew contracts of possibly change certain things within the contract. So it’s possible for example that in 2013 to be contracted, but not in 2014.
How do Co-Pays, Outpatient Services, In-Patient Admissions and E/R really work?
In most cases these services all vary in cost and benefits; and depending on the plan they can vary a lot. For example office visits often have much lower co-pay than a co pay through E/R. Also in recent years because of the high E/R cost. Insurance companies have put certain exclusions for E/R or Ambulance services, meeting their guidelines of necessity or the member is responsible for the entire cost.
Most, but not all outpatient services are usually subject to a deductible then covered at a certain percentage often something like the insurance will cover 80% why you will need to pay 20% after the deductible, until you have met you’re out of pocket.
Inpatient Admissions often have a co-pay amount per day up to a certain amount of days. Because of the huge increase in facility cost for inpatient stays however, most insurance companies are denying inpatient services for medical necessity, and instead forcing the stay into observation care which increases the cost to the patient under outpatient services.
Medicare and Medicare Advantage plans:
Do I have Medicare in addition to my Medicare Advantage plan, or do I have my Medicare Advantage Plan in addition to Medicare?
Medicare Advantage plans are basically a Medicare replacement plan, often with an added Supplement and Prescription part D drug plan included in it. It really depends; each level increases the cost, so you can have advantage plans for example without the supplement part. Some advantage plans are PPO; some are HMO also changing the cost to you. Most of plans pay at the Medicare allowable rates (but not all). Unlike Medicare, many of these advantage plans have restricted networks and services that require pre-authorization.
So what is a Medicare Supplement then?
A supplement is used in addition to Medicare. Some countries like Australia’s universal healthcare system supplies Medicare for all which covers part of the bills and allows people to purchase supplements to help pay the difference. The same is also true here for those that qualify for Medicare. Medicare will cover 80% of the allowable rate. You can then purchase a supplement to cover 80% of the 20% left over that Medicare doesn’t pay, but only after you have met their deductible. Also most supplements will only pay on claims that Medicare has paid on, therefore if Medicare fails to pay anything, so will your supplement.
Can you please explain the difference between Medicare part A and part B?
A short explanation would be that Part A covers facility cost, and Part B covers professional services. If for example I only have Part A and have an office visit, it isn’t covered. To confuse matters more, if I go to the hospital and are admitted requiring surgery while inpatient. Part A will only cover the hospital services, but it will not cover the doctor performing surgery. That will only be covered if you have Part B. Also Hospice is only covered under part A, however home healthcare can be covered with part A or part B. One thing to also keep in mind is that Medicare does have premiums and also has deductible before claims start getting paid by Medicare.
What exactly is Medicaid?
Medicaid is a service created to help people who live in poverty get medical treatment and other services. Each state controls what they put into it; although a lot of funding comes from the federal government for example in 2013 23% of the federal budget went towards these programs. Not all Medicaid is healthcare related. Some are assistance for housing, food stamps, etc. etc. Since we are talking about healthcare though, I will address a short overview. Since each State is different, it would be impossible to go into detail here. Some states hire 3rd party administrators some allow open access to any provider that is registered why others have strict HMO guidelines. Some states have really strict benefits based on diagnosis paired with procedure, and some states require co pays. Some plans offer emergency care only and many states have restrictions on how long someone can get benefits under Medicaid.
In some instances Medicaid can be secondary to other insurance, if the patient still falls within the income limit. Many people for example that have Medicare also have Medicaid services. There are also special programs that can help clients pay Medicare premiums and deductibles.
Please Explain ObamaCare.
First of all, if you have Medicare or a Medicare Advantage plan, Supplement or Part D. ObamaCare doesn’t affect you. Obamacare addresses the people who don’t qualify for Medicare. It was enacted for a few different purposes. To have more Americans covered with insurance, and get rid of pre-existing condition limitations and lifetime maximums. According to the American Journal of Medicine 62% of all bankruptcies happen every year due to medical cost, why at the same time the insurance industry shows assets over 3 trillion dollars.
ObamaCare is also an attempt to reduce the Gross Domestic Product from 18% to 11%. To put this in perspective we spend less than 9% housing GDP. In order to reduce GDP we have to pay less for certain services and manage a patient’s healthcare better through preventative care.
The basic idea is to treat people to keep them out of the hospitals (where most of the cost is), instead of treating them after they have been in the hospital.
ObamaCare was based on two systems of universal healthcare. It was cross between Netherlands and Switzerland. It requires all Americans to have insurance or face a penalty. Businesses that exceed more than 50 fulltime employees are required to offer an insurance plan or face a fine. Individuals must have insurance or be subjected to a 1% tax penalty (increasing to 2%) later. It also requires insurance companies to pay 100% of certain preventative care services. It allows Americans or Companies that pay premiums that don’t use services equal to 80% of their premium cost; a tax credit on the difference, for example if I spend $4000.00 on premiums, but don’t use anything. I will get $3200.00 back in tax credit. However, I feel the biggest problem with ObamaCare is that it allows insurances to increase rates by 9% a year.
So, how should I budget my healthcare needs?
I look at healthcare through my personal budget needs more than just focusing on having coverage and attempt to get something that will fit for both. For example if the goal of our government is to reduce GDP to be 11%. I can reflect that within my own budget as well. For example if I make forty-five thousand dollars take home per year, I understand that eleven percent of my budget that could go towards healthcare would be $4950.00 this amount must include Premiums, Deductibles, Co pays and Out of Pocket Expenses. Therefore I would need to research healthcare plans that fall into that total cost to make it acceptable to my budget needs.