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Because of a few insurance hiccups in the last month (mainly with the insurance Ambetter, which is why we are no longer accepting new patients with them until they can straighten themselves out!), I realized that the average insurance literacy level for laypeople is probably close to nil. And since I'm all about empowering you to be able to make smart decisions, both health-wise and financially, I thought I'd talk about this statement that you're likely to get if you have insurance coverage for your healthcare.
When a doctor performs a service on your behalf, and you use an insurance company to help pay for those services, the doctor will submit a claim to that insurance company with the Date of Service (DOS), CPT code (procedure code - basically, what service was done - for example, an Evaluation & Management visit, a Coordination of Care service, etc.), and an ICD code (the diagnosis code - this does not mean you necessarily absolutely have the diagnosis listed when you google this code - it could just be a working diagnosis or even just a placeholder).
About 2 weeks after the insurance company receives the claim, they will have processed the claim, and they will send you and your doctor an "EOB" which stands for Explanation of Benefits. This explains how much your doctor billed for their services, how much was "allowed" under the contract between your doctor and your insurance company, and how much your responsibility is. Let's read one together!
First of all, important to know that every insurance company has their own unique-looking EOB, so it may not have all or even most of these elements, and they may look completely different. Here are some of the pieces of information you can find on your EOB.
Name and address the EOB was mailed to
The insurance plan's subscriber/member ID and insurance plan identifying information.
The patient seen, the place of service, and the date that the claim was received by the insurance company.
The Claim number, the type of service (Medical, vs. Dental, Vision, Home Health, etc etc), and the date that the insurance company processed the claim.
The provider that performed the service and/or the facility where the service was provided, and where the insurance company sent their payment.
Then, below, there is usually a table of the charges listed on the claim. Here are the important terms to be aware of. Date of Service, or DOS: the date that the service was performed. This may or may not be the day you saw your doctor face-to-face, as some care coordinating activities often occur between visits.
CPT code: procedure or service performed. In the case above, it is a Level 5 Evaluation & Management visit which is either a high level of complexity or takes at least 60 minutes to perform with the patient.
Total Charges, or Total Amount Billed: this is the amount that the doctor billed to the insurance company for the service performed. Important to note: this amount is 99% of the time much higher, often several-fold higher, than the "Amount Allowed" (#9) or the "Amount Paid" (#11). The reason for this is complex, but to simplify, this is based on the fact that the contract that exists between the insurance company and your physician usually stipulates that their patients are receiving a "discount" based on their network coverage. This is the insurance company telling you, "Look! Usually, the doctor charges $500 for a similar visit, but for being a part of our network, we pass on a network savings of $350, so the visit only cost $150, of which you only are responsible for $30!" The doctor is also motivated to bill higher than expected payment for multiple reasons. In order to be able to see self-pay (or direct-pay) patients, she must argue with the insurance company that those patients are not getting a better deal than the insurance network. Often, this is stated as a "prompt pay discount" which means the self- or direct-pay patient got a steep discount because they paid for their visit up front, rather than waiting for insurance payment, which takes at least 2 weeks or more. Additionally, the lower the charges billed, the less negotiation and wiggle room the insurance company will give when negotiating contracts with physicians; the insurance company's argument is often, "If you charge so little anyway, our patients will be able to pay this out of network, we'll reimburse them the bare minimum, and it's less skin off our nose." That can result in the insurance company not negotiating or even accepting the physician into their covered networks, leaving patients high and dry if they can't afford the doctor's direct pay rates. All that aside, the doctor NEVER gets the full amount of the Total Charges/Total Billed. I will write a future blog post discussing what the Total PAID (#11 above) covers in addition to going into the doctor's pocket, since there is a misconception that the doctor gets it all and uses it to pay for golf clubs. 😅
Total Allowed: this is the amount that the insurance company negotiated with the doctor for the listed service. In the above example, for a 99205 high complexity visit, despite the doctor billing $500 for the visit, the insurance company has negotiated with them previously that such a service will only be paid up to $150. Everything else is written off.
Amount Adjusted: the amount that was written off; that is, the difference between the Total Charges/Total Billed (#8) and the Total Allowed (#9).
Total Paid: the amount the insurance company actually paid the doctor for the service. Note: this may or may not appear on your Explanation of Benefits. Some insurance companies, like Ambetter, like to mislead their members by skipping this and the last 2 columns altogether, making the member assume that the doctor was paid the full amount of the Charges Billed, which, as I explained above, is never true.
through 16. are components of 17. the Patient's Responsibility - as in, the proportion of the allowable charges that fall on the patient (you). This will depend on your particular agreement, or plan, with your insurance company, as well as the network status of the physician seen, the service performed, any modifiers used, etc., etc. I will take another blog post to explain the portions of the Patient Responsibility in more detail, but by contract, you are responsible for these portions, and the doctor will not be paid their full promised amount by the insurance company unless you do. Non-covered charges are charges that are not covered under your insurance plan, which automatically go to you, because the insurance company has told you previously they will not pay for them. For example, cosmetic procedures, or anything else that is excluded under your individual plan.
Deductible: the portion of the allowable charges that fall to your deductible because you have not yet met your yearly deductible.
Coinsurance: the proportion/percentage of the allowable charge that falls to you based on your plan's coverage. Some plans only cover 80% of a visit's charges, leaving you with a bill for the remaining 20%. Every single plan is different.
Copay: a fixed fee that falls to you based on your plan. For example, some plans do not have a copay at all for preventive visits; they may have a $30 copay for sick visits to their primary care doctor, and $40 copay for visits to a specialist. This is often stated on your insurance company, but not always. Again, every plan is different. This copay goes toward part of the allowable charges.
Total Patient Responsibility/You Owe: the sum of 12-15 above. Added to #11 Total Paid [by the insurance company], it should equal #9 Total Allowed/Allowable Charges. Ideal Neurology Clinic tries to estimate the amount of this patient responsibility before a visit and charge the patient up front for these amounts for multiple reasons, the main one of which is to avoid surprise bills to the patient later. Imagine if you went to a restaurant, ate a meal, and got a bill only one month later! It also protects from patient non-payment and having to send people to collections, it minimizes paperwork and mailing fees, and minimizes staff time chasing payments. Plus, patients love the convenience of it! If there is ever any amount that was overcharged due to a miscalculation on our part (rare), it will always be refunded at the time of insurance payment.
PHEW! That was a doozy. Questions? Comments? Leave a message below and I'll try to address! Hope that leaves you with just a little more information and thus a little more empowerment when you see a doctor, pick an insurance company, or get a medical bill. Stay healthy!
This post is a controversial one, I know. As a patient and consumer, I don't like giving out my credit card information any more than the next person. As a physician and a practice owner though, the time has come and gone to make this change.
Here's an excerpt from an article about doctor's offices keeping credit cards on file that I think sums up the issue quite well:
Speaking on behalf of the AMA, Robert Mills said in an email: "Employers are offering health plans that require their employees to shoulder a greater share of health care costs. Total cost-sharing for the average patient from deductibles, co-payments and coinsurance has increased from $422 to $747 between 2004 and 2014, according to the Kaiser Family Foundation."
He said the cost-sharing trend is accelerating because of the health insurance exchanges opening up. Those often come with high-deductible plan options that people choose to keep their premiums down.
Meanwhile, overhead for doctors' offices has soared, he said, in part because of time spent complying with government regulations and health insurer policies.
"To lower overhead costs," Mills said, "medical practices are focusing more on streamlining patient payment collections. Some practices do take credit card numbers for this purpose."
Basically, insurance companies do what they can to squeeze money out of good people and good practices. And unfortunately, to stay afloat, those practices cannot afford to write off the patient's responsibility - what's more, it's illegal not to collect the patient's responsibility if we have a contract with an insurance company. For those of us "micropractices" who don't have a lot of staff or resources to send statements and call patients to harass them about payments, keeping a credit card on file is a much more convenient and hassle-free way to collect those payments. It is our policy to keep those CCs on file with a secure third-party (we use Stripe). We only use it to charge for copays, deductibles, coinsurance, late cancellation fees (so please do call us or cancel/reschedule your appointments at least 2 days in advance!), and any non-covered costs. Usually it is charged at the time of your visit, and we give you a heads-up before your appointment how much the charges will be (or a range), and if it's a charge that comes up after we receive your insurance statement, we will do you the courtesy of calling to let you know first and ask if you'd prefer to pay using another method. Despite these practices, I understand that not everyone will feel comfortable with this policy. My practice is small, and it won't be for everyone, but that's okay - I have to keep the lights on in order to help anyone at all.
Want to learn more about the issue and why more doctors are ditching their insurance contracts altogether and moving to direct-pay practices? I love this EXCELLENT analogy: How Do Doctors Get Paid?
Have questions? Please feel free to comment below or send anonymous feedback here.
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