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- The key phrases to determine a consumer’s out of pocket liability under an insurance policy are: premiums, deductibles, co-insurance, co-pay, and non-covered services
- When disputing a claim with the insurance company or a healthcare provider, you should look at the policy rather than the outline or summary of benefits to figure out whether a set of services is covered or not
- Whether a provider is a contracted “in-network” provider or an “out-of-network” provider can have a significant impact on a patient’s out-of-pocket liability; out-of-network providers have no obligation to accept insurance adjustments on claims
Health insurance companies provide several documents which inform consumers of their rights and obligations under a health insurance policy. During the insurance shopping phase, most consumers receive a document that is called a “summary of benefits.”
Due to the Affordable Care Act and the subsequent administrative regulations, these benefit summaries are now standardized across plans and companies so that consumers can better make apples-to-apples comparisons of insurance plans.
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Each summary of benefits should disclose the various out of pocket expenditures an individual or a family may be liable for under the plan.
Once enrolled in a plan, a consumer has a summary of benefits, a policy or evidence of coverage, and an outline of benefits to which they can refer to for questions about whether various services are covered or not. Here is an example of what a policy document looks like.
The Key Components of Health Insurance Coverage
Here is a quick primer on the terms you will need to understand what the policy documents are saying is covered or not covered.
Premiums are the monthly or annual payments made for the policy to be issued and remain current. For many consumers, premiums are deducted from paychecks, and the human resources department is responsible for ensuring timely premium payments. Other consumers have to treat premiums as a monthly bill.
For many of these nonemployer policies, insurance companies only accept cash equivalent payments from the insured to satisfy premiums, so credit card payments are not permitted, and family and friends can’t directly pay the insurance company.
If family or friends are going to help out, they have to give consumer cash which the consumer then forwards to the insurance company. (This is a precaution insurance companies take to make it more difficult for unscrupulous employers to try to get around ACA provisions).
The vast majority of insurance policies have two different coverage levels depending on whether healthcare services are provided by an “in-network” provider or an “out-of-network” provider. The health insurance policy is a contract between a consumer and a company to provide negotiation and payment of prices for health care services.
When a consumer goes to an “in-network” provider that indicates that the insurance company also has a contract with the provider where they have already determined the price of most healthcare services.
Insurance companies encourage consumers to use “in-network” providers by making the consumer’s out-of-pocket obligations less when using “in-network” than “out-of-network.”
Consumers can still get services from “out of network” providers, but the cost is less certain before receiving services, so insurance companies make consumers share more of the cost for “out of network” providers.
While the premiums a consumer pays gains them access to benefits, many policies don’t cover health care expenses until the deductible has been satisfied. The deductible amount is usually how much a consumer will have to pay before the insurance company starts cutting checks to the healthcare providers.
However, under the ACA, many routine wellness benefits are covered, so a consumer only pays the deductible if they get sick or have an accident requiring emergent care.
Once the deductible is met, the insurance may still share costs with consumers until the policy’s out of pocket maximum has been reached. If the policy says there is a 50/50 co-insurance then the patient is responsible for 50 percent of the allowed amount; if the policy says there is an 80/20 that means the patient is responsible for 20 percent of the allowed amount on all claims until the out of pocket maximum is reached.
A few insurance policies make the deductible the same as the out of pocket amount, but most require some coinsurance payments after the deductible is satisfied before the out-of-pocket maximum is met.
Once the out of pocket maximum is satisfied, the insurance company will pay for 100% of covered health insurance expenses for the remainder of the plan year.
Many insurance policies handle cost-sharing by requiring patients to pay a set dollar amount each trip to the doctor. These set dollar amounts are called co-pays.
Co-pays generally do not count towards the out-of-pocket maximum, so if a patient sees a doctor 52 times in a year in an out-patient setting, then the patient will pay 52 copays
. If the co-pay is $10, that equals $520 in co-pays alone!
Before the ACA, many policies had lifetime maximums. These lifetime maximums carried across plan years, so if a patient stayed with the same insurance company for five years, five years worth of medical expenses were accumulating to reach the lifetime cap.
Once a patient reached the lifetime max with one company, it became difficult and expensive to get coverage through other companies because the patient is “high risk.”
These lifetime maximums were discontinued by the ACA, but they may make a reappearance if the ACA is repealed.
Also before the ACA, insurers could refuse to cover treatment for “pre-existing conditions” if there was a lapse of coverage. A pre-existing condition was commonly defined as any injury or illness experienced in the year/ three years/ five years before the current policy.
So, a 2-year-old child who had one ear infection in their lifetime would have to pay out-of-pocket at cash payer rates for all treatment related to ear infections until the pre-existing condition waiting period was over. These pre-existing conditions were discontinued by the ACA, but they may make a reappearance if the ACA is repealed.
Even though the ACA requires insurance companies to pay for certain basic services as part of the premiums with no additional cost-sharing from the patients, there are still a wide variety of services that insurance is not required to cover.
Understanding the terminology will help you read through a policy and extrapolate what it means on your out-of-pocket liabilities while insured under a policy.
In addition to all of the information above about figuring out the amount you could potentially owe, it is also important to look at the network of providers and see how likely it is that you’ll be able to receive all health services from in-network providers, or if you have to go out of network.
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