Health insurance explained

Remember when you went to see the doctor and your insurance paid for it? Of course you do! That was just a month ago! Yes, the end of the year is the time when many people have met their “deductibles.” That almighty threshold that must be crossed before the health insurance actually starts paying for your diagnosis or treatment. Unfortunately, the first of the year rolls around and it’s back to square one. Tallying up the health bills until you hit $1,500. Or $6,000 in some cases!  

Understanding how health insurance works can be incredibly difficult. For one, the terminology is strange. What is the difference between a “deductible” and an “out-of-pocket maximum”? Or the difference between a “copay” and “coinsurance”?

To further complicate things, most healthcare providers have different pricing structures.  

  1. Your provider has a fee for the service provided. Let’s say it’s $200. This is what’s billed to insurance companies. It may be called an “out-of-network price” or simply the “fee for services”.
  2. The “in-network” or contracted price is the agreed-upon fee that your provider has with your particular insurance. This will vary from insurance to insurance. Different insurance companies do not pay your provider the same amount for the same service.  For our hypothetical service, your insurance company might pay $120; your friend’s might pay $80. It all depends on their contract.
  3. The “cash” price, or “self-pay” price is something different. This is usually much lower than the fee in No. 1. It could be half as much. If you are wanting a transparent price, ask the clinic, “What is the self-pay price?” Self-pay prices may be discounted as much as 40 percent. In this case, let’s say the self-pay price is $120.

Everyone likes transparency, and that’s what makes Option No. 3 so appealing. But here’s the rub. If you pay the “self-pay” price for the service, you have cut your insurance out of the deal. That transaction is not eligible to be filed with your insurance company. And therefore it won’t count toward your deductible. However, if your deductible is $6,000 and you never meet it, then it might not matter.

Providers like self-pay pricing as much as you do! When they file with insurance companies it takes weeks, even months, to get paid. They have to pay staff, office workers or an outsourced billing company to get that money. If you choose to pay right then and there, that works much better for everyone.

So what about all the different insurance terminology? I like to break it down into two categories: traditional insurance and high-deductible health plans (HDHPs).

With traditional insurance, think of it as three levels.

  1. Level 1 – Deductible not met. You pay your copay and the balance of the bill after insurance has been filed. Your insurance will discount the fee to their contracted rate and then you will get a bill for the balance remaining.
  2. Level 2 – Deductible met but out-of-pocket max not met. You still pay copay, and you pay a portion of the bill balance based on your co-insurance percentage. So, take a $200 charge as an example. You pay your $20 copay at the time of service. The bill is sent to your insurance who decreases the fee to the contracted rate of $120. You have already paid $20, so the balance remaining is $100. Your co-insurance percentage is 30 percent, so you will owe $30 and your insurance will pay $70.
  3. Level 3 – Out-of-pocket max met. Now, your insurance pays literally everything.

Remedy brings the doctor to you. (5)

HDHPs have only two levels. Deductible met and not met.

  1. Before your deductible is met, you pay for everything except for well checks. There is typically no copay. So the $200 bill is sent to your insurance, who then reduces it to the $120 contracted rate. Then, you are sent the balance bill for that amount ($120).
  2. After your deductible is met, your insurance covers everything. (Caveat: If the provider is out-of-network, it may not be covered depending on your plan).

So, what to do?

First of all, as much as possible, use urgent care (and in particular, Remedy!) for unexpected illnesses and injuries (or your doctor, if you have one). The emergency room can be in the thousands of dollars even for something as simple as a sinus infection. Emergency rooms, including free-standing emergency departments or FSEDs, charge a facility fee and the fee for the medical services. This can get very expensive. By contrast, Remedy is usually in the $100-200 range.

Always ask for the “cash price” or the “self-pay” price. At Remedy, we publish our self-pay prices right on our website. Our goal is to be as transparent as possible.

Lastly, if after your insurance has processed a claim and you think the bill sounds high, then call the clinic’s billing department. At Remedy, I always tell our patients to call if they have any questions about the bill. One issue we see often is that an insurance company rejects a claim for some reason, and the patient gets a bill for the full rate without the contracted discount. In most cases, we will reduce that to our self-pay price without any questions asked.