Crash Course in Health Insurance. Part 1

My husband works in the health insurance industry.  He arrived home from work the other evening, steam coming from his ears, mumbling something about “coinsurance” under his breath.  He was frustrated that a certain clinic had no idea how to bill some sort of “coinsurance” claim properly and had completely messed up a client’s medical bills (my explanation of this diatribe is probably a little off as I don’t actually know what “coinsurance” is either).  “You know what coinsurance is, right?” he asked.  “Nope” I responded unashamedly admitting my ignorance.

My husband is constantly amazed at how little providers know and understand about health insurance.  I’m not.  As a provider myself I have some basic understanding of health insurance vocab but ask me a question about your plan and my eyes will glaze over and I will promptly direct you to that ever so unhelpful number on the back of your Blue Cross card.  After all, my responsibility as a provider is to send you your medical bills, not help you figure out how to pay for them, right?

Even if I can’t be expected to answer in depth questions about specific insurance plans within our crazy medical billing system, it would benefit my patients and myself personally to do a little brush up on health insurance concepts.  Stop yawning– these concepts are becoming increasingly important as our medical payment system becomes more complex.  Knowing a few basic terms can help you navigate the world of medical billing helping you guide your patients a little more clearly.  Here are a few must-know health insurance related concepts:

  • Deductible– I think it’s safe to say most of us have this one down, but let’s make sure.  The deductible is the amount the patient must pay out of pocket with their own cash before the insurance company will contribute anything towards the medical bill.  For example, if you, the patient, fracture your clavicle resulting in a $2,000 emergency room bill and your insurance plan deductible is $3,000 you will be financially responsible for the entire ER bill yourself.  You have not reached your $3,000 deductible.  Say, however, that you fractured your other clavicle earlier in the year which had also cost $2,000 in medical expenses.  Now your medical bills total $4,000 for the year.  You have reached your $3,000 deductible so your insurance plan will help pay for the additional $1,000 since the deductible was reached.
  • Out-of-Pocket Maximum- Also known as the out-of-pocket limit, this is the most a patient will possibly pay for medical bills in a given year.  It may or may not include the deductible depending on the insurance plan.
  • Coinsurance-This one gets a bit more complicated but let me simplify.  Coinsurance is the sharing of medical costs between the patient and the insurance company.  It is the percentage of the medical bill the insurance company will pay after the patient’s deductible is reached up to a certain amount defined in the insurance policy.  For example, an insurer may pay 80% of medical claims (coinsurance) after the patient has met their deductible until the patient has reached an out-of-pocket maximum of $3,000.  Coinsurance is expressed in a pair of numbers, 80-20 or 90-10 for example.  The first number is the percentage paid by the insurance company.  The second is the percentage paid by the patient until they reach their out-of-pocket limit.  Once the out-of-pocket limit has been reached, the insurance company generally pays 100% of the claim.
  • Copay- copay is a payment made by the patient each time a medical service is rendered.  This amount is outlined in the insurance policy.  Copayment’s do not usually count toward the out-of-pocket maximum.

Alright, I hope you aren’t bored to tears and that you were able to refresh your memory on some more familiar terms while learning a few new health insurance concepts as well.  Next time my husband comes home with coinsurance related frustration, I may be able to empathize more appropriately.  Stay tuned for Crash Course in Health Insurance Part 2 to explore a bit more complex terminology.


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