This article is about insurance claims and how they work. See Part 1 of this series for any insurance terms and background information.
After you visit the doctor, if it's an in-network doctor, a claim will get filed for you to your insurance company. This filing is done by the doctor's billing office, and is almost always done electronically. Electronic claims are subject to federal law regarding the information that is required and how it's formatted. This is a good thing for you, because it means there's little possibility of it getting screwed up. On the claim there's information about you, the doctor, where the service was rendered, who the insurance company is, what services were rendered, what the doctor's official charges are, and so on.
The insurance company takes the information from the claim to find you and the policy you are insured under so it can pull the correct benefits for paying your claim. It also uses the information about the doctor to identify the network so all the information related to the network agreement can be brought in as well.
At the end of all this, here's what the insurance company determines:
1) Which services are covered and which, if any, are not covered.
2) The negotiated allowed amounts for all the covered services.
3) What copay, if any should be applied for the services
4) What deductible amount, if any, applies for the services
5) What coinsurance, if any, applies for the services
6) If there are any of a variety of other things that need to be considered: max payments, out-of-pocket limits, etc.
Which is a fancy way of saying that the money, the charges submitted by the doctor, get divided into three basic chunks:
Provider Write-off: This is the non-covered amount, the amount the doctor agreed to forgo in return for being a member of the network.
Subscriber Liability: This is the amount you have to pay the doctor due to non-covered services, copays, deductible, coinsurance, etc. See below for some definitions of these terms.
Payer Liability: This is the amount that the insurance will pay the doctor as part of your benefits.
The insurance company then sends out the results of the claim processing. You will receive an EOB, or Explanation of Benefits. It lays out the specifics of how they decided the claim should be handled, and you will see information that matches the items described above. This document will also state how much money the doctor can bill you within the terms of the network agreement. This is important. You should ALWAYS review your EOBs and compare them to the bills you get from the doctor. Or how much you paid them when you were in the office.
The insurance company also sends this information to the doctor's billing office. This document is called a remittance, and describes again how the charges got divided up. Some offices get paper remittances mailed to them, others get an electronic version: but the information is the same. How much goes to write-off, how much you the member can be billed for, and how much the insurance company will pay. It's very common for remittance information to be bundled together - in other words, the doctor may get a combined remittance that has information about all the claims that were submitted and processed within some period of time, like a week.
So now, you and the doctor know what's what. What could possibly go wrong? Stay tuned for Part 3 and find out!
A few more terms:
Copay: a flat fee that accompanies specific services. For example, you may have a $25 copay for any visit to your primary physician, and a $60 copay for a specialist visit. You have to pay this every time, and they don't add up towards any kind of limit. However, it comes out of the allowed amount for your visit.
Deductible: This is a dollar amount which must be satisfied by you before the insurance company will start to pay, depending on the service. Insurance policies vary widely as to which services are subject to deductible and which are not. Really, this is all over the map and you have to read your benefit booklet to know how your plan is set up. Again, though, the deductible only applies to allowed amounts.
Coinsurance: A percentage that usually kicks in after the deductible has been met. For example, it's pretty common that a covered service is subject to deductible, then after that the insurance company will pay 80% of the allowed amount. This would be described as "Deductible, then 20%".
This Series:
Part 1 is a description of fee-for-service health insurance in the US, including lots of boring terminology.
Part 3 describes my personal experience of how a medical practice tried to cheat ME.
Summing Up: Don't Let them cheat you
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