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Understanding Your Health Insurance and Medical Bills

By MARY ELLEN KALUZA

Understanding your health insurance policy can be an exercise in crazy-making. Very few of us have insurance policies that cover everything. What isn’t covered shows up in medical bills. A little knowledge can help make sense of it all.

INSURANCE PLAN TERMS

Premium: This is what you pay to have insurance. Insurance through your employer is deducted from your paycheck. Otherwise, it’s a regular bill like auto insurance.

Copay: A fixed amount you pay for a medical procedure or an office visit. The copay amount may be different for different services. Not all insurance plans have a copay.

Deductible: This is the amount of medical bills you must pay 100% before your insurance kicks in to pay expenses. This amount can range from a few hundred dollars to several thousand. Knowing how much your deductible is will help you plan for medical expenses.

Coinsurance: After you have satisfied your deductible, your coinsurance kicks in. Typically, plans will cover 80% and you are responsible for 20% of the bill – your coinsurance. These percentages can differ depending on the medical procedure or provider.

In-network or out-of-network: In-network providers have an agreement with your insurance company to provide services at a certain cost to their policyholders. You usually pay more to see an out-of-network provider.

Out-of-pocket limit: This is the amount you must pay each year before your insurance will cover you 100%. The amount is often in the thousands of dollars. The out-of-pocket limit does not include your premium payments.

MEDICAL BILLS

Medical billing isn’t uniform, so if you go to different clinics or practitioners, your bills may look totally different. And you may receive extra bill-like notices to help increase your blood pressure.

Statement: You could get multiple statements for the same service. Your provider sends a bill (aka claim) to your insurance company and may send you a statement, too, with a notation like “Your insurance has been billed”. You’ll receive another statement after the insurance company has paid what they will. This will have the amount you owe the provider.

Explanation of Benefits (EOB): This comes from your insurance company. It tells you what they will pay for that service, the allowed amount. The EOB will note if you have a copay, deductible, or co-insurance to pay.

Statement (again): Statement formats are all over the map, but you should be able to tease out the essentials:

  • Date of service – when you saw the medical provider
  • Service provided – with any humanity, the service is noted in plain English
  • Cost of service – what they normally charge for it
  • Provider amount (or adjustment) – the difference of what the provider would charge and what the agreement with the insurance company says they can charge for that service
  • Insurance payment (or insurance adjustment) – what the insurance company paid
  • Amount you owe – just that, the bottom line, and it should match up with your EOB

Statements can get confusing, especially if you received another service before any payments were made on the first one. You’ll receive statements monthly as long as there is a balance due. It is easy to get lost and frustrated and throw the bills in a pile until they grow to a frightening height.

Hopefully these explanations help you understand your bills so they don’t become a crazy-making mess. (Medicaid and Medicare coverage add other layers not covered in this article.) Paying your bills is a whole different column. Stay tuned.

Mary Ellen Kaluza is a Certified Financial, Housing, and Reverse Mortgage Counselor.

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