Once upon a time, only Medicare was confusing. Now, even commercial insurance plans are hard to understand—which is why many patients (and providers) are asking tough questions, questions like, “Deductible vs. copay? Copay vs. coinsurance? What’s the difference?” While it may not feel like insurance education is something you should have to shoulder, doing so may be a big benefit—both for your patients and your payment collection efforts. With that in mind, here are some seriously helpful definitions of common insurance terminology (as well as why knowing this information—and passing it on to your patients—is good for your business):
Understanding Insurance Terminology
The deductible is the total amount a patient must pay out of pocket before his or her insurance starts to pay. For example, if a patient’s deductible is $1,500, then his or her insurance won’t pay anything until that patient has spent $1,500 on services that are subject to the deductible (it’s important to note that not all services apply to the deductible). Furthermore, even after a patient meets his or her deductible, that patient may still owe you a copay or coinsurance amount for each visit.
A copay is a fixed amount that a patient must pay for a covered service—as determined by his or her health plan. Usually, copays vary for different plans and types of services. Patients typically pay their copays at the time of service—and, because this amount is fixed, they’ll pay the same amount regardless of the visit length. In most cases, copayments go toward the deductible.
This type of out-of-pocket payment is calculated as a percent of the total allowed amount for a particular service. Thus, it’s the patient’s share of the total cost. For example, let’s say:
- the insurance plan’s allowed amount for an office visit is $200;
- the patient has already met his or her deductible; and
- he or she is responsible for a 20% coinsurance.
In this scenario, the patient would owe $40 at the time of service, and the insurance company would pay the rest of the allowed amount for that visit. Coinsurance amounts may vary from visit to visit—depending on what services the patient receives.
Coinsurance for Patients with Medicare Part B
Patients who have Medicare Part B are responsible for a 20% coinsurance, which usually comes to $11–25 per visit. If a patient has original Medicare as his or her primary insurance—and he or she also has a secondary insurance—then the secondary payer is responsible for paying that 20%. In some cases, though, the secondary insurance also charges patients a copay, coinsurance, or deductible. Because secondary insurances can be even more confusing than primary ones, we recommend having your patients contact their secondary insurance carriers to learn more.
Want all this information in a handy document that you can share with your staff—and your patients? Click here to download your free copy of the PT Patient’s Guide to Understanding Insurance.
Connecting the Dots
Now, how do the specifics of your patients’ insurance plans impact you? Well, given that only 21% of patient balances that aren’t collected at the time of service are ever recovered, don’t you want to know exactly how much you should be collecting from patients while they’re in your office? The only way to know what each patient owes is to understand the ins and outs of his or her insurance coverage—and to ensure they do, too.
Patients with High-Deductible Health Plans
With the steady increase in high-deductible health plans (HDHPs) over the last few years, more and more patients are having to foot a bigger bill for the cost of their care. As a result, patients are acting much more like consumers, weighing the value of the services they’re receiving against the money they’re shelling out. As WebPT President Heidi Jannenga and CEO Nancy Ham discussed in this webinar, to be successful in this new environment, providers must not only demonstrate their value via the care itself, but also:
Understanding patients’ copays, coinsurances, and deductibles can also help you make informed decisions about care and payment plans. After all, some patients with HDHPs may not be able to afford to the cost of your care—even though they might really benefit from your services. While you should avoid waiving—or discounting—copays, you can absolutely create payment plans and/or tailor your plans of care to take into account limited patient budgets. Essentially, with the right information, you can make the best possible decisions for your patients and your practice.