In addition to selling insurance I work with Providers helping them understand all the new regulations and how the Affordable Care Act will affect them. Recently I spoke with a Medical Biller about provider charges, the incredibly high deductibles patients must meet for their insurance plan and what Payer consider to be an allowable service. This particular Biller suggested Providers raise their charges to astronomical levels so patients will reach their deductible faster. This is absolutely wrong and here is why.
The three terms we are discussing here are: Charges, Deductibles and what the insurance companies and Medicare call the Allowable. A Provider can charge whatever they want to Charge for their services. The industry standard is usually 2 or 2 1/2 times whatever Medicare or the Center for Medicare and Medicaid Services (CMS) will pay. You will see the charge, because that is what the Provider puts down on the claim.
We should all know what the Deductible is. That is the amount you typically have to pay before your benefit plan will start paying towards your claims. In the recent healthcare climate, that could be as much as $6,350.
The Allowable is what the insurance company or Medicare deem covered under your benefits and what they will pay for that particular service. Please note that not everything included on your claim from the provider is deemed allowable.
When insurance companies calculate whether or not you have met your deductible, they do it using the allowable amount, NOT the charged amount. Therefore, it really doesn’t matter what the Provider charges, only what the insurance company deems allowable.
If your deductible is $3,000 and the charges are $20,000 but the insurance company only allows $1,000 of it to be paid, then you will still have $2,000 to pay before your deductible is met.
If you are dealing with an in-network provider, you don’t have to worry about “balance-billing.” Balance billing is the practice some providers (who aren’t in network) use to collect the difference between the charged amount and the allowed amount.
I hope this helps clear up some of the confusion. I will post more about how claims are handled and what is expected from you the patient, your insurance company and the provider. Go to www.versaclaim.com to find out more about what can be done with out-of-network claims.
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