What makes up your Medical Insurance Costs (Part 3 of 3)
In the previous article we discussed the out-of-pocket expense cost portion of Medical Insurance. In this final installment we will talk about how you can determine those costs by reviewing your Explanation of Benefits.
How to Read an Explanation of Benefits, and Why you Should
To understand your out-of-pocket costs for medical services it is important to know how to read the Explanation of Benefits (EOB) that will be provided to you. The EOB reports the cost of healthcare services and what your Plan covered. Knowing how this works can help you select the right health plan option during your enrollment period.
Insurance companies have slightly different EOB formats, but they all include similar information. Some also provide a "Benefits Summary" document which can be helpful but contains less detail. The EOB provides the most complete picture of the services provided and the amounts billed, and paid, by your insurance plan.
Most EOBs will prominently state “this is not a bill”. You shouldn’t pay a provider based on the EOB alone. The EOB shows what you may owe to a provider. You may have already paid some, or all, of that amount. You should wait for a bill from the provider to avoid overpaying.
The EOB will list the services you received by date and medical provider. It will list the cost associated with those services. Each row of the EOB will be shown in sequence like the following example:
· Total Amount Billed – this is the amount that the provider charged your health plan for the services you received. This figure represents their normal cost for that service.
· The Member Rate – this is the amount that your Plan has negotiated to pay the provider for the services you received. Sometimes there is a significant discount compared to the billed amount. An advantage of being part of a large insurance group results from the Plan or insurance company being able to negotiate discounted rates.
· Applied to Deductible – depending on the Insurance Plan in which you enrolled, and the services received, the EOB will list how much, if any, of the Member Rate was applied to your deductible. If you are enrolled in a high-deductible health plan, and haven’t yet met your annual deductible, the amount shown will be the same as the Member Rate. If you have already met some, or all, of the deductible, the remaining unmet amount will be shown here. You are financially responsible for paying the deductible.
· Your Copay – depending on your Insurance Plan, and whether you have met the deductible you may have a copay which will be shown here. A copay is a fixed dollar amount you pay for specific services. You are responsible for paying copay amounts.
· Your Coinsurance – depending on your Insurance Plan you may be responsible for a percentage of the of the charges that exceed the deductible. This amount can vary based on plan design but is typically around 20%. You are responsible for paying any coinsurance.
· The Plan’s Share – this will show the amount that was paid by your health plan. You are not responsible for paying this amount.
· Your Share (sometimes shown as You May Owe) – This is the combination of any amount applied to the deductible plus copays or coinsurance. You are financially responsible for this amount; HOWEVER, you may have already paid some of it when services were provided.
Itis a good idea not to pay the “Your May Owe” amount shown on the EOB until you receive a bill from the provider that matches that amount. You may not receive the EOB and provider bill at the same time, so wait until you have both in hand to make a comparison.
The services you received may be listed individually or bundled together on the EOB and the bill you receive from your provider. You should reconcile any bills with the EOB to make sure all the services you received are listed and have been processed correctly (remember that you may have already paid some of your responsibility). If the EOB and the bill don’t match, ask the billing department at your provider to explain. You may need to share the EOB with them so they can help you figure out any confusion.
What is the Out Of Pocket Maximum?
Part of the Insurance Plan design will be an out-of-pocket maximum. This is that part of your insurance that protects you from catastrophic events. The out-of-pocket maximum is the limit on the total amount that you will pay during the year. After you meet that maximum any additional care you receive will be completely covered by the Insurance Plan.
Medical care and Insurance is complicated, but it is worth investing time to understand what you are being charged and what you actually need to pay. It is helpful to maintain a record of the providers from who you received care, and the dates that care was provider. Those notes will help you monitor your EOB statements and make sure everything was billed and has been paid by either the Insurance Plan or by you.
Errors can occur, so call the Plan administrator if something on the EOB doesn’t look right to you. The phone number and other contact information should be listed on your ID card and the EOB.
Understanding the costs of healthcare and the split between the Plan’s responsibility and your responsibility will help you make better decisions when it comes to utilizing care. For example, when you see the associated costs, you will quickly understand why you are encouraged to use Urgent Care Centers instead of the Emergency Room. The EOB will also help you understand the relationship between your premium contribution and out-of-pocket expenses that can be important when you select a health plan option during your enrollment period.
Written by Brian Mitchell
Brian Mitchell has experience leading Total Rewards strategy and implementation for large employers.
Benefit Boosts by Brian Mitchell© – Vol 2024-012
You may also like these articles:
