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Health Care Buzz: What is an insurance 'allowable'? How does it impact what I will pay?
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HEALTH CARE BUZZ

Health Care Buzz: What is an insurance 'allowable'? How does it impact what I will pay?

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We hear plenty about the cost of health care, the high deductibles and the amount left for the patient/family to pay and the most difficult one: “charges don’t mean anything if you have insurance.” What?

It’s hard to hear all this and realize that when we access health care, we are usually scared, didn’t ask to be sick or have our life be disrupted by an unexpected illness or injury and now have to sort out all the health care and insurance language.

Let’s see if we can simplify and reduce the frustration factor through education.

Allowed amount of charges

As we have shared in previous articles, there are contracts between health care providers and the insurance plans that dictate what the “allowed amount” will be for services. This can include commercial insurance, veteran’s benefits, state Medicaid plans, original/traditional Medicare, Medicare Advantage, tribal coverage, worker’s compensation and self-insured plans. Yep, pretty much all entities that are paying health care claims with the exception of liability insurance.

Under the new transparency legislation that took effect Jan. 1 (more on that in later articles), the allowable for each outpatient service must be made aware to the patient when asked — prior to services — to better inform the patient regarding their out-of-pocket expenses. It also has to be declared on the after-service explanation of benefits. The allowed amount (also called approved charges) is listed on the explanation of benefits from the insurance plan to the patient when services are used.

The allowed amount is the total amount that is due as a result of the negotiation between the health care provider and the insurance company. The disallowed amount (or insurance discount) is simply the difference between what was billed to the patient by the health care provider and what the insurance has paid. These amounts are not billable to the patient; instead, they are written off by the health care provider.

Examples:

Doctor visit and two X-rays: Billed charges $548. The insurance plan identifies the disallowed/discount amount of $312, leaving the amount paid by the insurance or applied to the deductible of $235. The insurance total payment (including any patient portion) was 43% of billed charges. The difference of $312 is written off by the health care provider.

In-patient five-day stay: Billed charges $32,201. Patient has a copayment of $1,300 for the five days based on a per-day rate of $325. The insurance paid $6,100. When adding the patient portion and the insurance payment the total allowed amount is $7,400. This represents 23% of billed charges. The difference of $24,801 is written off by the health care provider.

Out-patient procedure: Billed charges of $612. The insurance plan declared $119 non-covered. The discounted rate from the insurance or applied to deductible is $492. This represents 80% of billed charges.

Summary

As you can see, it is important to understand the allowable for every service as this is the amount that will represent total payment and is different per service, per insurance plan. Getting an estimate of the allowable per insurance per service will ensure an enhanced understanding of what will be due by the patient. After 40+ years in health care reimbursement, I am still amazed that health care business that bills $1 and expects to get closer to 40 cents and must write off the difference with the patient portion factored in with the 40 cents equals “payment in full.” Wow!

Reminder

With the ongoing rollout of the COVID-19 vaccinations, remember-the COVID-19 vaccine will be paid for through funding authorized by the Coronavirus Aid, Relief and Economic Security Act (CARES). When patients are registering for the vaccine, they are asked to bring their insurance card with their insurance billed for the administrating/giving of the vaccine. Under the CARES Act, the administration charge will be paid for by the insurance plan. There is no out-of-network penalty if the patient goes to an out-of-network provider to receive the vaccination. “Providers are prohibited by agreement with the U.S. Government from billing patients for the vaccine or its administration, including balance billing.” If you don’t have insurance, ask about assistance through special funding in the CARES Act under HRSA. (Hint: when in doubt, ask the health care provider when getting your vaccine. No surprises.)

Update

The “Medicare 101, Social Security Benefits and Assistance for Senior Boot Camp” has been delayed until the fourth quarter of 2021. Our community outreach education will resume when it is safe for all of us. All the fun related topics will be included and open to all ages. See you in mid-2021!

Day Egusquiza is the president and founder of the Patient Financial Navigator Foundation Inc. — an Idaho-based family foundation. For more information, call 208-423-9036 or go to pfnfinc.com. Do you have a topic for Health Care Buzz? Please share at daylee1@mindspring.com.

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