After purchasing health insurance, it is important to learn the policy terms and how the different processes work for coverage, claiming, and billing. This can help a person avoid any unexpected coverage difficulties and costs.
Since coverage and out-of-pocket costs vary among insurers, understanding these areas can help a person make decisions when shopping for a policy.
Becoming familiar with the processes involved in billing can help an individual know which payments providers expect at the time of service and which payments they expect later.
This article discusses coverage and prior approval, as well as in-network versus out-of-network providers. It also examines billing and claims and suggests questions to ask an insurance company.
Knowing the coverage options that an insurer offers means becoming familiar with the extent to which it pays for the medical treatment a person may need.
This will typically include inpatient and outpatient charges, as well as any general coverage exclusions. Exclusions are things that the insurance does not cover.
The term “inpatient” refers to hospitalization and charges incurred during a hospital stay, while “outpatient” refers to services such as doctor consultations and lab tests.
For both categories, a person should review policy documents to find out the following:
| What it is | Example | |
|---|---|---|
| Deductible | The deductible is the amount that someone must pay before the insurance company will cover costs. Deductibles are typically annual. So, once a person pays the amount in full, they should not have to pay again until their policy renewal date. An individual must pay their deductible before any other out-of-pocket expense. | For inpatient care, a person may have a $500 deductible. Upon discharge, their bill comes to $1,500. They would pay the hospital $500 for the deductible, and then the insurer would cover the rest. The insurer should pay for any further inpatient treatment in full unless a policy stipulates otherwise. |
| Copayment | The copayment, also referred to as a copay, is the set amount an individual must pay for a medical service at the time they receive it. | A person may have a doctor’s consultation that costs $100, but they have only a $10 copayment per visit. They would pay $10 to the doctor’s office directly and their insurance would cover the remaining $90. |
| Coinsurance | Coinsurance is the percentage an individual pays a provider for a service. | A person has coverage for physical therapy at 90%. Their bill comes to $200. The insurance plan will cover 90% of the $200 cost, which is $180. The person must pay the doctor’s office the remaining 10% of the cost, which is $20. |
| Out-of-pocket maximum | The out-of-pocket maximum is the maximum amount that a person may need to pay each year before an insurer pays 100% of healthcare professional charges. | A person has an out-of-pocket maximum of $530. They pay $500 for their inpatient stay. They pay $10 for their doctor’s consultation. They pay $20 for their physical therapy. This totals $530, meaning they have paid their out-of-pocket maximum. The insurer will pay 100% of future costs until the policy renews. |
A person also must consider the cost of a monthly premium. This is the amount someone pays an insurer for their healthcare policy, and the amount is payable whether a person receives any healthcare services or not. Often, the higher the monthly premium, the fewer out-of-pocket expenses a person will have.
Additionally, an individual should review their policy documents to learn about coverage for:
- medications
- special conditions or treatments, such as pregnancy, physical therapy, and psychiatric care
- home care or nursing home care
- specialist consultations, such as with eye doctors and dentists
According to the Centers for Medicare & Medicaid Services, an insurer may require prior approval of certain types of services before it provides coverage. Other words for this are “precertification” and “preauthorization.”
This is not the same as a referral from a healthcare professional, and it does not act as confirmation that an insurer or plan will cover all costs.
Except in emergencies, a person may require prior approval for:
- specialty prescription medications
- durable medical equipment, such as walkers, wheelchairs, and at-home hospital beds
- planned admission to a hospital
- transplants
- surgeries
It is important to note that, should an individual receive a service without prior approval, they may have to pay the total cost.
Obtaining prior approval
To obtain prior approval, a person may have to work with their doctor to clearly establish that a treatment or service is medically necessary. The following steps may help obtain this:
- Firstly, check policy documentation to see which services require prior approval. This varies among insurers and policies.
- Sometimes, an insurer can provide prior approval over the phone. A person or their doctor’s office can call the insurer directly. If this is not an option, an individual can ask about the process for submitting prior approval forms.
- In some instances, a doctor’s office is responsible for submitting prior approval forms. Working with the staff can help to ensure they have the necessary information.
- After the office submits the request for prior approval, the insurer will process it and send a letter with notification of denial or acceptance.
Some, but not all, health insurance providers have a network of hospitals, doctors, and other healthcare professionals that they contract with to offer medical care to policyholders at an agreed-upon fee.
Any doctor or facility not listed as or considered “in network” by an insurer is usually an out-of-network provider. This means a person may have to pay a higher cost for treatment. In some cases, insurers may not cover any out-of-network costs.
A person should ask their healthcare professional’s office if they will bill the insurer directly. If the answer is no, the individual can inquire about the preferred billing method.
Here is how direct billing works:
- After a doctor’s visit and once any out-of-pocket costs are paid, the office submits an itemized bill to a person’s insurer. This bill is also known as a claim. It lists the services a person has received. Services will display their corresponding
current procedural terminology (CPT) codes . - The insurer pays its portion of the bill and sends the individual an explanation of benefits (EOB). The EOB shows the date that the insurance company received the bill and the amount paid.
- At the same time, the doctor’s office may send the person a statement showing the amount it billed the insurer, minus any out-of-pocket expenses, for the services they received. This is not a bill.
- Once the insurer pays its share, an individual may need to settle the remaining balance due for either deductible, copayment, or coinsurance if they have not already done so.
It is worth noting that an insurer does not always send an EOB and a healthcare professional does not always send a statement. Individuals can request these at any time.
It is important that people file their health insurance claims promptly. Many insurers have deadlines, beyond which they no longer consider claims eligible for reimbursement or payment.
A claim is a request for payment that a person or their healthcare professional submits to an insurance company.
An individual usually pays the healthcare professional their part of a bill, and they expect the insurer to pay the remainder.
Sometimes, though, a person may need to pay in full, then submit a claim for reimbursement. An insurer’s website will provide information on:
- how to submit a claim
- the information required to process the claim
- a phone number to call to ask for help
Here is how a typical claiming process works. This can vary among insurers.
To file a claim, someone needs:
- An itemized bill from the service provider. This bill should include:
- the dates a person received care
- a list of services they received
- charges and description
- CPT code for each service
- Personal information. This information includes:
- Social Security number
- employment status and whether the health condition or accident is related to a person’s work
- health insurance ID or policy number
- Instructions on where to send payment. If the insurer sends the payment to the individual, that person is responsible for sending it on to their healthcare professional. If payment should go to the healthcare professional, all payment instructions should already show on the invoice.
Insurer invoices
Sometimes, an insurance company may settle a claim with a healthcare professional in full, then send an invoice to an individual for any applicable deductible, coinsurance, or copayment. In this case, a person should pay their health insurance provider as instructed on the invoice, which should detail their preferred payment method.
Below are some questions that a person may consider asking their insurance provider.
When requesting treatment or asking about prior approval
- What are the specific services for which the insurer requires prior approval?
- Does the insurer require a specific amount of notice before the anticipated date of treatment?
- What is the wait time involved in a prior approval request?
- What is the procedure for applying for prior approval?
- Who notifies the provider when approval is granted or denied?
- Is there an appeal process if approval is denied?
What to ask about coverage
- Are a person’s specific conditions covered? If so, to what extent?
- Are there any specific or general exclusions? If so, what are they?
- What is the coverage for inpatient and outpatient services, and what are the expected out-of-pocket costs?
- What is the coverage for prescription drugs?
- What is the coverage for pregnancy, physical therapy, and psychiatric care?
- What is the coverage for vision and dental care?
What to ask about billing and out-of-pocket expenses?
- Is there a deductible on the policy?
- What are the copayments and coinsurance?
- Does the insurer have a preferred doctor network? If so, can a person visit an out-of-network healthcare professional?
- Do the costs differ between in-network and out-of-network doctors?
- Is there a yearly out-of-pocket maximum?
What to ask about claiming
- Is there an appeal process if a claim is denied?
- Can a person add bank account details to their policy for reimbursement?
- Can an individual upload claim documents online?
- How can a person submit a claim without access to the internet?
- Does the insurer accept direct billing from a healthcare professional?
A person may not know where to begin when it comes to navigating their health insurance policy. Becoming informed and confident about the terms and processes involved can give a person peace of mind and confidence in handling health insurance matters.
Knowledge of an individual’s specific coverage and out-of-pocket costs is a good place to start. Other processes to look at include prior approval (preauthorization), claiming, preferred doctor networks, billing, and appeals.