Understanding Medical Billing

For medical services provided, we submit a claim to your Insurance Plan. In order to prevent errors or denial of payment, it is important that we have accurate information about your plan and about you. After we receive the EOB from your Health Plan (Explanation Of Benefits form), we determine the amount, if any, that you still owe. Your statements will reflect this amount.

Introduction

Billing starts with the fee which is the original charge for a particular service. Billing involves 3 common types of payment to physicians. These are the co-pay, the deductible and the co-insurance.

The Fee

Medical billing (other than HMO) is based on "fee-for-service". The doctor provides services, and for each service, there is a fee (or a charge). The amount you actually owe is usually less than the up-front fee due to fee-reduction contracts, called reduced fee-for-service, between the practice and your health insurance company.

Contrary to what many people believe, insurance does not “cover everything”.

There are separate fees for various services such as a fee for the doctor's visit, for any procedure or ultrasound performed or for a blood or other type of lab or imaging test done or ordered (like a mammogram).

The Co-pay

The co-pay is the amount of money that you owe up front for every doctor visit. Each insurance plan is different. The co-pay might vary in amount or there might be none. The co-pay needs to be paid in advance at the time of your visit. Some co-pays are as high as $50. There are normally no co-pays for a preventive care (well-woman) visit or for a routine prenatal visit.

The deductible

Many patients have an annual deductible. This is money that the insurance company will determine is owed to the practice, but that the patient has to pay. When a balance due is applied to your deductible, you personally owe this money to the practice but the amount is applied to your deductible. See the example below.

The co-insurance

This is the percentage of the fee that is owed to the practice based on your plan. The amount depends on what the insurance has approved for payment. Th co-insurance normally does NOT apply until the deductible has been met. You owe the co-insurance amount to the practice. See the example below.

Example using the above terms

You go to the doctor for a problem (not a well-woman visit). The visit fee (charge) is $150. Your co-pay is $10 and your co-insurance is 20%.

The co-pay is paid at the time of the visit. Afterwards, the practice files a claim with your insurance company. The EOB arrives and it shows that the Health Plan approved a payment of $95.00 for this $150 visit. The $95 is called the "allowed amount." The practice has to "write-off" the remaining $55. This is called an "adjustment."

The $95 is what your insurance has approved as the full payment owed for this visit (the fee was reduced from $150 to $95 due to a "reduced fee-for service contract"). You have already paid $10 of this as your co-pay so the practice is still owed $85. 

If you have an unmet deductible, then you now owe $85 and this $85 will be applied to your deductible. In this case, you have a balance due of $85, and this will appear on your statement.

If your deductible is fully met, the co-insurance applies. You have a co-insurance of 20%. This means that you still owe 20% of the $85, which is $17. The insurance owes 80% of the $85 which is $68. They will pay the practice $68, and you will get a statement for $17. This $150 visit cost you out-of-pocket $27.

Here is another explanation of this complex subject