A few weeks ago I tore the Achilles tendon in my right foot. I was seen at a walk in clinic, had an MRI, had surgery a few days later and have had 2 followup visits since. As you might imagine the medical bills are starting to roll in, and I’ve had a crash review course in how medical insurance works.
Here are some of the concepts and terms you’ll hear when dealing with medical insurance.
Explanation of Benefits (EOB)
You healthcare provider sends information about your visit to your insurance provider. The procedure(s) done are given a code as well as a cost. The insurance company uses this information to determine how much of the cost they will pay, and how much you will have to pay. A detailed breakdown of this information is made available to you in a document called an explanation of benefits.
Negotiated Rate
Your insurance company has negotiated rates with your medical provider for just about every possible procedure. Since the insurance company drives business to the medical provider by including it in their network, the medical provider discounts care given.
Here’s a hypothetical scenario: A medical provider charges $150 for a standard office visit. Because of the agreement between the medical provider and your insurance company, your cost could be $100.
Deductible
A deductible is a magic number set by your insurance company. Your insurance company keeps track of how much you’ve paid out of pocket for the current calendar year. Once the amount you’ve paid reaches this magic number, your benefits increase.
Here’s another hypothetical example: Your deductible is set at $5000 by your insurance company. Until you pay that much out of pocket, you are responsible for the full negotiated rate of your medical bills. Once the amount you’ve paid exceeds the deductible your insurance company may implement an 80/20 split, meaning they pay 80% of the negotiated rate and you pay 20%. Our $150 office visit from the first example, with a negotiated rate of $100 now becomes $20 (20% of $100) after you’ve reached your deductible.
Out Of Pocket Maximum
Your out of pocket maximum is another magic number set by your insurance company, and it’s exactly what it sounds like. Even after you’ve met your deductible, the insurance company continues to track how much you’ve paid out of pocket. Once that amount reaches your out of pocket maximum, the insurance company pays 100% of covered procedures.
Medical insurance is complicated, yet it is an essential aspect of life we all must deal with. The ins and out of medical insurance are not typically taught to high school students, leaving them absent of a skill they will need to successfully navigate life. This article introduces some of the basics to help people learn how medical insurance works.
How about you, EOD Nation, do you know how your medical insurance works? Where did you learn that skill?
