Guest post by Dina D. Strachan, M.D.
If one were to survey the public, it is not obvious whether being sick would rank as more frustrating than dealing with health insurance —- especially in these times of health reform and uncertainty. Doctors also sometimes find dealing with health insurance difficult —- especially when their patients don’t understand their responsibilities. Here is a list of some of the things doctors wish patients knew about health insurance.
- Doctors take risks by participating in insurance contracts. Specifically, doctors take financial risks. Financing health care through health insurance is one of those peculiar arrangements in which a third party (the insurance company) might decide that the service being provided to the patient isn’t covered -— after it has already been given. In this scenario, patients usually have no obligation to pay for the service although it was provided to them. It costs more money in administrative effort and time to collect a fee via insurance than straight forward fee-for-service. Doctors often participate in plans because patients have health insurance and want to use it. It helps guarantee volume. Participating, however, can make collecting the same amount of money more expensive.
- A copay is not a tip —- it’s part of your share of the fee. Many patients don’t realize that all health insurance is a contract regarding who is going to pay for what, how much is to be paid and what is to be paid for. Insurance companies make more money if you pay for insurance and don’t use it. This is much like the subscription to the local gym. In their defense, some patients will abuse a resource if there is no cost to them at the point of service. Copays also help catch doctors who abuse the system. A patient is more likely to call foul if a doctor submits a bill to an insurance company for a service not provided if that patient is responsible for part of the bill. So, we have copays. A copay fee, however, is not an extra fee the doctor collects. Doctors typically contract with insurance companies to provide service for a preset rate. Whether you pay a copay or not, we are entitled to this amount. What the copay does is pass on a portion of the responsibility for paying what is owed to the patient, instead of the insurance company, when the patient uses the service. For example, if our contracted amount is $100 for the service provided to you, and you have no copay (or other obligation) then the insurance company should pay us $100. If you have a $25 copay, however, you pay the doctor $25 and the insurance company should pay $75. We just get $100 — either way. How we get it is between you and them. We are just legally obliged to collect a copay from you if we want to get paid from the insurance company at all. So, your copay — it’s not a tip.
- If you get a bill toward your deductible, that means the service was COVERED. Like the copay, a deductible is just another part of the financing structure of an insurance contract. Patients not understanding what this means has become increasingly frustrating to doctors as more and more people have high-deductible health plans. As with any other type of insurance contract, a deductible in a health insurance contract is the amount the patient has to pay down first, should they use their insurance, before the insurance company will begin to contribute to the payments. Sometimes deductibles apply to one type of service, such as a procedure, but not another, such as a consultation. The details are in the patient’s contract —- not the doctor’s. Why would anyone pick a plan with a deductible? This usually is because the monthly premium in a plan with a deductible is lower. A high-deductible plan, with the lower premium, is a great option if one does not expect to use one’s insurance. If one does use one’s insurance, however, one has to pay. It’s an issue of pay now or pay later -— if you need services. Nothing in life, even health care in Canada, is free. If your doctor bills your health insurance for a service you received, and that service is covered, and you have a deductible, the insurance plan will instruct the doctor to send you a bill until the amount of the deductible has been met. If the service is not covered, the fee will not apply to the deductible. The doctor, in this case, is usually out of luck in terms of getting paid at all (see point 1.)
- Patients have legal obligations to honor their insurance contracts, too. The media loves those stories about the rogue doctor who was billing for services illegally. It’s not just doctors, however, who commit health insurance fraud. Patients sometimes do this, too. In not paying a copay or deductible to the doctor, a patient is violating the health insurance contract, which could result in being dropped from the plan. Patients who try to intimidate doctors into waiving their copays or deductibles — this is a popular tactic on sites like Yelp! or on “patient satisfaction” surveys — are, in fact, trying to intimidate the doctor into committing a crime for which the doctor could go to jail, and arguably, also the patient could too. What kind of doctor-patient relationships does one expect to have if one presents insurance, and it is accepted in good faith, but after the service has been provided, one asks the doctor to choose between unwittingly working for free, an online attack, or jail?
- Insurance companies pay different doctors different rates for the same service. Yes, Doctor A, who is down the street in the same city as Doctor B, gets 30% more from the same insurance company for the same service. There are “street” rates (fees paid to individual doctors contracting with an insurance company) and group rates for doctors. Groups are somehow able to get paid more for the same thing. Why? Reasons are sometimes given, such as quality and efficiency, but in truth, it’s all a bit mysterious. Groups likely have financial leverage for other reasons. Doctors don’t even really know. We just try to “get in the club” in which our services are more highly valued. This often comes at a cost of service, restriction or fees. Of course, we’d rather be able to get the higher fees on our own, but that is not often an option.
- Different insurance companies pay the same doctor different amounts of money for the same service Patient A’s insurance company pays $35 for the same procedure, while patient B’s insurance plan pays $187. Doctors are contractually, and ethically, bound to provide that same care. If the doctor’s practice were made up of mostly patients with Insurance A, the doctor would be out of business. Why doesn’t the doctor drop insurance A? Some do. Doctors may participate in Plan A for a variety of reasons, such as there are enough patients on plans that pay more, a need to be on multiple plans to retain patients and get referrals, volume, other service to upsell, the popularity of that plan in the area, a desire to serve a particular population AND having the resources from something else to do so, etc. Just like doctor fee-for-service fee schedules vary from office to office, insurance company payments to doctors also vary from plan to plan.
- Insurance by nature is never “fair.” For insurance to work, someone is paying who is not using it as much as someone else who has paid the same amount. Some people are going to be able to get the same service for less money than someone else. We think of “fair” as paying for what you use. We think of “fair” as everyone paying the same as everyone else. The person who pays for coverage but who doesn’t have to file a claims for health, disability, disaster, accident or liability insurances, however, is usually considered lucky. After all, we pay for insurance to protect us when something we don’t want to happen, happens. If we choose to purchase it, we hope we never have to use it. The healthy subsidize the sick.
Health insurance, like other types of insurance, exists as a financial backup should we need a resource we may not be able to pay for at the time. Until we come up with a better system, however, when we choose to participate in a health insurance contract, all parties, even patients, can educate themselves about their rights, and responsibilities, for the insurance they are participating in now.
Copyright Dina D. Strachan, M.D., 2017
Dr. Dina D. Strachan is a board-certified dermatologist in private practice in New York City. Her practice website is www.aglowdermatology.com