February 2006
How to avoid expensive health-insurance errors
If you aren't vigilant, you could end up owing thousands
Health insurance is possibly the most vital armament in your financial self-defense. Without it, you leave yourself open to
an onslaught of expenditures that could rob you of your savings and even your house.
But having coverage is not enough. Even with the best policy, you could end up owing gigantic sums for your medical care. And don't think that hospitals, doctors, laboratories, anesthesiologists, or other medical providers will cut you slack just because you are ill. All of them can and do send unpaid bills to collection agencies that then hound you for payment and report you to credit bureaus and even take you to court to get the money.
Indeed, half of those in a sample of 1,771 people who filed for bankruptcy protection cited medical bills as the cause, according to a 2001 study conducted by researchers at Harvard and Ohio universities. Seventy-five percent of them had health insurance at the onset of the illness that ultimately bankrupted them. Most were solidly middle-class families who had attended college and owned homes. Some families even went bankrupt after a relatively modest medical problem like an appendectomy.
The fact is that consumers can make disastrous errors with their health insurance. Among them: misunderstanding the limits of the policy, purchasing less insurance than is needed, and failing to have a Plan B fallback in case a job loss terminates the coverage. "The fact that it's called health insurance does not guarantee that it gives adequate coverage for most things that will go wrong," says Elizabeth Warren, professor of law at Harvard University and one of the authors of the study.
Don't wait until you need your coverage to learn how it works and where you can get snagged. If you are sick, you do need kinder, gentler treatment. Expect it from your family and friends, not from the hospital billing department.
Here are some of the top mistakes to avoid if you want to use your insurance for maximum benefit and minimum cost.
IGNORING THE RULES
You may think those rules set forth in your plan are little more than bureaucratic twaddle, but plan administrators don't. And those rules could turn into traps that land you thousands of dollars in the red. This is what you have to know:
Pre-authorizations. If you're required to get an authorization from your plan before you have treatment, by all means, make sure you get it. Don't assume the plan will pay simply because the treatment is medically necessary. Double-check with the treating doctor to make sure that he or she has the authorization in hand.
Referrals. Know whether you have to get a referral from your primary-care doctor before seeing a specialist. Even if you get the proper referral, any treatments that arise from that visit may still require preauthorization.
Limitations. Both benefits and payments may have limitations. If your plan says it will pay for 10 physical therapy visits a year, and you go for 20, you are on the hook for the extra visits. If the plan pays $50 a visit, and you consult a more-expensive therapist who charges $85, you must pay the $35 difference.
Deadlines. If you want to dispute a denial of your claim or the amount of the insurance payment, you have a specific time period in which to make an appeal, typically up to six months. Know what it is; otherwise, you could lose an appeal by missing a deadline.
Deductibles. Understand how much your deductible is and what it applies to. For example, a preventive checkup might be covered even if you haven't met your deductible, but a subsequent treatment that the doctor prescribes during that visit might not be.
In recent years employers have been increasing deductibles, from $250 to $300, $500, $1,000, or more. Make sure the plan has included every dollar you paid. For example, in some plans, prescription drugs may now count toward meeting the deductible. Don't leave them out.
Prescription drugs. In many plans, it's not only brand-name vs. generic medications, but tiers of brands. We're seeing "preferred brand, less-preferred brand, and 'oh, my God, don't use this brand,' " says Kathleen Stoll, director of health policy at Families USA, a nonprofit organization in Washington, D.C., that advocates for affordable health care. You are entitled to see the "formulary," or list of drugs, and the reimbursement amounts you can expect from your insurer so you can know which tier your medication falls under. To avoid getting charged for lots of expensive brand-name drugs, ask your doctor to prescribe an equivalent generic or a less-expensive medication. (For information on lower-priced medicines that might be equally effective alternatives to expensive brand-name drugs for many conditions, go to CR Best Buy Drugs at www.crbestbuydrugs.org.)
GOING OUT OF NETWORK
Some health plans do not allow you to be reimbursed for care you receive from physicians and hospitals outside of their network. If that's the case, you should expect to pay for such care on your own. Other health plans do reimburse you for out-of-network services but pay only a fraction of the total. Obviously, steering clear of out-of-network providers will keep costs to a minimum.
If consulting an out-of-network doctor is a matter of life and death--only the renowned specialist can perform the surgery you need--then you'll have to find out what the procedure will cost and whether you can afford it. When you use a provider who isn't restricted by an arrangement with your insurer, he or she may charge you the highest level of fees. Someone has to make up for the lower rates paid by insurers, and it's usually the patient who uses his own money.
In advance of treatment try to find out how much the provider charges for high-fee services. Then check with your insurer to find out what it will pay, if anything, under the terms of its "reasonable and customary" payment for out-of-network care. Most insurers are not forthcoming, but you must insist on an estimate. The gap between the provider's fee and the insurance reimbursement, known as a balance bill, is yours to pay.
You'll also have to find out whether your insurer will pay for the full reasonable and customary fee or if some of it is still your responsibility. If you don't, says Maura Carley, M.P.H., a health-insurance expert and advocate with Healthcare Navigation LLC of Fairfield, Conn., a health-care consulting firm for consumers, you may end up owing more than you dreamed possible. One of her clients underwent minor surgery performed by an out-of-network doctor, expecting to get some reimbursement of his $3,500 fee. However, the insurer's "reasonable and customary" fee for that type of surgery was only $417. The patient didn't even get that amount back because she hadn't yet met her $500 deductible.
In another one of Carley's cases, a man underwent treatment for cancer at an out-of-network research hospital. The cost was $302,915. The insurer considered $157,360 reasonable and customary, leaving a gap of $145,555 for the client to pay. On top of that, the plan called for a co-insurance of 30 percent of that amount, or $47,208 more. The family's financial responsibility totaled nearly $200,000.
There are some circumstances where, despite your best efforts to stay in network, you get hit with out-of-network bills. For example, you choose a hospital in your plan, but providers like radiologists, anesthesiologists, and pathologists are not. Prepare yourself for extra bills.
ERRORS AND OVERCHARGES
If you don't take the time to review your bill for errors, you could end up with outrageous charges, like $1,004.50 for a toothbrush. That's what showed up on one patient's bill, says Nora Johnson, founder of Med-X, a Caldwell, W.Va., company that specializes in medical billing errors and a member of Medical Billing Advocates of America, an association that focuses on spotting and adjusting billing errors and insurance underpayments (www.billadvocates.com). When one of her colleagues at the association, which has some 45 experts nationwide, objected on behalf of the patient, the hospital's response was: "Oops." The bill should have been just $4.50.
Medical Billing Advocates of America estimates that patients and insurers spend about $10 billion a year on erroneous charges that range from a keystroke slip to outright fraud. Johnson, who was formerly a horse trainer, became an advocate for others after she spotted overcharges for her husband's hip-replacement surgery in 1999. When his insurer refused to pay a $1,408 charge, Johnson did some research and found that it wasn't even a billable service; she got the insurer to remove the charge. Johnson has gone on to help other patients, such as one whose insurer was charged $58,796 for seven doses of a drug called Remicade, which is used to treat Crohn's disease, among others. She found that he had received only one dose, a hospital charge of $8,372. The wholesale cost for one dose of Remicade to treat a 154-pound patient with Crohn's disease is about $2,800.
Sometimes you can't miss the error if you just take time to read the paperwork. Carley recalls that one of her clients got an Explanation of Benefits (EOB) that read as follows: "Total charge: $720. Patient's portion: $2,605." However, most invoices are written in code and substitute terms like "mucous disposal receptacle" for a box of tissues, says Beth Morgan, a certified coder and patient advocate with Mor Med Consultants, a Wilton, Conn., medical-billing consulting company.
To help you decipher the bill, always keep EOBs from your health-insurance plan and match them against bills from providers. If you know that your doctor ordered a chest X-ray, but you receive a bill for a more-expensive bone scan, you have grounds to complain to the hospital. But things get more complicated if you have been hospitalized. Even if your stay lasted only a few days, you could get a bill with hundreds of itemized charges. And because you were under the weather at the time, you may not be able to remember how many blood tests you had or which doctor did what. In that case, you should ask a family member to monitor and record your treatments when they occur. Even so, to make your case, you will have to ask the hospital for a copy of the medical record to compare against the doctor's orders for care given and the bill you received.
If your bills are major, you might want to consult a billing advocate. Advocates may bill hourly or charge a sum based on the amount you've recovered, typically ranging from 30 to 40 percent. Hourly fees vary widely and may run less than $50 for a simple correction to upward of $200 an hour for a complex case that requires settlement negotiations. Get an assessment of the problem at the outset and decide if it's worth the potential savings to proceed.
GIVING UP
If you disagree with your insurer's decision not to approve a claim or pay a bill, don't give up-fight it. You have rights under state and federal laws to ask your plan for an internal review. Go to www.kff.org/consumerguide to find out about your state's regulations and to learn how to handle the review process. Says Harvey Matoren, president of Claims Security of America, a claims assistance company in Florida: "The important thing is to get the appeals process started. Once you do, you're in the system. Document everything. Who did I speak to, when, what did they tell me. Put it in writing, send it certified, return-receipt mail."
It's easy to get discouraged. Calling an insurer typically means being on hold, listening to Muzak, and telling your story again and again to different representatives.
But if there's a lot of money at stake, stick with it. Ask for a supervisor, then a manager, and on up the line. Initiate the formal appeals process if you feel you have a case. Unless you hire an advocate or have one at your employee benefits department who will argue your case, it's likely you'll have to do this on your own. One of the biggest mistakes in figuring out how to protect your finances when you have health insurance is to assume that someone else is watching out for you.
If you aren't vigilant, you could end up owing thousands
But having coverage is not enough. Even with the best policy, you could end up owing gigantic sums for your medical care. And don't think that hospitals, doctors, laboratories, anesthesiologists, or other medical providers will cut you slack just because you are ill. All of them can and do send unpaid bills to collection agencies that then hound you for payment and report you to credit bureaus and even take you to court to get the money.
Indeed, half of those in a sample of 1,771 people who filed for bankruptcy protection cited medical bills as the cause, according to a 2001 study conducted by researchers at Harvard and Ohio universities. Seventy-five percent of them had health insurance at the onset of the illness that ultimately bankrupted them. Most were solidly middle-class families who had attended college and owned homes. Some families even went bankrupt after a relatively modest medical problem like an appendectomy.
The fact is that consumers can make disastrous errors with their health insurance. Among them: misunderstanding the limits of the policy, purchasing less insurance than is needed, and failing to have a Plan B fallback in case a job loss terminates the coverage. "The fact that it's called health insurance does not guarantee that it gives adequate coverage for most things that will go wrong," says Elizabeth Warren, professor of law at Harvard University and one of the authors of the study.
Don't wait until you need your coverage to learn how it works and where you can get snagged. If you are sick, you do need kinder, gentler treatment. Expect it from your family and friends, not from the hospital billing department.
Here are some of the top mistakes to avoid if you want to use your insurance for maximum benefit and minimum cost.
IGNORING THE RULES
You may think those rules set forth in your plan are little more than bureaucratic twaddle, but plan administrators don't. And those rules could turn into traps that land you thousands of dollars in the red. This is what you have to know:
Pre-authorizations. If you're required to get an authorization from your plan before you have treatment, by all means, make sure you get it. Don't assume the plan will pay simply because the treatment is medically necessary. Double-check with the treating doctor to make sure that he or she has the authorization in hand.
Referrals. Know whether you have to get a referral from your primary-care doctor before seeing a specialist. Even if you get the proper referral, any treatments that arise from that visit may still require preauthorization.
Limitations. Both benefits and payments may have limitations. If your plan says it will pay for 10 physical therapy visits a year, and you go for 20, you are on the hook for the extra visits. If the plan pays $50 a visit, and you consult a more-expensive therapist who charges $85, you must pay the $35 difference.
Deadlines. If you want to dispute a denial of your claim or the amount of the insurance payment, you have a specific time period in which to make an appeal, typically up to six months. Know what it is; otherwise, you could lose an appeal by missing a deadline.
Deductibles. Understand how much your deductible is and what it applies to. For example, a preventive checkup might be covered even if you haven't met your deductible, but a subsequent treatment that the doctor prescribes during that visit might not be.
In recent years employers have been increasing deductibles, from $250 to $300, $500, $1,000, or more. Make sure the plan has included every dollar you paid. For example, in some plans, prescription drugs may now count toward meeting the deductible. Don't leave them out.
Prescription drugs. In many plans, it's not only brand-name vs. generic medications, but tiers of brands. We're seeing "preferred brand, less-preferred brand, and 'oh, my God, don't use this brand,' " says Kathleen Stoll, director of health policy at Families USA, a nonprofit organization in Washington, D.C., that advocates for affordable health care. You are entitled to see the "formulary," or list of drugs, and the reimbursement amounts you can expect from your insurer so you can know which tier your medication falls under. To avoid getting charged for lots of expensive brand-name drugs, ask your doctor to prescribe an equivalent generic or a less-expensive medication. (For information on lower-priced medicines that might be equally effective alternatives to expensive brand-name drugs for many conditions, go to CR Best Buy Drugs at www.crbestbuydrugs.org.)
GOING OUT OF NETWORK
Some health plans do not allow you to be reimbursed for care you receive from physicians and hospitals outside of their network. If that's the case, you should expect to pay for such care on your own. Other health plans do reimburse you for out-of-network services but pay only a fraction of the total. Obviously, steering clear of out-of-network providers will keep costs to a minimum.
If consulting an out-of-network doctor is a matter of life and death--only the renowned specialist can perform the surgery you need--then you'll have to find out what the procedure will cost and whether you can afford it. When you use a provider who isn't restricted by an arrangement with your insurer, he or she may charge you the highest level of fees. Someone has to make up for the lower rates paid by insurers, and it's usually the patient who uses his own money.
In advance of treatment try to find out how much the provider charges for high-fee services. Then check with your insurer to find out what it will pay, if anything, under the terms of its "reasonable and customary" payment for out-of-network care. Most insurers are not forthcoming, but you must insist on an estimate. The gap between the provider's fee and the insurance reimbursement, known as a balance bill, is yours to pay.
You'll also have to find out whether your insurer will pay for the full reasonable and customary fee or if some of it is still your responsibility. If you don't, says Maura Carley, M.P.H., a health-insurance expert and advocate with Healthcare Navigation LLC of Fairfield, Conn., a health-care consulting firm for consumers, you may end up owing more than you dreamed possible. One of her clients underwent minor surgery performed by an out-of-network doctor, expecting to get some reimbursement of his $3,500 fee. However, the insurer's "reasonable and customary" fee for that type of surgery was only $417. The patient didn't even get that amount back because she hadn't yet met her $500 deductible.
In another one of Carley's cases, a man underwent treatment for cancer at an out-of-network research hospital. The cost was $302,915. The insurer considered $157,360 reasonable and customary, leaving a gap of $145,555 for the client to pay. On top of that, the plan called for a co-insurance of 30 percent of that amount, or $47,208 more. The family's financial responsibility totaled nearly $200,000.
There are some circumstances where, despite your best efforts to stay in network, you get hit with out-of-network bills. For example, you choose a hospital in your plan, but providers like radiologists, anesthesiologists, and pathologists are not. Prepare yourself for extra bills.
ERRORS AND OVERCHARGES
If you don't take the time to review your bill for errors, you could end up with outrageous charges, like $1,004.50 for a toothbrush. That's what showed up on one patient's bill, says Nora Johnson, founder of Med-X, a Caldwell, W.Va., company that specializes in medical billing errors and a member of Medical Billing Advocates of America, an association that focuses on spotting and adjusting billing errors and insurance underpayments (www.billadvocates.com). When one of her colleagues at the association, which has some 45 experts nationwide, objected on behalf of the patient, the hospital's response was: "Oops." The bill should have been just $4.50.
Medical Billing Advocates of America estimates that patients and insurers spend about $10 billion a year on erroneous charges that range from a keystroke slip to outright fraud. Johnson, who was formerly a horse trainer, became an advocate for others after she spotted overcharges for her husband's hip-replacement surgery in 1999. When his insurer refused to pay a $1,408 charge, Johnson did some research and found that it wasn't even a billable service; she got the insurer to remove the charge. Johnson has gone on to help other patients, such as one whose insurer was charged $58,796 for seven doses of a drug called Remicade, which is used to treat Crohn's disease, among others. She found that he had received only one dose, a hospital charge of $8,372. The wholesale cost for one dose of Remicade to treat a 154-pound patient with Crohn's disease is about $2,800.
Sometimes you can't miss the error if you just take time to read the paperwork. Carley recalls that one of her clients got an Explanation of Benefits (EOB) that read as follows: "Total charge: $720. Patient's portion: $2,605." However, most invoices are written in code and substitute terms like "mucous disposal receptacle" for a box of tissues, says Beth Morgan, a certified coder and patient advocate with Mor Med Consultants, a Wilton, Conn., medical-billing consulting company.
To help you decipher the bill, always keep EOBs from your health-insurance plan and match them against bills from providers. If you know that your doctor ordered a chest X-ray, but you receive a bill for a more-expensive bone scan, you have grounds to complain to the hospital. But things get more complicated if you have been hospitalized. Even if your stay lasted only a few days, you could get a bill with hundreds of itemized charges. And because you were under the weather at the time, you may not be able to remember how many blood tests you had or which doctor did what. In that case, you should ask a family member to monitor and record your treatments when they occur. Even so, to make your case, you will have to ask the hospital for a copy of the medical record to compare against the doctor's orders for care given and the bill you received.
If your bills are major, you might want to consult a billing advocate. Advocates may bill hourly or charge a sum based on the amount you've recovered, typically ranging from 30 to 40 percent. Hourly fees vary widely and may run less than $50 for a simple correction to upward of $200 an hour for a complex case that requires settlement negotiations. Get an assessment of the problem at the outset and decide if it's worth the potential savings to proceed.
GIVING UP
If you disagree with your insurer's decision not to approve a claim or pay a bill, don't give up-fight it. You have rights under state and federal laws to ask your plan for an internal review. Go to www.kff.org/consumerguide to find out about your state's regulations and to learn how to handle the review process. Says Harvey Matoren, president of Claims Security of America, a claims assistance company in Florida: "The important thing is to get the appeals process started. Once you do, you're in the system. Document everything. Who did I speak to, when, what did they tell me. Put it in writing, send it certified, return-receipt mail."
It's easy to get discouraged. Calling an insurer typically means being on hold, listening to Muzak, and telling your story again and again to different representatives.
But if there's a lot of money at stake, stick with it. Ask for a supervisor, then a manager, and on up the line. Initiate the formal appeals process if you feel you have a case. Unless you hire an advocate or have one at your employee benefits department who will argue your case, it's likely you'll have to do this on your own. One of the biggest mistakes in figuring out how to protect your finances when you have health insurance is to assume that someone else is watching out for you.
