(Washington, DC) - If you have ever been to the doctor who told you that you need to visit a specialist for surgery, you will justifiably be focused on your health. The last thing you may be thinking about is your health insurance. However, any pain you may feel as a result of the surgery is nothing compared to the pain, and possible expense you may incur if you don’t consider your health insurance.
That is why the DC Department of Insurance, Securities and Banking (DISB), the District of Columbia’s government regulator for the financial-services industry, has put together these five health insurance concepts you need to recognize and understand. These terms explain who gets billed and whether your insurance will cover the full cost of surgery, or only part of it; whether the bill comes directly to you, and you have to present it to the insurance company, or whether it goes directly to the insurance company.
“Residents should be aware that insurance benefits differ from policy to policy, and from company to company,” said DISB Commissioner Gennet Purcell. “That is why it is so important for them to learn about these terms, read their policies, and call DISB if they have questions or need further clarification.”
The Five Health Insurance Terms
1. Certificate of Coverage
The Certificate of Coverage is the document issued by the insurance company to any member of the insurance company’s insurance plan. It defines the benefits that are covered, excluded, or limited, and includes fee schedules for that specific insurance plan. The provisions of this certificate will always govern the benefits the insurance company will, or will not pay for. If the member is part of a group (an employer group or other sponsored group), the Certificate of Coverage will be made available to the member via the group. If the member buys health insurance individually, and is not part of a group, the insurance company will make the Certificate of Coverage available directly to the member.
2. In-Network Provider—Out-of-network Provider
Most health insurance plans today contract with doctors, hospitals, labs and others that are collectively called medical providers or simply, providers. Those providers who have contracts with insurance companies such as Aetna, CareFirst or others are referred to as “in-network providers” or “participating providers.” Providers who do not have a contract with your insurance company are called “out-of-network providers” or “non-participating providers.” Modern health insurance plans are designed to provide financial incentives for members to use in-network or participating providers, while also including financial disincentives if members use out-of-network or non-participating providers. Insurance companies want you to use participating providers because the contract between the company and those providers establishes a fixed fee schedule that participating providers agree to accept as full reimbursement for the treatment or care they provide, even if it does not cover the full amount the provider bills for treatment or care. In addition, the in-network providers also agree not to charge the company’s members any additional monies for the treatment or procedure; and they agree to bill the company using its billing procedures.
Out-of-network providers, on the other hand, do not have contractual agreements with your health insurance company to provide medical services to you. The Certificate of Coverage provides reimbursement for medical services provided by out-of-network providers at a lower fee than for in-network ones. With a few exceptions, out-of-network providers bill you, the patient, not the insurance company. When you receive the bill from the non-participating provider, you submit it to the insurance company, which reimburses you at a lower rate than what it would have paid for an in-network provider. Frequently, the amount the insurance company pays the out- of-network provider is less than what that provider has billed you. Therefore, you are responsible for the difference between what the non-participating provider billed, and the amount reimbursed by the insurance company. When an out-of-network provider bills you for the balance, it is known as balance billing. Bear in mind, since in-network providers have agreed to accept the company’s fee schedule as 100 percent payment in full, in-network providers are prohibited from balance billing, and agree to hold you harmless for the balance. You save money by always visiting your in-network or participating providers.
3. Fee Schedule
The insurance industry has established fee amounts, known as fee schedules, which it will pay for, for each medical procedure. These fee schedules are not designed to pay medical bills in full. When an in-network provider contracts with an insurance company, it agrees to accept the insurance company’s fee schedule as payment in full for 100 percent of its bill, except for co-pays, coinsurance and deductibles, for which the members are responsible. However, since the out-of-network provider has no such contract with the insurance company, this provider has not agreed to the company’s fee schedule, and can charge any amount.
Referrals occur when your Primary Care Physician (PCP) decides you need to see a specialist, and your insurance plan is a Health Maintenance Organization (HMO). Most insurance plans have their members select a PCP. It is generally to your financial advantage to use an in-network provider as your PCP, since it will generally cost you less for his or her services. In the event the PCP believes that a specialist is needed, the PCP will make that referral to the specialist. Generally, referrals are required if your plan is an HMO. If your plan is a Preferred Provider Organization (PPO), you may also self-refer. If your plan is a PPO, you will need to obtain a pre-authorization directly from the insurance company before receiving services, so the provider will be paid by the insurance company.
Consumers should be aware that referrals are:
- time sensitive, and must be acted on usually within 30 or 60 days, and
- usually limited to a specified number of visits to the specialist
If the treatment will require more than the time limit or number of visits specified, the patient should obtain a new referral from the PCP. A referral to an in-network specialist will usually result in direct payment from the insurance company to the specialist at the agreed upon fee. From the standpoint of how the physician will be paid for treatment, patients should use in-network providers whenever possible. Treatment or care provided by an out- of-network provider will result in the bill being sent to the patient, and the likelihood that the patient will be required to pay some, or all of the out-of-network provider’s bill.
Preauthorizations are similar to referrals, and occur when the PCP decides you need to see a specialist, and your health insurance plan is a PPO. Preauthorization is not a guarantee of payment for medical services. However, if preauthorization is not obtained, the person who pays the bill may vary, depending on whether the provider is in- network or out-of-network. Preauthorization means that you or a medical provider (in- or out-of-network) has received verification from the insurance company that your specific insurance plan provides benefits (not necessarily coverage) for the specific treatment, procedure or service. Even with a preauthorization, however, the insurance company may not pay for such treatment, procedure or service.
Whenever an in-network or out-of-network provider submits a bill for services, the insurance company reviews that bill against the benefits provided in the Certificate of Coverage. Even if the member or medical provider has obtained preauthorization, there are a variety of reasons why the treatment or service may not be covered. One example may be that pre-existing conditions are generally not covered until after a new member has satisfied the waiting period—therefore, even though the Certificate of Coverage provides the benefit for that procedure, it does not provide coverage. This kind of example can apply to both in-network and out-of-network providers. The Certificate of Coverage may include the procedure as a benefit, but payment for that procedure may be denied for another reason.
Preauthorizations—Who Pays the Bill?
If a member goes to a specialist for treatment, a preauthorization is likely to be required (there are some variations depending on whether your plan is an HMO or a PPO). If no preauthorization is obtained, the one responsible for the bill depends on whether you went to an in-network specialist or an out-of-network specialist. If you went to an in-network specialist, and the treatment was not preauthorized, and it is not a benefit provided by the Certificate of Coverage in the vast majority of cases, the in-network specialist will be stuck with the bill. However, if you went to an out-of-network specialist, the specialist will bill you. And if the insurance company does not provide reimbursement, you are stuck with the bill. If, after the treatment, it is determined that the Certificate of Coverage does not provide benefits for that treatment, the result is the same. In the majority of cases, the in-network provider will be responsible for the bill; and if you used an out-of-network provider, you will be responsible for it.
Understanding these terms and concepts is important as the following steps indicate:
- if a patient goes to an in-network or participating provider,
- the provider bills the insurance company,
- the provider has agreed to accept what the insurance company will pay, and
- the provider cannot balance bill (charge more) the patient.
- if a patient goes to an out-of-network or non-participating provider,
- the provider bills the patient,
- the provider has no contract or agreement with the patient’s insurance company,
- the provider can bill the patient any amount the provider chooses, and
- the insurance company is not obligated to reimburse the patient.
Residents needing more information on these or any other health-insurance related terms should call Senior
Insurance Operations Specialist Carolyn King at (202) 727-8000.