How to Explain a Deductible to Your Patients

How to Explain a Deductible to Your Patients

When starting a medical practice, you expect to have a steady cash flow so that you can meet the expenses of running the practice and make healthy profits. Unfortunately, this might not happen in most cases. 

Patient numbers and the amount of office visits dwindle in most medical practices during the first few weeks and months of the year. This doesn’t mean people are healthier at this time. They simply avoid care at the beginning of the year because insurance companies reset their deductible during this period. Therefore, patients would rather wait to see how high their new deductible will be.

A study by the CDC’s National Center of Health Statistics noted an increase of almost 50% in people with high-deductible health plans from 2011-2016. Owing to the high deductibles, most patients opt to postpone their non-urgent care. They wait until the end of an insurance year to book procedures they assume are not urgent so that they can exhaust their cover before it is renewed. You thus might experience high patient numbers at the end of the year. Though this trend is not new, the increase in high-deductible health plans significantly affects your practice.

Deductibles are quite confusing for patients. In fact, a study concluded that 1 million patients have to learn insurance. Therefore, it is recommended to explain to them the process of deductibles and claims to help them comprehend what they are. Those who have them might not fully understand what they are, while those who are just getting them misunderstand their timing and assume that delaying their care saves them money. Four out of five doctors cited high-deductible health plans as the causes of their patients’ canceled or delayed treatment.

Helping your patients understand their deductible will translate to profits for you all year round. Here is a guide to help you when explaining deductibles to patients.

What Are The Different Out-Of-Pocket Insurance Costs?

To a large extent, health insurance plans all work in the same way. An insurance provider will collect a premium from participants and then pay benefits for them in the form of medical expenses. For patients, it is much like a gamble, where you, for example, pay an insurer $500 and they in return covers up to $100,000 in medical expenses. The insurer profits because there is no guarantee that you will incur any medical expenses during the insurance period, and the patient has peace of mind that their expenses are covered.

There are different out-of-pocket or cost-sharing expenses that a patient has to meet before an insurer steps in and settles the remainder of the bill. The amount an insurer pays and the patient’s responsibility depends on the arrangement of the different types of out-of-pocket costs. These include:

1. Deductible

This denotes the amount a patient will pay annually towards their health care expenses before an insurer pays the balance. For example, if your client has an annual deductible of $2,500 and undergoes three procedures costing $1000 each through the year, they will pay the full $1,000 for the first two procedures and $500 for the third procedure with the insurer settling the $500 balance.

Typically, deductibles do not apply when paying for standard doctor visits and an annual wellness visit, but they will cover other hospital visits, including emergency care. Most insurers apply a copay for wellness and standard doctor visits.

1. Copayment

This is a fixed monetary amount that a patient will pay when seeking certain services defined by their plan. Most insurance plans have copays for primary physician visits and the purchase of a prescription drug. This copay amount remains the same irrespective of the costs of the visit or drug. As such, if the copay is $20 for a physician’s visit, a client will pay this amount, then the deductible and insurer will cover the balance. 

Other than the standard copay, where a fixed dollar amount applies to all services, there is also a variable copay. Variable copay plans have different copay amounts for different healthcare costs. For instance, an insurance holder might have a $20 copay for pediatrician visits and a $50 copay for visits to a speech therapist.

1. Co-insurance

This somewhat resembles the co-pay. Even so, it is expressed as a percentage instead of a fixed dollar amount. Co-insurance is used after a patient has paid the deductible. For instance, if a client’s bill for your services is $1,000 for a plan that includes a 30% coinsurance and $100 deductible, they will first pay the deductible, then 30% of $900, which is $270 before the insurance pays $630.

1. The out-of-pocket maximum 

This denotes the highest amount a client should pay within a year in deductibles, coinsurance, and copay. Assume your patient has an out-of-pocket maximum of $1,500, 20% coinsurance, and $1000 deductible. For this, the client pays for services under the deductible until the $1,000 is exhausted. They will then pay 20% of their medical expenses until the total payments reach $500. At this point, an insurer will pay fully for other treatment costs incurred in the year.

The difference between an out-of-pocket maximum and a deductible is subtle but crucial for your clients to understand. A deductible is lower than the out-of-pocket maximum because the latter also includes coinsurance and copayments.

Types of Deductibles from Insurance Companies

If your patient has a family plan (one that covers at least two members), they will have one of the following two deductible types:

1. Aggregate deductible

This is the aggregate amount of deductibles that should be paid upfront by the people in a family plan before the insurance kicks in. If an aggregate deductible is $10,000, there are no restrictions on who or how many people can use the deductible until it reaches this maximum.

1. Embedded deductible

In this alternative, the family plan has one overall deductible and an additional one for each person covered in the plan. Assume a family plan’s embedded deductible is $10,000 plus a $5,000 deductible for each person. If person 1 has treatment costs that exhaust their $5,000 deductible, further costs are covered by the insurer without touching the family deductible. 

If person 2 seeks treatment, they will pay their deductible until it reaches the $5000 maximum. Though insurance kicks in quickly for family members that exhaust their deductible, it might take longer to meet the overall $10000 deductible in this case.

How to Ease the Payment Amounts of Out-Of-Pocket Costs

After helping your patients understand what deductibles entail, it is best to also educate them on the ways of easing the payment of their out-of-pocket expenses. According to a survey by the Advisory board, an excessively high deductible reduces the chances of a patient paying it. Here are some tips you can share with them to reduce bill default rates:

• Inform the doctor’s office of any changes with your insurance plans, even if you are with the same health insurance company
• Confirm if your health plan requires you to use in-network doctors (those approved by your insurance) only
• Take advantage of the payment plans some healthcare providers have
• Ask the right questions when calling your insurer to find out about your coverage
• If you get a bill with errors from the doctor’s office, sort it out immediately because some insurers have deadlines for filing complaints about errors

Work with NCDS: The Medical Billing Specialists

Collecting deductibles and other out-of-pocket charges from patients might be challenging, more so when they do not understand what they should pay. According to a study, 32% of Americans have medical debt, something that significantly affects the revenue of medical practices. 

The above tips will go a long way in ensuring these dismal statistics do not affect your revenue. Your clients will undoubtedly appreciate the information on what deductibles entail to ease their payment of the same.

Let us work with you to implement the right strategies for collecting payments from your patients and for resolving payment disputes, as well as explore the viable payment options for patients. Our expert consultants will review your reports, trends, industry changes, and policy updates to provide your business with the right feedback and solutions to improve your entire billing process.

To learn more about our commitment to excellence and performance for medical practices and health care providers or for questions regarding our tailored revenue cycle management solutions or other medical billing services, connect with us today by visiting our website or sending an email to billing@ncdsinc.com.

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