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Patient Deductibles: What You Need to Know and Expect

When running a medical practice, it is advisable to remain vigilant to avoid bad debts that will cripple your business. The largest portion of bad debts for physician offices come from patients who do not settle their bills. According to a survey by Salary Finance, more than a third of the over 2,700 working Americans interviewed had a medical debt with 28% of these owing at least $10,000, and 54% of the ones with medical debt in the survey had defaulted on their unpaid balance. From these worrying statistics, you now appreciate the essence of ensuring that all patients who access your services can pay for them.

Most medical practices assume that everyone with a health insurance plan can comfortably pay for their services. The rising deductibles in health insurance plans have, however, made it quite a challenge for insured patients to afford their medical costs. A 2017 study by Black Book noted a 29.4% increase in out-of-pocket and deductible costs since 2015, something that has placed considerable strain on patients’ health care expenses.

To guarantee that deductibles do not hamper the collection of your patients’ bills, it is essential to understand how they work and how best to collect them. Here is some information to help you.

Common Terms When Dealing With Insurance Payments

Below are some explanations of the typical terms you will come across when dealing with insurance payments for your medical services:

• In-network: This denotes health care facilities and providers that are part of the network of providers approved by an insurer. They often sign a contract agreeing to accept a health insurance plan’s negotiated charges for their services.
• Out-of-network: This includes the health care facilities and providers who are not a part of an insurer’s approved network.
• Usual and customary: This term denotes a reasonable monetary amount determined by a health insurer as the acceptable payment range for a specific medical procedure or health-related service.
• Copay: This is a fixed dollar amount patients pay when they use specific healthcare services. It is paid for each doctor’s office visit or filling of prescriptions and sometimes counts towards the deductible. When you have a copay, you pay a flat fee upfront at the time of service.
• Coinsurance: With this, a patient pays a certain percentage of the costs of a healthcare service, often after paying a deductible. The payment of coinsurance continues until he/she reaches the annual maximum out-of-pocket costs.
• Out-of-pocket maximum: This is the highest amount a patient will pay before an insurer covers the balance of eligible healthcare services under a health insurance plan.

What Is A Deductible?

A deductible denotes the amount that a patient will pay annually for the eligible medications and medical services before his/her health insurance plan kicks in to cover the balance. For example, if a patient has an annual deductible of $2,000, this means that he/she will pay the initial $2,000 of his/her medical care costs before an insurer steps in to pay the rest of his/her eligible medical expenses for a particular calendar year.

Some costs that are often included in a deductible include those of:

• Surgical procedures
• Lab tests
• Hospitalization
• Anesthesia
• Medical devices like pacemakers
• Therapist or doctor visits that are not covered by a copay.
• CAT scans and MRIs

Remember that the deductibles offered by insurers for individual and family coverage are different. Moreover, even when a plan has out-of-network benefits, the deductible will often be lower when patients opt for in-network hospitals and doctors.

For healthy patients who will not have a lot of doctors’ visits, plans with low premiums and high deductibles might be ideal. On the other hand, those with chronic conditions that need regular physician visits will get health savings with plans that have high premiums and low deductibles. This means the insurer will pay for a higher percentage of the patient’s medical expenses.

How Does a Deductible, Coinsurance, Out-Of-Pocket Maximum and Copay Affect a Patient’s Bill?

Copay, deductibles and coinsurance are forms of cost sharing between insurers and patients. Some healthcare providers confuse them for balance billing. However, in balance billing, you bill patients for the differences between what an insurer pays, or the amount paid by the patient in cost-sharing and the patient’s bill.

On a patient’s insurance health plan, he/she might have a deductible, copay and coinsurance. If the patient’s coinsurance plan is 20%, he/she will pay 20% of his/her total bill, then the insurer will settle the 80% balance. This, however, often comes in after the patient has exhausted his/her annual deductible. For example, if the patient has met his/her annual deductible in June but needs services in July, the coinsurance will cover this. A high coinsurance percentage means that a patient will pay higher costs for his/her medical bill.

Patients whose health insurance plans have a copay will have an upfront fee to pay for each physician visit or prescription filling. You will find this amount printed on the patient’s health plan card. Even so, some hospital charges like those of an annual wellness visit and preventive health services need no copay since the insurer covers them.

The out-of-pocket maximum comprises the deductibles, coinsurance and copay a patient pays per year. Assume a patient’s plan includes a 20% coinsurance, an out-of-pocket maximum of $6,350 and a deductible of $3,000. If you admit this patient at your facility for health care services amounting to $150,000, he/she will first pay the $3,000 deductible then the coinsurance will pay 20% of the bill up to the level the remaining maximum out-of-pocket expense of $3350 is exhausted. After this, the health plan settles the unpaid balance.

How Do You Charge For Outpatient Visits?

There is a difference between a physician office and hospital outpatient billing. When patients visit your outpatient location, there are two charges they will incur that might see them pay more than when they visit a physician’s office. The out-of-pocket expenses in this case will include:

• A charge for the doctor’s examination; the co-pay covers this.
• A charge for the use of the hospital space, support staff and equipment. This is called a hospital facility charge. Most health plans apply this fee to a patient’s annual deductible. When the deductible is used up, it can be charged as a co-insurance payment.

This is unlike in physician offices, where you are only charged a co-payment for the examination.

How to Collect Patient Deductibles

There are two main schools of thought on how you can collect deductibles from patients. One approach favors treating patients without emphasizing the deductible’s payment. After treatment, you will submit your claim to the insurer then wait for the company to inform you that the patient has not paid his/her deductible. Though this sounds convenient, it takes 2-4 weeks for insurers to respond to clean claims. By the time you send the patient an invoice for his/her deductible, a month will have passed since he/she received the services and it becomes less likely to get your unpaid balance.

Another option is collecting the deductible at the time of service. This optimizes your practice’s financial health because it maintains your cash flow and keeps the account receivables manageable. Most healthcare providers are uncomfortable asking for cash at the time of service. This should not be an issue because 75% of patients research their out-of-pocket expenses before seeking medical care, and 49% have clear information on the payment arrangements to expect when they walk into your practice.

Irrespective of the approach you choose for collecting your deductible, it is essential to have a written payment policy that service providers in your organization follow. This policy will also help patients know what to expect when seeking your services. The policy should address the following:

• How deductibles and copayments are handled
• How the payment for non-covered services and uninsured patients is handled
• Any discounts offered
• Method of handling delinquent accounts and patient balances
• Charges for medical services offered over-the-phone or online

Here are some tips for easing your organization’s collection of deductibles without affecting the cordial relationship you enjoy with clients:

• Know when you will collect your deductible by reviewing insurance contracts before seeing patients. Some companies do not allow the collection of deductibles before provision of services.
• Review your financial policies annually and remind patients about their payment obligations. You can even send newsletters and emails to patients on the same, so they know what to expect.
• Always verify if the deductible has been paid when calling to verify your patient’s insurance.
• Ensure your staff is well-informed on the policies on deductible collection. They should also know how to handle objections from patients.
• Make it easy for patients to pay their deductibles. This means having multiple payment options for your deductible. With most things having become digital, online payments were found to be the preferred mode of payment by health consumers in a 2016 report on trends in healthcare payments.

Without a thorough knowledge of deductibles and how best to get them from your patients, you will be losing a major income stream from the clients on self-pay. With most insurers and employers now moving to higher copay and deductible pans, it is time for you to rethink your revenue collection strategy. The tidbits above have hopefully pointed you in the right direction on what deductibles are and how best to handle them in your practice.

Work with NCDS: The Medical Billing Specialists

Since 1985, NCDS has provided superior third-party medical billing services. We have proven knowledge of ways to cut costs and minimize risks without compromising patient relationships. 

To learn more about our commitment to excellence and performance for medical practices and healthcare providers or for questions regarding our tailored revenue cycle management solutions or other medical billing services, connect with us today. 

It may be the first of many financial decisions that increase profits while you focus on patient care.

Questions?