What Is The Relationship Between Insurance Contracts and What Members Pay?

Recently we were asked by a hospital client to address three common questions they hear from the public regarding price transparency. Last time we answered “Why do Hospitals Offer Lower rates to Some Payers?” Now we’ll look at “What Is The Relationship Between Insurance Contracts and What Members Pay?” and next we’ll investigate “Why Hospitals Charge Payers Different Rates?”

Patient responsibility amounts are based upon the contractual terms that the health plan and provider have negotiated, assuming that there is an actual contract in existence.  While these negotiated rates are an important determinant of patient payment responsibility, there are likely even more important elements that will impact what specific out-of-pocket payments will be for services.

Plan design will impact patient out-of-pocket payments – typically, with a cap:

The actual amount that a patient with commercial health insurance will be responsible to pay for any specific service is dependent upon several factors related to the specific terms of their plan coverage.  Two of the largest factors are deductible and coinsurance requirements.  Patients in high deductible plans will be required to make payments to the health provider until their deductible is met.  A coinsurance payment may also be required until the maximum allowable cost provision in their coverage has been met. Once deductible and coinsurance provisions are met, patients typically are no longer responsible for additional payments as the health plan will pay remaining balances.

Health plans determine what services and providers are covered and that can impact patient payment.

Health plans may also deny coverage for services that they deem to be medically unnecessary.  In these cases the patient would be responsible for those denied services.  Typically, health plans will discuss this with patients prior to care, however, it’s always advisable to confirm coverage with the health plan and your provider prior to care, if possible.  In addition, the specific healthcare providers included in the health plan’s network will also have an effect on patient responsibility amounts.  A patient who selects a provider that is deemed out of network will often face higher deductible and/or coinsurance payment requirements.

Patients who are concerned about possible out of pocket payments should utilize the hospital’s cost estimator tool – or contact the hospital’s patient financial advisors – to get a more accurate estimate of patient required payments.

Hospitals are in a unique position where what they are paid and how can vary dramatically between each person who walks through their door, even if they have the same insurance. There are a lot of factors in play as hospitals balance these differences.

We’ll look at why hospitals charge payers different rates next time.

To read “Why do Hospitals Offer Lower Rates to Some Payers?” click here.

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