Frequently asked questions about health insurance & Medicare

What does “covered” mean anyway?

If a service is covered, it means your health plan will pay for some or all of the cost. In most cases, your doctor also needs to be on the list of doctors that take your insurance, called a network. How much your health plan pays for depends on what type of care you use and where you get it.

How do I know what’s covered?

Every plan – even plans through the same insurance company – covers different doctors, clinics, prescriptions and other services. This is often because there are different types of plans to choose from. Some members are surprised to learn that their plan covers things they didn’t expect, like their chiropractor visits and pumps for breastfeeding moms. Check that the care you want is covered – and the amount you’ll have to pay co-pay or deductible) – before you make an appointment.

Here are four places to go for info:

1. Your Summary of Benefits and Coverage: Log onto your online account through your insurance company, and look for a link to your plan’s Summary of Benefits and Coverage, sometimes called an SBC. This is a standard document that all plans are required to have. It lists the services the plan covers and how much.
2. Your doctor search tool: Log into your online account, and look for a link to your plan’s network, provider or doctor search tool. Different plans cover different doctors, specialists and clinics – called the plan’s network. Check that the doctor you want to see is covered.
3. Your list of covered drugs: Log into your online account, and look for a link to your plan’s preferred drug list. All plans have a list of the prescriptions they cover. Search the list to make sure the prescriptions you need are included. Some plans also offer a calculator tool to help you find the lowest prices on prescriptions from specific pharmacies or in different quantities.

Pre-approval: Many insurance plans require pre-approval or prior authorization for certain healthcare services, such as surgeries, hospital stays, lab tests or x-rays/CT scans/MRIs. You or your doctor must contact the insurer before you receive care to get authorization; if you don’t, the service may not be covered by your insurance.

Plans in the U.S. are required to offer a number of “essential health benefits” which include

• Emergency services
• Hospitalization
• Laboratory tests
• Maternity and newborn care
• Mental health and substance-abuse treatment
• Outpatient care (doctors and other services you receive outside of a hospital)
• Pediatric services, including dental and vision care
• Prescription drugs
• Preventive services (e.g., some immunizations) and management of chronic diseases
• Rehabilitation services

TERMS:

• Out-of-pocket expenses: The terms “out-of-pocket cost” and/or “cost sharing” refer to the portion of your medical expenses you are responsible for paying when you actually receive health care. The monthly premium you pay for care is separate from these costs.
• Annual deductible: The annual deductible is amount you pay each plan year before the insurance company starts paying its share of the costs. If the deductible is $2,000, then you would responsible for paying the first $2,000 in health care you receive each year, after which the insurance company would start paying its share.
• Copayment (or ‘Copay’): The copay is a fixed, upfront amount you pay each time you receive care when that care is subject to a copay. For example, a copay of $30 might be applicable for a doctor visit, after which the insurance company picks up the rest. Plans with higher premiums generally have lower copays and vice versa. Plans that do not have copays typically use other methods of cost sharing.
• Coinsurance: Coinsurance is a percentage of the cost of your medical care. For an MRI that costs $1,000, you might pay 20 percent ($200). Your insurance company will pay the other 80 percent ($800). Plans with higher premiums typically have less coinsurance.
• Annual out-of-pocket maximum: The annual out-of-pocket maximum is the most cost-sharing you will be responsible for in a year. It is the total of your deductible, copays, and coinsurance (but does not include your premiums). Once you hit this limit, the insurance company will pick up 100 percent of your covered costs for the remainder of the plan year. Most enrollees never reach the out-of-pocket limit but it can happen if a lot of costly treatment for a serious accident or illness is needed. Plans with higher premiums generally have lower out-of-pocket limits.

What it means to be a ‘Covered Benefit’:

The terms ‘covered benefit’ and ‘covered’ are used regularly in the insurance industry, but can be confusing. A ‘covered benefit’ generally refers to a health service that is included (i.e., ‘covered’) under the premium for a given health insurance policy that is paid by, or on behalf of, the enrolled patient. ‘Covered’ means that some portion of the allowable cost of a health service will be considered for payment by the insurance company. It does not mean that the service will be paid at 100%.

For example, in a plan under which ‘urgent care’ is ‘covered’, a copay might apply. The copay is an out-of-pocket expense for the patient. If the copay is $100, the patient has to pay this amount (usually at the time of service) and then the insurance plan ‘covers’ the rest of the allowed cost for the urgent care service.

In some instances, an insurance company might not pay anything toward a ‘covered benefit’. For example, if a patient has not yet met an annual deductible of $1,000, and the cost of the covered health service provided is $400, the patient will need to pay the $400 (often at the time of service). What makes this service ‘covered’ is that the cost counts toward the annual deductible, so only $600 would remain to be paid by the patient for future services before the insurance company starts to pay.

Price setting for Hospital Services – how do they know what to charge?

Medicare beneficiaries’ average coinsurance amounts for 10 frequently provided outpatient services at critical access hospitals were between two and six times greater than the coinsurance for the same services at acute-care hospitals, according to a report from of Office of Inspector General.

For electrocardiogram tracing (the most frequently provided outpatient service included in the OIG’s analysis), beneficiaries who received care at critical access hospitals had an average coinsurance rate higher than the entire Outpatient Prospective Payment System reimbursement rate for acute-care hospitals. Medicare reimburses critical access hospitals at 101 percent of what it considers their reasonable costs, rather than using the predetermined OPPS rates.

The high coinsurance rates stem from the fact that critical access hospitals charged on average more than double the average costs of the outpatient services (and, subsequently, double the OPPS rate for acute-care hospitals), according to the OIG. “This can happen because charges are not required to be tied to costs in any way; CAHs are allowed to set their charges at any rate,” the report states. “Because charges are higher than costs, the amount of coinsurance calculated from charges can constitute a significant proportion of the cost.”

Based on these findings, the OIG has recommended that CMS draft and submit to HHS a legislative proposal that would change how coinsurance is calculated for critical access hospital patients. For instance, CMS could change its payment process to treat critical access hospital outpatient claims as if they were being paid under the OPPS and therefore charge OPPS coinsurance rates.

Lowering coinsurance rates would increase the amount Medicare pays critical access hospitals for outpatient services, since the program pays the difference between the cost of services and what beneficiaries pay, according to the OIG. Still, CMS could also seek legislative changes to mitigate the increase in Medicare payments through avenues such as ensuring only critical access hospitals that meet all participation requirements receive cost-based reimbursement.