Medical Insurance Gets Overlooked

One of the largest costs that people overlook when it comes to their personal finances is Medical Insurance. Medical Insurance allows for expenses related to health care to be paid, in part or full by an insurance company, in exchange for a monthly payment by the policy holder.

How Medical Insurance Works

What most people don’t know is that insurance rates are negotiated and agreed to by doctors. This is why it is very common for certain doctors to accept and not accept certain types of insurance. What this means is that doctors who do not accept certain insurances have not agreed to the amounts that they would be paid by the insurance company for certain services.

Anatomy of an Insurance Claim

The three main parts of an insurance claim are the following:

Charge, Adjustment, Patient Responsibility.

For example, a common visit might cost 75 dollars. This is the amount that the doctor charges the insurance company. The patient has a 20 dollar copay which he/she pays when at the office. The insurance company has already agreed to a fee-schedule with the doctor. In this case, the agreed to fee is 48 dollars for this service. This means, that the different between the 75 dollars and the 48 dollars becomes an adjustment; in effect, 27 dollars is discounted from the bill and no one ever pays it. The remaining 48 dollars is the amount that the Insurance company agreed should be paid for the service. 20 dollars of this amount has been paid by the patient as the required copayment. The difference of 28 dollars becomes the insurance company’s payment to the doctor.

A little known fact is that medical expenses contribute to 50% of bankruptcies. Often times, this can be because average people get sick and do not have insurance. By not having insurance, they are missing out on the automatic “discount” that people with insurance are getting. In addition, if an expensive health problem arises, the average person has to deal with the fact that this money is due and due fast. Most people end up racking up significant debt in the form of credit cards or personal loans in order to cover these expenses.

Lots of Options, None of Them Cheap

Frequently, there are people who like to consider the amounts of money that are paid for various services to see if there is a better deal. The same process can be done with insurance. In fact, there are some insurance services that barely pay for anything but the most expensive services and often leave the patient with very high deductibles and copays. However, the patient is still saddled with smaller amounts than an uninsured person because of the automatic discount that the uninsured person does not get.

Shop around for your health insurance, especially as your life situations change. In most cases, if you are working, you will have insurance through your company, whereas if you are retired, it will be through Medicare. But there are additional plans that can be purchased and just like any insurance or expense, it is worth reviewing periodically to make sure you have the right amount of coverage and are not over paying for services that you don’t use.