Getting Paid from Insurance: Where Does the Money Come From?
Running a profitable private practice while accepting insurance is possible, but requires a good understanding of how you get paid, and where exactly the money comes from. There are two sources of payment; your patient and the insurance company. But who pays what when? We will break it down.
Getting Paid From Insurance: Your Allowed Amount
When you contract with an insurance company, your fee schedule will show a list of allowed amounts that you agree to receive as reimbursement for each service you may provide. An allowed amount is the full rate that an insurance company will pay for a service. As a hypothetical example, with Insurance Company A you have an allowed amount of $125.00 for code 90837. Each type of service will have its own allowed amount according to the insurance company, and each insurance company will offer different allowed amounts for each service.
The allowed amount is the maximum that you should collect for a service for a patient that has insurance. This amount can either be paid by your patient, the insurance company, or split between them both. We will cover the situations below in which each scenario would apply. The total allowed amount is often referred to as an “insurance payment” even if the patient is responsible for all or a portion of the payment since a claim is submitted and documented with the insurance company against the patient’s insurance plan.
Patient Payments or Deductibles
If your patient owes a deductible, they are responsible for the full allowed amount until they meet their deductible amount for their plan. If you are in network with insurance then the amount you would need to collect from your client would be the exact allowed amount from the insurance company. You need to track and maintain a record of how much of the deductible has been met.
As a note, it is normal that you over collect a little bit on the deductible amount when a client is close to meeting their deductible. For example, your client has a $2000 deductible, and has paid $1950 toward their deductible, but sees you for a session with a $125 allowed amount. You collect $125, putting them $75 over their deductible. Your options in this situation are to refund the client the difference or to apply a credit to the client’s account for a copay or coinsurance.
Copays and Coinsurances
After a patient has met their deductible, the insurance company will then pay a portion of the allowed amount and your client will be responsible for the copay or coinsurance.
When your patient owes a copay or coinsurance, they are responsible for a set dollar amount (copay) or a percentage of the allowed amount (coinsurance). You calculate the coinsurance by taking the allowed amount and multiplying that amount by the percentage amount.
For example, if your allowed amount is $125.00 and your client has a 10% coinsurance the client would owe $12.50 or $125.00 X 0.1 = $12.50. The insurance company would then pay for the remainder of the allowed amount. In this case, your patient would be responsible for $12.50 and the insurance company would pay $112.50, totaling the full allowed amount of $125.00.
While coinsurances need to be calculated, copays are more straightforward. The copay amount is a constant dollar amount set by the insurance company that a patient will pay. For example, your patient may owe a $25.00 copay, and the insurance company will cover the balance of the allowed amount.
The only way that a coinsurance or copay goes away is if the client meets their out of pocket maximum.
Full Insurance Coverage
There is a maximum amount that your client will pay for healthcare in a given year. This amount is referred to as the out of pocket maximum.
Once the out of pocket maximum is satisfied then the client will pay $0.00 per session for the rest of the plan year, and the insurance company will pay you for the entire allowed amount. The out of pocket maximum is important to track to make sure you know when a client meets this amount.
How Do I Know What to Charge My Patients?
To understand whether or not you should be collecting any money from your patients and how much, you will want to do what is called an eligibility and benefit check. This is the process of calling an insurance company to verify a patient’s benefits, understand their plan and what a patient will owe for services. Eligibility and Benefits checks are important to complete and a useful tool in insurance billing, however we always give the warning that there is a small chance that the information obtained is incorrect, or changes between when the check is performed and the date of service.
Practice Solutions offers Eligibility and Benefit checks as part of our billing services. Our billers call on your behalf to verify eligibility and report on copays or deductibles to you so that you can communicate with your patients clearly. They have the expertise to ask the right questions at the insurance company to get you the most accurate benefit information as possible.
How Do I Get Insurance Payments?
Regardless of whether your patient, the insurance company, or both are responsible for paying the allowed amount, you will need to submit a claim to the insurance company. We have a step by step guide on filling out claim forms. This allows the insurance company to track how much a patient has paid toward their deductible if they are responsible for payment, or allows the insurance company to process any part of the allowed amount that they owe to you. If your patient is responsible for any amount, you will need to collect the payment from the patient while they are in your office, or bill them after the session.
Practice Solutions Billing Services includes claim submission managed by experts. Our billers work with you to make sure that claims are submitted timely and accurately to ensure that you are getting paid by insurance companies regularly.