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Thursday, February 6, 2014

Obamacare: Have you heard that health insurance is changing? (Part Two)

Recently we sat down with Dr. Matt to discuss how Obamacare is impacting many of our chiropractic patients.  Many of our patients do not realize that Dr. Matt has years of experience teaching chiropractors and chiropractic billers how to improve patient care though better documentation, honest insurance billing and regulatory compliance. 

Here's Dr. Matt's attempt to simplify the way that many of the new Obamacare insurance plans work.  Later in the interview he also explains some simple things that he thinks many of us can start doing in order to get more bang for our buck with each of our healthcare dollars.

You said the other day that we need to define some key terms in order to understand how most of the newer "Obamacare" policies work.  What are those terms and what do they mean?

You're absolutely correct about the importance of understanding a these terms related to health insurance.  There are several "buzz words" that are floating around regarding health insurance, and we cannot understand how many of these new "Obamacare" plans function unless we know what those words mean. 

This terminology is not new, but it is becoming increasingly more important to "Joe Normal" as a result of the widespread insurance plan changes that stem from the new healthcare laws.   I only want to address four of those terms today, but we will hopefully deal with the other concepts in a future interview and blog post.

The first term is "copay".  Historically, many of the plans that we have seen were based on "copays".  Under this type of insurance plan a patient usually pays a flat fee for each visit to a provider's office and the insurance plan generally pays the rest.  For example, when I first started practicing in this state many patients had a $10.00 copay for a certain number of allowed visits to a chiropractor.  To a large extent, that meant that no matter what we did for those patients on any given day the patients would pay $10.00.  Once the patient paid that small copay, the insurance company would foot the rest of the bill as long as the doctor adhered to the insurers guidelines.  In those situations the math surrounding the patient's share of the bill was easy, mostly because those patients almost always paid the same amount for each visit regardless of what we did. 

The second term is "coinsurance" (pronounced co-insurance).  This is a little bit like a copay, except that when we talk about "coinsurance" the patient pays a percentage of the bill instead of paying a flat-rate copay.   For example, instead of writing the provider a check for $10.00 on each visit, the patient might pay 20% of the bill and the insurance company might pay the other 80%.  When a policy has a coinsurance instead of a copay it is possible that the amount the patient pays will go up or down from one visit to the next depending on what the doctor does during the visit.

The third term is "deductible".   This is basically what the patient pays out of pocket each year before the insurance company starts paying for any of the covered healthcare costs.  For example, if a patient has a $3,000 deductible that means that the patient must pay $3,000 out of pocket before the insurance plan pays for anything.  Often the plan will have two different deductibles: one for the individual and a larger deductible amount for the entire family.  Usually, once either one of these deductibles is met the patient only has to pay the coinsurance (or sometimes a copay) and the insurer pays the rest.  It then keeps working that way for the rest of the year unless the patient meets the "out-of-pocket maximum".

That brings us to our fourth term: "out-of-pocket maximum".  At least in theory, this number represents the largest amount that a person or a family will pay for healthcare during that year.  Once the patient crosses this line in the sand the insurance carrier should pay for 100% of the covered healthcare expenses.  Much like the deductible, there may be an individual "out-of-pocket maximum" and a larger "out-of-pocket maximum" for the entire family.  Just like we said about the deductible, the patient normally only has to meet one of those out-of-pocket maximums for the insurance to start covering at 100%.

Those are a lot of terms, some of which may be new to many of our readers.  Can you give us some examples of how this works in the real world?

Let's look at two examples.  These numbers are not realistic and I'm oversimplifying things, but at least we can grasp the basic concepts related to how this works. 

The first hypothetical patient has a $20.00 copay and sees a doctor 40 times in a year to accumulate $33,000 in covered charges.  Even if that patient saw the provider 40 times at $825 per visit, she will only pay $20 to the provider on each of those visits. 

$20 X 40 = $800  (copay X visits = amount patient pays)

Therefore, this patient pays $800 for all 40 of those visits and the insurance pays the rest of the $33,000.

In the real world, many Kentucky Medicaid plans work this way.  The patient has to pay a small, flat-rate copay for each visit.  There are still other plans that work like this, but as time goes by these plans are becoming far less common than they were a few years ago.

That makes sense.  That's basically how my insurance used to work.  I paid $20 for each visit and the insurance company paid the rest.  What is the second example?

Let's imagine that the second person also sees a doctor 40 times in a year and also accumulates $33,000 in covered charges.  In this instance, however, let's say that the patient has a $3,000 deductible, a 20% coinsurance and a $5,000 maximum out of pocket. 

At first the patient is in what I call the "deductible phase".  There are some exceptions, but in this first phase the patient basically pays for 100% of the cost of his healthcare.  The insurance does not pay for anything until the patient has forked out $3,000 of his own money to the doctors.  Thus, early on the patient is basically responsible for most of the medical expenses in addition to paying the insurance premiums.

Once the $3,000 deductible is met, the patient enters the "coinsurance phase". In this phase the patient pays the 20% coinsurance and the insurance company pays the other 80% of the healthcare costs.  These rules only apply from the time that the deductible is met ($3,000) until the "out-of-pocket maximum" is met ($5,000).  In this situation, that might mean that up to $25,000 of the bills will be split 20/80 between the patient and the insurer with the patient owing $5,000 and the insurer paying $20,000.

The last phase is the "out-of-pocket maximum phase".  Once the out-of-pocket maximum is met, the insurance company will cover 100% of the cost for any covered healthcare expenses.  For some policies this amount may include the copays, but in other cases the copays are not included in the out-of-pocket maximum, meaning that the patient may have to pay $5,000 in addition to the previously paid copays.

Many private insurers are shifting to this insurance model, but let me say again that this is not a new concept.  For example, Medicare Part B and many other plans have used the deductible/coinsurance formula for many years.  

However, because so many plans are changing as a result of the new healthcare law, many of our patients are starting to get this type of plan for the first time.  Those who have never experienced this are finding these plans to be very confusing.  My hope is that this blog will help to clear up some of that confusion for them, because once someone explains this it really isn't as complicated as it is at face value.

How do you think this shift in insurance types might impact the interaction between patients and their chiropractors in the future? 

The down side to the old "copay-based" plans was that many patients didn't really mind if a doctor performed extra labs, took a lot x-rays, or performed questionably necessary services in the office.  Consequently, insurance premiums were forced to go up because many providers ran up astronomical bills by performing many additional services during each visit, some of which might not have been necessary to diagnose or treat the problem. 

Ironically, some patients even felt like they were getting a better bang for the $10.00 copay when a provider performed additional services that had very little long-term benefit for the patient.  I once even had a patient tell me to bill an insurer for extra services that we didn't provide because he wanted to get his "money's worth" out of the insurance - We obviously didn't do that.  These folks didn't realize that their insurance premiums would invariably have to go up in order to pay for those seemingly not-so-necessary services that their previous chiropractor or physical therapist had provided on every single visit to the office. 

On the other hand, now that these "coinsurance/deductible/out-of-pocket" insurance plans are becoming more common I think that patients will probably be more aware of how many services a provider is performing and/or billing to the insurer.  A smart consumer will start asking providers to explain why a service is necessary and may even shop around to find providers who get better long-term results for a more reasonable cost.  My experience is that the patients who get more involved in their healthcare decisions will not only save some money, but they also tend to get better outcomes from the care because they take responsibility for performing home care activities and making the lifestyle changes that will help prevent health issues down the road.

Under these new plans if a lab or an x-ray will not likely have any significant impact on how the provider treats the patient, some patients might not want to spend extra money on a seemingly useless test (not to mention the unnecessary exposure to ionizing radiation). 

Similarly, if a patient can do exercises or apply ice at home and get the similar results that way, he or she might be less prone to waste an extra 30 minutes and extra money to do that in the office of a chiropractor or physical therapist. 

Likewise, if one chiropractor can get results similar to another chiropractor (or even a physical therapist) patients will be more prone to select the provider that gets the best results in exchange for the smallest investment of time, money and energy.

In other words, under these new insurance plans I believe that patients will be more likely to stop and think about the necessity and cost effectiveness of the healthcare options that they use.  I also hope that patients will be more willing to do any prescribed exercises, apply ice, or do other things at home without them having to rely on us as much.

For Dr. Liz and me, our job satisfaction comes from getting results without running up a huge bill and unnecessarily wasting too much of the patients time in our office.  In one sense, I hope that this shift in the style of healthcare payment will help us to encourage patients to think more about prevention and home care while focusing less on treatment in our office.

Thanks for taking the time to share with us today.  Can you give us a preview of what we will discuss in the next blog of this series?

In a couple of days, let's get together and discuss some other important terms that have a huge impact on what health insurers will pay for.  These are words like "medical necessity", "allowable visits", "negotiated fees", "non-covered services", "HMO", "PPO", "participating providers" and "non-participating providers".  Once we define those additional terms I hope that everyone will be able to make better informed decisions when it comes to selecting a health plan.  Once we get that health plan in place, I also hope that this discussion will help us to spend our limited healthcare dollars more wisely.

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