Understanding Insurance: A Crash Course on a Complex System

It may be an understatement to say that health insurance is confusing. With terms like in network, out of network, deductible, and claim, and acronyms such as EOB, PPO, and HMO, talking about insurance can seem a lot like trying to have a conversation in a foreign language.

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Unfortunately, there are a few healthcare organizations that take advantage of the fact that insurance plans are complex, and end up charging patients a higher fee than necessary. One way that this is done is by using terms that sound like they mean one thing, but they actually mean another. The most prominent example of this is the use of the terms “in-network” and “accept” in terms of insurance policies.

In order to avoid high charges that become the patient’s responsibility, it’s important to understand a few common insurance terms:

Cover/Coverage: when a service is “covered” by an insurance plan, it is within the scope of accepted procedures and services the insurance plan will compensate the provider for. However, not every procedure will be covered by insurance plans, and not every covered procedure will be paid for in full by the insurance plan. What isn’t paid for becomes patient responsibility.

Patient Responsibility: the amount that is not paid for by the insurance company transfers to the patient, and the patient is held accountable for paying the remaining balance of the bill. Depending on the individual member’s insurance plan deductible and whether or not the provider is in-network or out-of-network with that insurance company, the amount left to patient responsibility can fluctuate.

In-Network: When a practice is “in-network” with an insurance company, there is a contractual relationship between the practice and the insurance company. This means that the practice charges a discounted fee, and the amount left to patient responsibility counts towards the patient’s in-network deductible.

Out-of-Network: When a practice is “out-of-network”, there is no contract between the practice and the insurance company. This means that the practice can charge any amount for the services rendered. If a claim is filed, the insurance company may still pay a certain amount, but a larger fee is pushed to patient responsibility. In some cases, insurance plans have an out-of-network deductible and out of pocket maximum, and if both of those amounts are reached by the patient, the insurance company will pay for out-of-network services. However, the deductible and out of pocket maximum are typically very high, so reaching both of those amounts is rare.

Accept: When a practice accepts a certain insurance plan, this means that they will simply file a claim with the insurance company and accept any amount of payment they receive. The remaining balance is pushed to patient responsibility.

With the terms defined, understanding your insurance plan becomes a bit easier. However, since many patients aren’t aware of the proper meaning of these terms, it’s easy to rack up an unnecessarily large bill. One of the main points of confusion comes with the terms “in-network” and “accept”. Given the common definitions of these words, it seems they could be used interchangeably. However, looking at the insurance definitions of these terms, it becomes clear that is not the case. Being in-network with an insurance company and accepting payment from an insurance company are absolutely not the same thing. Unfortunately, many practices will tell patients that they “accept” a certain insurance plan because it sounds more positive than saying they are “out-of-network”.

To further explore the confusing and oftentimes deceptive use of the term “accept” as opposed to “out-of-network”, we called a few Freestanding Emergency Rooms (FSERs) to ask whether or not they were in-network with our insurance plan. This is how nearly every conversation went:

UC4K: “Are you in network with United Healthcare?”

FSER: “We accept United Healthcare.”

UC4K: “Yes, but are you in network with United Healthcare?”

FSER: “It depends on your plan. You will have to call your insurance company to see if it is in network.”

Unfortunately, many people who don’t have a clear understanding of insurance terminology would stop asking questions after hearing that a practice “accepts” their insurance. Notice that the FSER did not state, “NO, we are not in-network, but we accept United Healthcare”. They simply stated that they accepted United Healthcare, and as we learned earlier, “accept” means they will accept payment but do not have a price-fixed contract with United Healthcare. These practices depend on the fact that people do not understand the difference, and leave patients with unnecessarily high bills.

It is important to note that a few FSERs we spoke with stated they “honor in-network benefits”. This means that although they may not be in-network with an insurance company, due to pushback from patients educated on insurance terms and an abundance of unpaid bills, these practices have been forced to offer a discounted rate to patients. While this does make the patient’s bill lower, it still does not change the amount the insurance company will pay, nor do the services apply to the patient’s in-network deductible.

Overall, while insurance can be a complex system, knowing and understanding a few key terms can help simplify the process. Asking practices the proper questions about insurance is key to avoiding unnecessarily high medical bills, and to effectively using your insurance policy. When in doubt, call your insurance company to double-check whether or not a practice is in-network: when you see your bill, you will be glad you did!