Insurance Billing. Deductibles, Copays, and Coinsurance

 

Insurance Billing. Deductibles, Copays, and Coinsurance

If you are going to accept insurance in your private practice, you need to understand what deductibles, copays, and coinsurance are and how they operate if you want to get paid. You also need to help your client understand them since a shocking number of people don’t know the basics of how their insurance coverage works. It is a conversation you need to have with your clients from the moment of intake if they are going to use their insurance.

Even if you think you already understand what these are, do not skip this. The deductibles, copays, and coinsurance significantly impact getting payments from clients and you need to understand them and have a policy in place for them before seeing clients. You also need to be prepared to help your client understand the details and your policy around them.

Here’s the basics.

You pay a monthly premium for your medical insurance. This is the monthly fee you pay to have coverage, and it buys you a policy.

 

Deductibles

The deductible is a charge in addition to your premium. It’s the amount you pay out of pocket for medical services before your insurance starts to cover the charges. Exemptions to this are basic well care, like a yearly exam. Other than that, you are paying out of pocket until the deductible is met. Once you have met your full deductible, your insurance will start paying for medical charges.

Let’s say you have a $1000 deductible. This means, after paying your monthly premium, you will still need to pay all medical expenses up to $1000. Once you’ve paid $1000 out of your own pocket, the insurance company will start to pay any other claims for the rest of the year. But only for this year. Next year it’s a new year, so it’s a new deductible. You start all over again.

Here’s an example. Let’s say you go to a dermatologist to check out a suspicious mole. The dermatologist removes the mole and sends it out for to a lab to get it tested. The tests come back all good. Yay! However, if you haven’t met your deductible yet, you’re now going to have two bills: one from the dermatologist, and one from the lab. The insurance company isn’t going to pay for those until you’ve met your deductible.

 

Allowable Amount

This is where the allowable amount comes into play for you. Let’s say the dermatologist charges $100 for office visits. He’s an in-network provider, though, so he’s agreed to accept the rate that the insurance company sets for office visits. Let’s say the allowable amount for an office visit is $60. You won’t pay the $100, you’ll pay the $60. The doctor is not allowed to charge the additional $40 to make up the difference between his private pay rate and the allowable amount – that’s balance billing which is illegal in many states. In our private practice, we are the doctor. We have our private pay rate (the $100), but we accept the insurance rate (the $60).

Just like you directly pay the doctor the $60 if you are still meeting your deductible, the client will pay you the full allowable amount for each session until they meet their deductible. Let’s say the allowable amount for sessions is $100. Your client will need to pay you $100 each session until their deductible is met.

This is important for both you and the client to understand. It is especially relevant for us because unlike the doctor, who you see for one appointment, most of the time we are seeing our clients every week. This means, if they are still meeting their deductible, their balance due can grow very large very quickly while you are waiting for their claims to be processed. You need to discuss this with your clients from the beginning and along the way.

You will not actually know how much a client owes you until the claim is processed because you will not know how much of their deductible they’ve met at any given time. Even if you attempt to track this (good luck having the time to do that!) it’s super hard to know because there will be multiple claims from multiple medical professionals coming in at any given time. Bottom line, you won’t know how much the client owes until the claim is processed. You need to wait for the session claim to be processed before you can get payment from the client for the session.

If you are lucky, the insurance company will process claims quickly, maybe in a week or two. As soon as the claim is processed, you can simply ask for payment from your client at that time. No big deal.

If you are unlucky, the insurance company takes longer. This is where it becomes a serious issue for us. Client balances can grow large quickly. Imagine if the insurance company takes a month to process claims. In the meantime, you’ve had 4 sessions with your client. If the allowable amount is $100 per session, the client now owes you $400. Not great for them and not great for us.

You need to figure out how you will handle this. You need to have a good system in place to stay organized, because this can get confusing quickly when you are trying to track which clients owe what and who has paid. Get a system in place! This is also where an EHR (Electronic Health Records system) will help you out – it will automatically keep track of balances due based on the claims that have been processed, including deductibles. It will help keep you sane. I have an entire chapter devoted to EHR’s in my Master Course. If you are billing insurance I HIGHLY recommend you get one. You can check out a list of some of the tops EHR’s for therapists here.

You also need to help the client understand what is happening every step of the way.

• You need to help them understand what a deductible is (if they don’t already understand this).
• You need to help them understand what the allowable amount is and how much of a balance may be accruing while you are waiting for the claims to be processed.
• You need to discuss with them how to manage this financially and make sure you have a plan in place to get paid once you know how much the client owes.

In my practice, I have a credit card on file. The agreement with the client is that once the insurance company processes a claim, I charge the card on file for the sessions that have been processed. If it is taking more than two weeks for a claim to process, I am discussing this with the client along the way, tracking how much the balance may be if they end up needing to pay the full allowable amount. You don’t want the client to get a nasty surprise once the claims are processed.

 

 

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Copays/Coinsurance

Copays and Coinsurance operate the same way. Once you have met your deductible, you then pay either a copay or coinsurance for medical services. This means that you only pay a portion of the allowable amount and the insurance company pays the other portion. The copay is a set amount. For office visits, including therapy sessions, this is generally around $20 – $30. Coinsurance is a percentage of the allowable amount. It’s also generally in the $20 range. Let’s say the allowable amount is $100 and the client’s copay/coinsurance is $20. The client will pay you the $20 and the insurance company will pay you the remaining $80.

Once the client’s copay/coinsurance kicks in, your life gets a whole lot easier. You then know exactly how much they will owe each session and you can simply ask them for that amount at the time of session, just as you get payment from private pay clients each session. Some clients don’t even have a copay/coinsurance. Once they’ve met their deductible, insurance pays the entire amount. Sweet!

You need to be clear in your Office Policies that copays are due at the time of session.

One other very important note about copays and coinsurance. You can not waive those for clients. This is considered fraud since you have agreed to take the contracted rate from the insurance company. You need to collect them. In special circumstances, you may be able to get authorization from the insurance company to waive the payment, but do not do this without authorization. If a client does not pay, and you have made good faith efforts to get payment, you may write this off, but you need to document your efforts in the client’s file.

 

There you have it. Those are the basics related to deductibles, copays, and coinsurance. However, this is only a small part of what you need to know to take insurance in your private practice, including crucial information on how to avoid inadvertently committing insurance fraud. It’s not as hard as you think. The Master Course and Mini Course, Billing Insurance 101 also cover:

• Should You Take Insurance in Your Private Practice?
• Insurance 101: The Basics
• Getting on Panel.
• NPI Number, What It Is, Why You Need One, and How To Get It
• In-network vs Out-of-network
• Subcontracted Mental Health Coverage
• How to Bill Insurance
• How much do You Bill the Insurance Company?
• No-Show and Late Cancellation Fees for Insurance Clients
• Why You Need To Get a Copy of the Driver’s License
• Insurance and Informed Consent
• Bonus CPT Code Guide

If you are planning to take insurance in your private practice, you don’t want to miss out on all this crucial information.

 

To find out more crucial information about the steps you need to take when starting your private practice check out The Master Course, Everything You Need To Know About Private Practice But Didn’t Know To Ask. To get the same information in more affordable, bite size pieces, don’t miss the Mini Courses!

 

 

I love helping therapists build successful private practices! For more great information like this to help you build yours, make sure to check out the Master Course and the Mini Courses. I’m here to support you and I want to help you reach your dream!

If you need some individual help with all of this, I’m here for you! I offer mentoring services for those who want some personal attention to help them build their successful private practice. Don’t hesitate to reach out to me. You can find out more on the Mentoring page.

 

 

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