5 Insurance Words You Need to Know to Avoid Surprise Bills

Do you want to avoid surprise bills? While not all surprise bills are avoidable, you can avoid many of them by understanding five words in your insurance plan. Insurance companies use these words with little to no explanation. They certainly don’t tell you the details that can cost you money. Here’s what you need to know about those words that will help you avoid surprise bills.

1. Deductible

A deductible is the amount you have to pay before the insurance company will begin paying any portion of your bills.  Avoid surprise bills by understanding how your deductible really works.

• Details that cost you money:
  • Deductibles are an annual amount.  That means no matter how much you’ve paid towards your deductible at year-end, the amount goes to $0 the next year.  For example, on December 31, 2020 you’ve paid $900 towards your deductible. That amount goes back to $0 on January 1, 2021
  • Out-of-Network deductibles are higher than in-network deductibles.  Use in-network providers whenever possible.
  • Some services, whether in or out-of-network, do not apply to your deductible.  Those details can be found in your plan document. Or call your insurance representative to ask if a specific service applies to your deductible.
• How to save money:
  • If you have met, or nearly met, your deductible, schedule elective services before the year ends.  
    • The money you’ve already paid toward your deductible will apply to your services
    • Next year, that money won’t apply.  You will start all over again at $0.
  • Meet your deductible as early in the year as possible.  The insurance company won’t pay anything until your deductible has been met.  The earlier you meet your deductible, the sooner your insurance company will pay part of the bills.
  • Keep a record of how much you pay towards your deductible.  Then make sure your number is the same as the insurance company’s calculation.  If not, notify the insurer.  If they won’t correct their figure, challenge their calculation through an appeal or grievance process.

2. Out-of-Pocket (OOP) Maximum

You don’t pay for any eligible expenses after meeting your out-of-pocket maximum.  The insurance will pay 100% of eligible expenses.   

• Details that cost you money:
  • Some services do not apply towards the OOP maximum
  • Out-of-Network payments are often excluded from the OOP maximum
• How to save money:
  • Like your deductible, keep a record of how much you pay towards your OOP maximum.  If your number differs from the insurer, you can challenge their calculation through an appeal or grievance process.

3. Excluded Benefits

If medical equipment or a service is excluded, you have to pay the entire bill.  Avoid a surprise bill by knowing if the service is excluded before you incur the cost.

• Details that cost you money:
  • The service or equipment may not be listed under “Excluded Benefits” in your plan document.  That doesn’t mean it is not excluded.  The list does not contain all excluded services.  If you don’t see the service, call your insurance company to ask whether or not it’s a covered benefit. 
  • While not being excluded, some services require pre-authorization.   That means the cost will only be covered if you get insurance company approval before receiving the service or equipment.  If you don’t, the costs will be excluded. 

• How to save money:
  • Ask your insurance representative if a service is covered before costs are incurred.  If it is not excluded, ask if it needs pre-authorization.  Document their answer, including the name of the representative, date, and time you called.
  • Get pre-authorization approval in writing.  Again, do that before receiving the service or buying equipment.

4. Emergency Room Visits

If you are having a health emergency, go to the ER!  But before you have an emergency, it’s good to know about these details. 

• Details that cost you money:
  • Many states have laws that do not allow surprise bills for ER visits.   But those laws don’t always cover all plans.  For example, self-funded plans (those funded by employers – and very common among large employers) are often excluded from state laws.
  • You don’t know how your plan defines an emergency.  For example, you thought a terrible case of strep throat was an emergency since the doctor’s office was closed.  Your insurance company won’t pay any of the huge ER bill because you should have first called the nurse hotline.  Or you should have gone to urgent care.       
• How to save money:
  • First, let me stress, if you are having a medical emergency, call 911 or go to the ER.  That is not the time to pull out your plan document to decide what is or is not covered.
  • If you get your insurance through work, ask your employer if it is a self-funded plan.  If so, you may not receive the benefits from your state’s law banning surprise bills.  Your insurance representative should know the answer.
  • Plan documents are not exciting pieces of literature!  But they contain important details, like ER charges that are not covered.  Read this when you’re feeling well.  Then you will know in advance what charges you may have to pay.

5. Formulary

This is a fancy word for the list of drugs that your insurance plan covers.  Usually there are two or three tiers (such as “generic,” “brand,” and “specialty”) of drugs.  Avoid surprise bills by knowing which tier your medication is in.

• Details that cost you money:
  • Tiers determine how much you pay, with generic being the least expensive, and brand or specialty, the most expensive.  If your prescription drug moves from a lower-cost tier (generic) to a higher-cost tier (brand or specialty) your cost will increase.
  • Your doctor may prescribe a brand or specialty drug rather than suggest a lower-cost generic drug.
• How to save money:
  • Changes to the formulary typically occur at the beginning of each plan year.  Read your open enrollment material for changes to the drug formulary.  If your drug will be on a higher cost tier, you can take your formulary list to your doctor and ask if a generic, or lower-tiered drug, would meet your needs.
  • You and your doctor can also review the formulary list whenever you’re given a new prescription.   That way you will know in advance what the drug will cost.  Or, you and your doctor can discuss the option of using a lower cost drug.

Surprise bills can’t always be avoided. But now that you know what these words mean, you can make choices that will minimize the likelihood of getting a surprise bill.

Do you have questions about these or other words in your insurance plan, on provider bills, or insurance claim forms?  Contact me!