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Paying Health Insurance Deductible Upfront

Sidecar Health

October 12, 2021

Every time you visit the doctor, either you or your insurance company are paying the medical provider for their services. How the costs are split will depend on the terms of your health insurance coverage. At the very least, in most cases you’ll be expected to cover your copay for every trip to the doctor.

But what about your deductible? Do you have to pay a deductible upfront?

In most cases, no. But there is a current trend with some providers asking patients to pay upfront before services are provided.[1]

So, how does that work? Let’s review.

What is a Deductible?

Before we dive in, it’s important to review some terms, starting with deductibles. Most health insurance plans come with a deductible, but what is a deductible? This is the agreed-upon dollar figure that you need to pay annually before the insurance coverage kicks in. Before it’s met, you’re responsible for 100% of the medical bills.

There are exceptions to this. In some cases, preventative care and some telemedic options will be covered before you reach the deductible threshold. And situations vary significantly according to plan terms.

But generally speaking, after you’ve reached the deductible, the costs of medical services should be dramatically reduced until you hit the point where you meet your health plan’s out-of-pocket maximum. At this stage, the health insurance plan should cover most costs (except for the copay and premiums), provided you stay in-network.

Typically, the vast majority of medical services and medications will count towards your deductible. And those services not included are:

  • Not covered benefits – There are some health care services (particularly elective) that won’t be listed as a covered benefit in your health plan. These services wouldn’t be counted toward your deductible or paid for after you’ve hit your out-of-pocket max. For instance, a plastic surgery that’s performed for non-medical reasons would likely not be a medical expense counted by your health insurance plan.
  • Out-of-network care – If your plan doesn’t cover out-of-network care, it may not cover healthcare services, except in the case of an emergency. Per Verywell Health:[2] “Federal rules require insurers to count the cost of out-of-network emergency care towards the patient’s regular in-network cost-sharing requirements (deductible and out-of-pocket maximum) and prohibit the insurer from imposing higher cost-sharing for these services.”
  • Copay – Copays are the amount you agree to pay for every visit to the doctor, regardless of the reasons or services received. Typically, it’s a small amount under $100. Copays probably won’t count towards your deductible; however, they count toward your out-of-pocket maximum. Some mistake these copays for a deductible, but it’s important to make the distinction between a deductible vs copay when choosing insurance
  • Premiums – Premiums are the amount you agree to pay the insurance provider each month in order to retain coverage. These payments are the cost of having insurance. Therefore, they don’t count toward any cost-sharing mechanisms. You have to pay your premium each month, whether or not you ever see a doctor.

How Does a Deductible Work?

Let’s say that your healthcare plan has a $1,000 deductible.

You go rock climbing in the mountains with friends. During the trip, you fall and hurt your shoulder. You go to the doctor’s office for an X-ray and checkup. He determines that the shoulder is torn. Unfortunately, you’ll need surgery. The cost of this visit (not counting your copay) is $600. That leaves $400 on your deductible.

The cost of the surgery is $1500. You’ll have to first pay the remaining $400 of the deductible. Once your deductible is hit, your agreed-upon cost-sharing kicks in (coinsurance), with both you and your insurance provider splitting the remaining $1100 until the point you hit your plan’s out-of-pocket maximum.

Now, for the rest of the year, physical therapy and other medical services should be covered by your insurance plan.

Uncompensated Care Has Changed How Deductibles Work

It sounds like you don’t pay your deductible upfront, right?

Well, that’s how it used to be.

In the past, most patients were expected to pay copays at the time of their visit, but wouldn’t be charged for the deductible until the bill came. So, in our example above, you’d pay the copay for the surgery, but you wouldn’t pay any deductible until a few weeks after.

It worked like this: the hospital would first send the claim to your insurance company. They would calculate and negotiate what they owed and pay their portion of the bill. After, the hospital would send you a bill for the remaining amount. But that’s changed. As online healthcare quotes for services continue to rise, an increasing number of hospitals end up providing care that goes uncompensated. They render the service, but patients either don’t or can’t pay their bills, leaving the hospital short-changed.

To improve their odds of receiving reimbursement, hospitals have started asking patients to pay upfront. This is a practice that’s become known as “point-of-services collections.” Through the use of software, they can estimate what you’ll owe after insurance covers its part.

Now, approximately 75% of hospital systems ask for payment in advance or when you show up for a procedure.[3] According to NPR:[4]“At many doctors’ offices and hospitals, a routine part of doing business these days is estimating patients’ out-of-pocket payments and trying to collect the money up front…

“There’s certainly been a movement by health care providers to store some of this information and be able to access it with patients’ permission,” one doctor quoted in the NPR story said.

So, if a hospital asks you to pay some of the deductible upfront, should you do it?

The answer to that is no, unless it would result in a reduced bill. Then you would have to decide.

What Do You Do If You’re Asked to Pay Upfront?

Because many people fail to understand the intimate details surrounding healthcare services, they don’t know what they can or can’t do. So, when the hospital says that they have to pay upfront, they go along with it. However, do people have to say yes?

As mentioned, hospitals will often bill people using an estimate of what they’ll likely be paying for specific services. But that figure could be wrong. In which case, you are allowed to request to pay when the bill is sent to you— after the insurer has paid a portion.

Is There an Advantage to Prepaying?

That said, sometimes it may be worth it to prepay.

Because they want guaranteed payment, most hospitals welcome it. Sometimes, they’ll reward you for it too, offering a prompt payment discount. If you have the means, this could be an easy way to negotiate a reduction in your total bill.

Deductible vs. Coinsurance

Most health insurance policies will place a percentage limit on the covered medical services. That remaining percentage is what you’re expected to pay after you’ve hit your deductible. This is what’s known as your coinsurance.

For instance, after you’ve met your deductible, your insurance company says it will pay 70% of all healthcare expenses. Then, you would be expected to pay the remaining 30% for all services—that is, until you hit your out-of-pocket maximum. Once you’ve reached that point, any additional medical expense will be paid by your provider. 

You won’t pay for coinsurance until after the deductible has been reached.

What is the Best Deductible for Me?

So, do you want a high-deductible or a low-deductible plan?

If you have a high deductible, the tradeoff is a lower monthly premium. Whereas, if you have a low deductible, you’ll be expected to pay a higher monthly premium. Finding the optimal coverage for your situation depends on several factors, including:

  • Your health
  • The number of people you’re covering
  • Your activity levels

A high deductible plan is ideal for people who are young and rarely visit the doctor. If you’re healthy, active, and don’t foresee any visits in your future, then this type of plan is probably best for you.

On the other hand, a low-deductible plan is best for people with large families, who are older, or who have chronic conditions that require regular visits for medical services. You may pay much higher premiums in order to see the doctor repeatedly throughout the year at a lower cost.

So, Is it Necessary to Pay Your Deductible Upfront?

It really depends on your individual insurance plan and on the provider requirements. Here are a few steps you can take if a provider asks for payment upfront.

1. Contact Your Insurance Company

You will definitely want to discuss any payment to a medical provider (beyond a standard copay) with your insurance company before you make the transaction. In some cases insurers have contracts with providers stating that all bills must be sent to the insurer before payment can be made. This allows the insurer the ability to negotiate rates and will hopefully save you some dough in the long run.

2. Check with Local Regulators

Contact your state’s insurance department to determine if the practice of requiring upfront payment is lawful in your state.

3. Consider Your Options

Is this an emergency? Do you need to use this specific provider or are there other options? Do you have the resources at hand to pay the amount they are requesting? If not, you could ask the provider if payment plans are available.


Sources:

[1] Wisconsin State Journal. Bill comes before baby, as hospitals seek advance payment from patients. https://madison.com/wsj/news/local/health-med-fit/bill-comes-before-baby-as-hospitals-seek-advance-payment-from-patients/article_8afd3896-b292-56e1-ab2c-17d30c5e9ad5

[2] Verywell Health. What Counts Toward Your Health Insurance Deductible? https://www.verywellhealth.com/what-counts-toward-your-health-insurance-deductible-1738559

[3] Consumer Reports. Should You Ever Prepay a Hospital Bill? https://www.consumerreports.org/healthcare-costs/prepay-hospital-bill/

[4] NPR. Doctors And Hospitals Tell Patients: Show Us The Money Before Treatment. https://www.npr.org/sections/health-shots/2016/12/07/504589131/doctors-and-hospitals-tell-patients-show-us-the-money-before-treatment

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