General queries on Insurance in USA

[Madhu]

Hi All,

It's been a year since my husband and I moved from India to USA. Though we immediately obtained medical insurance as it is a pre-requisite, we never really understood how it works here. It's a completely different process in India. Only after my husband was diagnosed with Crohn's disease this Feb, we got to deal with the insurance company directly and now we understand most parts of how hospitals work and how bills are paid here. I still have a few doubts, and am wondering if someone can help me clear them.

My husband got his first colonoscopy in Feb 2015 for diagnosis and when we asked if we had to pay before the procedure, the hospital said insurance will take care of it and we shouldn't worry. We forgot about it for a while until we received mail from our insurance co for $5050. Though the mail said it is not a bill and just a communication, we were alarmed at the amount and couldn't sleep that night. We then contacted the hospital later about it and they told us "You don't worry about it. You're not liable to pay anything. We will send you 3 bills as per law and then we will write it off".

I still call the hospital from time to time to check if there is any outstanding and everytime I get the same reply. We also confirmed that it wouldn't go to any collector's agency and credit score wouldn't be affected. Can someone help me understand how this works and what "write it off" means?

Thanks in advance
Aarthi

 

[BlindLogic]

Hi Aarthi and Husband,
Welcome to the USA and it's uncivilized system of medical billing and insurance. The phrase "write it off" is a shortening of the longer phrase "write the expense off of income taxes". Hospitals routinely have medical bills that go unpaid and so they will then deduct the expense of unpaid medical bills from the hospital's income taxes.

The letter you received from your insurance company was most likely what is called an explanation-of-benefits (EOB) letter which explains how much the hospital/doctors billed you and how much your insurance company paid them and the amount left that you are responsible for paying which is the amount the hospital/doctors should be billing you. One of the oddest things about medical billing in the USA is that the retail/list price that hospitals/doctors/pharmacies initially bill you for is not the amount they expect to actually be paid. The amount for your husband's colonoscopy ($5050) is the retail/list price (the inflated/undiscounted price). Your insurance company will have negotiated a lower wholesale/discounted price for the colonoscopy which will be somewhere around $2000 and this discounted price is also known as the approved/adjusted/allowed price. You should find this lower discounted price on your EOB.

The only people expected to pay the full retail/list price are people without insurance (self-pay/cash-pay) and people with insurance who use out-of-network/unapproved hospitals/doctors, and this brazenly unfair situation is the most criminally insane aspect of the healthcare system in the USA.

You will receive separate bills from the hospital/clinic and the doctors (instead of being lumped together in one bill). It can sometimes take many months before you receive these bills from the hospital/doctors. You might want to make sure the hospital billing department has your correct address. Hospital billing departments are a bureaucratic nightmare and they are prone to making mistakes such as over-billing you or losing track of your bill altogether. The fact that the billing department is telling you not to worry and that they will "write it off" may actually just mean that they don't have the time or motivation to actually do the work necessary to properly answer your questions.

I will now explain the basics of how private insurance in the USA works. Medical insurance has special features called the deductible, co-insurance, co-pay, and maximum out-of-pocket. The deductible is the amount you have to pay each year for your medical bills before the insurance starts paying anything. (The deductible can vary from 0-$10,000+). After you have paid your deductible amount for any given year, the insurance company will start paying the remainder of your bills minus the co-insurance percentage (20% is common but varies between 0-40%). The co-pay is a fixed fee for routine medical expenses such as doctor office visits and prescriptions. The maximum out-of-pocket is the maximum amount that the patient will have to pay in deductibles and co-insurance in any given year, after which the insurance company will pay 100% of all further bills. (The maximum out-of-pocket varies from 0-$10,000+).

If you are interested in more information about how health insurance works in the USA, you can google the article written by Steven Brill called "Bitter Pill" which was a special lengthy report in the March 4, 2013 issue of Time magazine.

Aarthi and Husband,
Welcome to the "bitter pill" of medical billing in the USA.
Wishing that you reach remission and live happily ever after.
John

 

[Madhu]

Hi BlindLogic

Thank you so much for the detailed explanation. I now understand what they meant by "write it off" and also the basic components of the insurance. I really appreciate it. Wierd system though