Insurance is a means for people to receive health care with someone (typically an employer sponsored program) paying for all or part of the medical services provided through monthly premiums to a third party. Those who cannot get insurance through an employer purchase individual policies (usually relatively expensive), are covered by Medicaid if eligible (based on lower income levels), or with Medicare, designed for the elderly. The remainder have no insurance at all (and this element of Americans continues to grow exponentially).

When contracting for health insurance, the purchaser and the insurance company create a legal and binding agreement between the two parties. The contract stipulates what will be paid on the member’s behalf and what won’t. Unless it is a managed care policy (HMOs, PPOs), the contract stipulates that when medical care is received;

- the member (insured party) must submit the claim

- when the claim is to be submitted

- where the claim is to be submitted

- how much will be paid by the insurance company

- member deductible, copayments

The provider in the above example is not a party to this contract. It is between the insurance company and the individual who pays the premiums.

Insurance companies DO contract with doctors. The contract between the doctor and the insurance company is not the same as the contract between the insurance company and the member. The contract with the doctor does involve the member's contract in that, the contract usually stipulates that the doctor will only provide those services that are a benefit to the member. So, it is important for the doctor to have a copy of the patient's contract to see what benefits the member is entitled to receive.

There are doctors that elect not to contract with insurance companies. Their reasons are many. If the doctor is not contracted with the insurance company, the insurance company's rules, regulations, policies and procedures have no jurisdiction on the non-contracted provider. Therefore, the non-contracted doctor has no legal obligation to send a claim, receive payment from the insurance company, or appeal a denied or partially paid claim. In addition, the doctor has no legal obligation to collect co-pays or deductibles that the patient might have to pay. Everything reverts to the contract between the patient and their insurance company. That contract requires the patient to submit their own claim. So when you have a patient with a non-contracted insurance company, and the doctor decides to send a claim, it is NOT his claim he is sending. The doctor has no claim against the insurance company. The member does. When the provider submits the claim it is only as a courtesy to the member. The ONLY time it is the doctor's claim is when, as and if the rovider is a party to a given contract.

The insurance company has no legal and binding obligation to pay the doctor. The payment of the member's claim may be paid directly to the member when the doctor is not contracted. That’s why the provider has the patient sign an “assignment of benefits.” What this permission entails is that the insurance company may pay the claim amount directly to the provider. The insurance company can deny this request or honor it, most of them pay the provider. But, sending the payment does not establish any legal and binding agreements between the insurance company and the provider. When payments are made directly to the provider, they are applied to the existing balance on the account. If the payment does not cover the total amount due (and most of the time it does not), then the patient owes the balance personally.

The provider is not legally bund to collect any co-pays or deductibles from a patient when he is not under contract with the payer. If the provider is under contract, those copays/deductibles must be collected. Such contracts generally provide specific amounts to be paid on specific services. So, even though the provider may charge an amount that is more than the anticipated reimbursement, s/he is legally bound to write off that difference (excluding copays or

An additional problem for a contracted provider is that the practice cannot do write-offs except for the differentials in the fees charged and the reimbursement amounts directly related to the fee. If the provider does not follow those legal guidelines, s/he is in breach of contract. Likewise, the provider is obligated to help the patient abide by his/her contract with the insurance company (when the provider is not contractually related to the payer). If a insured is required to pay a $5.00 copay, the provider is obligated to collect it, otherwise the insured is in violation of his/her contract with the insurer. Those fees are assessed as a model to make insureds more aware of costs of care so that they will assume some of the burdens of esponsibility.. If an insured does not pay his/her share, the payer is not obligated to pay either.

Case in Point: If the doctor routinely writes copays/deductibles off, s/he could be subject to an investigation by the Office of the Inspector General (US stuff) for a possible Stark Act violation. In addition, the doctor could be in violation of Title 18 of the United States Code - The False Claims Act. In regards to the Stark Act, it could be said that by writing off the co-pay and deductible, the doctor is taking this as a kickback as a means of saving the patient money, or even having the patient refer other patients to the practice. As far as the False Claims Act is concerned, the insurance company can take the write off to mean the doctor's charges are not what s/he says they are. For example, let’s say the doctor sends a claim for $100. The insurance company pays $80 and the $20 is applied to the co-pay or deductible. If the doctor writes off the $20, s/he is telling the insurance company that the $80 payment is really OK, therefore the charge for the visit is actually $80. The argument then is “why didn't the doctor send a claim for $80”? The presumption is that the provider submitted a false claim.

You get the picture, right? The whole process is pretty complicated anyway, then add the contractual elements and everybody involved (except the payer, of course) walks a tight rope.

indemnity policies:

Unlike HMO and PPO health insurance plans, most indemnity policies allow you to choose any doctor and hospital that you wish when seeking health care services. Indemnity health insurance plans offer more flexibility in services, but sometimes that comes with an extra cost. If you have the opportunity to choose an indemnity policy for health insurance, here are five important points to remember.

With an indemnity plan (sometimes called fee-for-service), you can use any medical provider (such as a doctor and hospital). You or they send the bill to the insurance company who pays part of it. Usually, you have a deductible, the amount of the covered expenses you must pay before the insurer starts to reimburse you -- such as $200 -- which you pay each year before the insurer starts paying.

Once you meet the deductible, most indemnity plans pay a percentage of what they consider the usual and customary charge for covered services. The insurer generally pays 80 percent of the usual and customary costs and you pay the other 20 percent known as coinsurance. If the provider charges more than the usual and customary rates, you must pay both the coinsurance and the excess charges.

For example, if the usual and customary fee for a medical service is $100, the insurer will pay $80 and you will pay $20. However, if the doctor charges $105, you will pay $25. Note that many fee-for-service plans pay hospital expenses in full; some reimburse at the 80/20 level as described above. policies typically have an out-of-pocket maximum. This means that once your expenses reach a certain amount in a given calendar year, the usual and customary fee for covered benefits will be paid in full by the insurer and you no longer pay the coinsurance. If your doctor bills you more than the usual customary charge, again you may still have to pay a portion of the bill.

There also may be lifetime limits on benefits paid under the policy. Most experts recommend that you look for a policy whose lifetime limit is at the very least $1 million. Anything less may prove to be inadequate.

Managed Care:

All managed care plans vary greatly in benefits and in terms of out of pocket expenses, so it is important to review your health insurance and medical insurance choices wisely and try to find the best policy to fit your circumstances. It is generally best, when trying to decide which plan to take, to look at the types of services you typically use. Do you travel a lot? Do you have one or more 'accident-prone' kids? Do you live in close proximity to a large number of network or preferred providers and facilities, or would it be a hassle to get to those providers who are on the "list"?

In order of expense, from least expensive to most expensive are: HMO or POS, PPO, and then traditional Indemnity. NOTE however, that depending upon your needs, a good indemnity policy that costs a bit more in monthly premiums, might actually be cheaper in the long run, while a highly restrictive HMO might seem like a bargain, as long as you are willing to follow the rules, but would become very expensive in terms of your personal out-of-pocket expenses, if you didn't. So, what are these managed care plans?

Health Maintenance Organization:

A Health Maintenance Organization, or HMO, provides employers a way to take care of all their employees’ health care needs with reduced costs by negotiating with specific doctors, hospitals, and clinics. By negotiating {contracting} with specific service providers, the HMO is generally able to provide services at reduced fees, and to generally leave the employee/insured with little or no copayment.

The main difference between an HMO and traditional Indemnity, PPO, or POS policies, is that the HMO requires that the patient stay within the provider organization {network}, which may limit either the geographic area where services are available or otherwise limit the patient's choices in selecting doctors or other facilites.

In order to receive services outside of the HMO provider network, the patient usually needs a written referral from a network provider and an internal review is generally required by the HMO plan administrator, before the patient (or service) will be covered. E.g., if the HMO patient chooses to go to a non-network doctor or facility without such a referral, the HMO usually pays little or nothing, and the patient must pay 100% of those expenses out-of-pocket.

Preferred Provider Organization:

In a Preferred Provider Organization, or PPO, an employer can also provide employees with reduced costs billed to their health insurance plan.

A PPO is similar to an HMO, but the employees can generally choose the physician they want to see instead of being solely restricted to the HMO provider's network. However, the PPO, as the name suggest, will generally have a "preferred" list of providers and the employee will generally have a lower copayment or no copayment at all, if they choose a provider from the preferred list. Otherwise, the employee can choose between a member or non-member providers, and the policy will generally pay without the need for a referral for non-member services.

Point of Service Plans:

Relatively new to the arena, are the Point of Service plans, or POS, where employees can choose their own physician (as in traditional indemnity and most PPOs), but only those who have previously agreed to provide services at a discounted fee (like an HMO).

The POS can sometimes seem confusing at first glance, because they really work more like an HMO. In a POS, the employee must use their chosen {primary care} physician as a gateway before moving on to a specialist. This is similar to the referral requirements of an HMO, but the POS generally only requires the primary care provider to be consulted for a recommendation, before the patient can move to another specialist, whereas with the HMO, that process may also require further approval from a corporate plan administrator. In other words, whenever the employee would have a medical issue, the POS physician must be contacted first in order to obtain the most benefit from the POS health insurance plan.

Discount Health Plans - Are Not Insurance:

Discount Health Care Card Programs: Are relatively new to the health care market. They are NOT insurance policies in the sense that you pay regular premiums and your medical providers file a claim with a third-party payer. They do however, function in much the same way that a traditional HMO or PPO does, in that individual doctors, hospitals and other medical service providers, sometimes even including dentists, vision care specialists and pharmacies, agree to become members of a network, and to provide discounts off their normal rates to the discount card-holders. Terms are still "cash" for services rendered, but with discounts, sometimes as high as 50%, the cost for routine care, especially when the charges are less than an annual deductible, will usually save the patient money.

Discount Plans generally save money for the service providers as well as the patients, because they are able to collect cash at the time of service, and do not have the expense (the overhead) of having to seek referrals, pre-authorizations, verify policy restrictions, deal with contract fee schedules, or to process and file claims to a traditional insurance payer, NOR do they have to wait an average of 60-90 days before they get their money.

Some primary examples of this type of program, are the Careington Discount Health Plans offered through Meditec.com. For a nominal monthly or annual fee, an entire family can receive the benefits of cash discounts for selected health care products and services. The provider of the service treats the patient as a "self-pay" client, just as they would any other un-insured client, but they agree to reduce their fees to those members of the discount plan.

The benefits of these programs, especially for those who are generally in good health, is that the card member only pays for the services they receive, and they get a discount for those services, in much the same way that a traditional insurance company might get a break through their contract or area-prevailing fee schedule. For Example:

Let's say that a husband and wife, who are in good health, sign up for a Discount Card program at $29.95 per month. That's $359.40 per year, which is probably less than one month of premiums for a traditional Indemnity Insurance Plan. Now, let's assume that the husband and wife each have a semi-annual checkup -- that's 4 visits to their primary care doctor in 12 months -- and each of these visit costs $85.00 (that's $340.00 without any discounts). Under many traditional Indemnity Insurance plans, those charges would not exceed the yearly deductible (which average at least $500.00 per year), so in this case, with a traditional Indemnity Policy, they would STILL have to pay 100% of that $340.00 out of their own pocket, in addition to the monthly premiums they've been paying. With the discount card, the doctor might give them a discount of 20%, bringing the out of pocket for the 4 visits to just $272.00.

So, if an Indemnity Plan cost $359.40 per month, that's $4,312.80 in premiums per year, PLUS a $500.00 deductible (that must be paid out-of-pocket by the insured/patient) before the insurance policy begins paying. In this example then, the total annual cost under the Indemnity Plan comes to $4,652.80. Under the Discount Card Plan, that total cost would only have been $631.40, assuming that the husband and wife only had the 4 office visits.

The drawbacks to a Discount Card Plan must also be considered however. If our example husband and wife suddenly had a catistropic medical need, let's say one had a heart attack that required a bypass surgery and an extended stay in an ICU, the Discount Card Plan probably isn't going to help a whole lot, because it is only going to provide a percentage off the overall cost, whereas under the traditional insurance plans, once the deductibles were paid, the insurance policy would then cover the vast majority of the expenses.

Insurance is a game of risk, where you're putting your money down (in monthly premiums) betting that you WILL get sick, and that the insurance company will end up having to pay MORE for the care you received, that you've paid in monthly in premiums. Not having insurance, or going with a Discount Card program, has a number of very cost-saving benefits, as long as you are generally in good health, and you are NOT spending more for medical care each year, than you would otherwise pay in traditional premiums.

Other Recommendations: If you are considering enrollment in a Discount Health Card Plan, you may also want to also consider purchasing a separate catistropic medical policy - one which would not address standard preventive or routine care (which you would pay for yourself under the Discount Plan), but would kick in for specific catistropic situations such as heart disease, cancer, or other unforseeable major medical events. Typically, a catistropic insurance policy, is substantially cheaper (sometimes less than half) that of a standard (broad-range) HMO/PPO/Imdemnity insurance plan would cost. So by going with a Discount Plan and a catistropic policy, your annual expenses will usually be anywhere from 30-50% less than with a traditional insurance plan.

BEFORE YOU MAKE ANY DECISIONS:

It is best to sit down and review your needs, review your financial situation, and perhaps contact one or more insurance agents or brokers, and ask them to help you evaluate all the options, so that you can decide which of all the available options best suits your needs.