Yesterday, I received a medical bill that is a perfect example of what is wrong with health care costs in this country. Several weeks ago I had an ultrasound as part of prenatal testing. The ultrasound was performed in a perinatologist’s office on one of their high-tech ultrasound machines. The scan took about 20 minutes, and was performed by a sonographer. The bill for that portion was $378. That part seems reasonable to me.
Here’s the part that makes me stabby: after the initial ultrasound, the perinatologist came in. He put the wand back on my belly for about 30 seconds to take a quick look, then said everything was fine. I saw him for three minutes, at the most. The bill for that portion was $370!
I’m fortunate that insurance covered the cost, for the most part. The scan ate my entire deductible, so in that sense, I had to pay $250 for it, but I would have had to pay the deductible at some point with this pregnancy.
Why Do Doctors Get to Bill Twice?
This isn’t the first time I’ve heard of this. A woman I know had a D&C with hysteroscopy to remove uterine fibroids. Although her doctor only dilated her once, she was billed for it twice – once for the hysteroscopy portion and once for the fibroid removal. When she challenged her doctor, she was told, sorry, that’s just how it’s billed.
Um, NO! That should not be okay. You don’t get to bill twice for only doing one thing. That would be like a deli charging me twice for a sandwich that they only made once.
And that is what is wrong with this country. In order to cover their costs, providers have to create creative ways to bill knowing that the insurers will only pay 50% of that cost, at most. So, if the true cost is $370 for the machine, sonographer, and perinatologist, they find a way to bill twice for it in order to make sure their costs are covered. (And actually, the total after insurance was $259.92, so it was only covered at about 35% of the charge.)
I’m not blaming doctors, I’m blaming the system. There has got to be a better way to come up with realistic costs and realistic payments than to just ask doctors to pad the bill and hope. I can definitely understand why some doctors are opting out of the insurance/medicare system and simply taking cash-only patients at a reasonable price that adequately covers their costs.
This is the season of open enrollment. If your company, like most companies these days, does the annual health insurance dance, check with HR to find out when your open enrollment period is and make the necessary changes. You should also check to see if your plan operates on a calendar year or benefit year system, and plan your appointments and procedures accordingly.
Common Changes to Health Plans
During open enrollment, employers give employees the option to do several things. In some cases, the employer will also make changes to the plans that affect all employees. Some examples:
- Adding insurance companies to the list of options
- Changing insurance companies for everyone
- Removing insurance companies from the list of options
- Adding different plan types, such as HMOs and PPOs
- Adding FSA or HSA options
- Changing employee contributions
- Adding or removing spouses or dependents
If you receive notice that your employer is changing the options, review that notice carefully and be sure to act by the deadline.
For example, this year my employer for the first time is adding an employee contribution for spousal and dependent insurance. The charge per month for my husband would be $87. He has free insurance through his employer, so we have to decide whether secondary insurance is worth $1044 a year. Last year, it would have been because the secondary policy saved us $4000 in medical bills from his surgery. This year, it may not be worth it. We have to run the numbers.
You may also have to choose your FSA election soon. The rules are changing for 2011, so review them carefully, then total up your expected costs and choose a limit accordingly.
Calendar Year vs. Benefit Year Benefits
Once you make the necessary changes to your plan, also note which benefits are on a calendar year and which are on a benefit year. For example, if your deductible is on a calendar year, it runs January 1 to December 31. If you’ve used it up, then plan as many appointments as you can before December 31 to avoid incurring more costs. On the other hand, if your deductible operates on a benefit year and your benefit year starts November 1, then you only have until November 1. However, if you haven’t used up your deductible, and need several appointments, you might be better off waiting until the start of your new deductible so you don’t have to double pay.
If you’re undergoing treatment, you should also confirm whether it falls under calendar year or benefit year coverage. If it’s benefit year and your benefit year ends shortly, your provider can start billing your insurance again once the next benefit year starts. If it’s calendar year, they can start billing your insurance again on 1/1.
If you’re not sure when your open enrollment period is, or where to find out what your benefits include, you should first check with your HR department or manager. Next, look at the back of your card for a toll free number. They can confirm benefits. Finally, visit the website for your plan. You can create an account that will detail your coverage and claims.
I recently started receiving acupuncture. I knew that my insurance covered 12 visits a year. I checked the coverage and learned that my portion is a $15 co-pay for the office visit, and then 10% of the treatment. But that’s not how it worked out, and it’s taken several calls to get it sorted out.
Reading the Benefits Website
I started at the website. That’s where it said that the office visit co-pay was $15 (standard medical co-pay) and the treatment was 10% of the cost (standard co-insurance.) It didn’t mention anything about a deductible.
I next looked at their provider list and located acupuncturists in my area. Then I looked at their websites and an acupuncture provider website to find out who treated my condition. I called and made an appointment.
My provider called my insurance before my first visit to confirm coverage and let me know my co-pay would be $22.50. Great. I went for my first visit, paid my co-pay, and then went on my way.
The Explanation of Benefits Arrive
You would think that between me reading the website, and my provider calling them, and my provider reading their website, we would have figured it out. You would be wrong. When my first explanation of benefits arrived, it said I owed $105.00. It also said that the second “treatment” on the same day was not covered. Apparently the provider used the proper billing codes, but the insurance misread them. They’re now reprocessing those initial claims.
I also called to find out what was going on, and was told that they were billing wrong and that I had a $250 deductible. It doesn’t say that anywhere in the acupuncture portion! The deductible for the plan is never mentioned anywhere except at the top of the benefits section.
My Provider Confirms Again
I showed the EOB to my provider, who called the insurance again. Finally they explained that there’s no deductible for office visits, as they said the first time, but there is for treatments. And that they don’t start counting my visits toward the 12 until my deductible is reached. Based on what they’ve said I owe, that started on my fourth visit, so in total I’ll have 16 visits under my plan.
I’ve learned from this to always call first to confirm your coverage. The website has the correct information, but it isn’t always organized in a way that makes sense to the average user, or even to providers. Even if your provider calls to confirm coverage, if it’s an unusual situation, call to verify yourself anyway. As I learned, it can take three or four calls to get it all straightened out!
And then sometimes, as happened with my husband’s surgery, they’re still wrong. Of the $4000 surgery co-insurance they said we would owe, we paid $60. No amount of calling could have figured that one out!
A few healthcare laws changed immediately with the passage of the Healthcare Reform bill, but most will take some time to take effect. Several important measures that don’t affect your taxes go into effect on September 23, 2010. You may have already received a notice about them from your health insurance company. If not, here’s what you need to know:
Health Insurance for Adult Children
Under the old law, children were no longer eligible for their parents’ insurance once they graduated from college or reached age 24, whichever came first. Under the new law, the coverage is extended to age 26, unless the child’s employer offers insurance. If you have an adult child who hasn’t yet found employment, or became unemployed, contact your insurer to re-enroll your child in your policy. Some insurers chose to keep adult children on the policies in the gap between graduation and September, but some didn’t.
Free Preventative Care
Starting now, your insurance company may no longer apply a deductible, co-insurance, or co-pay to preventative screenings like mammograms and colonoscopies. Well-baby and well-child visits are also included in this category.
No Rescinded Coverage for Technical Errors on Applications
Part of what prompted this particular reform were the horror stories about women with breast cancer having their coverage canceled because they forgot to mention a mole they had removed fifteen years earlier or other such ridiculous claims. Health insurance companies may no longer do this. I assume that they can still rescind if you intentionally lie about big things, such as not mentioning that you’ve had cancer before.
Appealing Insurance Company Decisions
It’s happened to everyone – a bureaucrat decided to deny coverage for something the patient needs because the bureaucrat thinks it’s unnecessary. While you’ve always had the option to appeal, most people didn’t know that. The new law creates a formal external review process and a formal appeals process.
Eliminating Lifetime Limits on Coverage
A person with an expensive condition or illness will no longer be able to exceed their coverage. This often happened with cancer patients, but could also happen to patients taking expensive medications. Once they reached the cap, they either no longer had coverage or had to find a new job with a new plan. Experimental procedures may still be excluded, but necessary treatments must be covered regardless of the total dollar amount the patient has used. If you require expensive care and had previously exceeded the cap, contact your insurance company to see if you’re now eligible for treatment coverage under the new rules.
Restrictions on Annual Limits
In addition to lifetime limits, some insurance companies include annual limits on coverage. Those limits are now strictly curtailed and will be banned in 2014.
No Exclusions for Pre-Existing Conditions in Children
This is another big one. Prior to today, children with conditions such as asthma, leukemia, or birth defects could be denied coverage for a pre-existing condition if their parents had to change plants. Now, children under 19 can’t be denied coverage if they have a pre-existing condition for new plans and existing group plans. If you have a plan that excludes your child, you can now apply for new coverage for him or her.
As you can see, most of these new rules targeted the most egregious insurance company abuses or are items that most people can agree needed to be changed. The controversial stuff doesn’t take effect for quite some time.
As I’ve mentioned before, we opted to contribute the maximum $2500 to our FSA account this year because we initially expected to pay $2000-$4500 in coinsurance for my husband’s surgery. As it turned out, we paid $0 in coinsurance, which meant we have to scramble to spend down the $2500.
Half-Year FSA Check-In
We use our FSA frequently, so I frequently check the balance and process requests for additional information. On a side note, I don’t know why they say you can use the card to pay at the doctor’s office if we ALWAYS have to send backup information and receipts. That doesn’t make it any more streamlined!
If you don’t check your FSA regularly, mid-year is a good time to check and see how much you have left to spend. Then you can start scheduling doctor’s appointments now, rather than waiting until the last month to try to fit them all in.
By the end of this month, we’ll have managed to spend almost exactly half of the money. That’s about $500 in prescriptions, two emergency room co-pays, miscellaneous travel/parking expenses, some over-the-counter items, and physical therapy. My husband’s preferred physical therapy center is no longer in Anthem’s network, but we opted to pay the higher co-pay rather than find a new center because we knew we had the FSA to spend down. That’s about $150 a week. (It varies. Some visits are $50, some are $25.) I’m not sure how many visits he’ll have, but twenty sessions will get us pretty close to the cap.
Planning to Exceed the FSA Limit
Given the higher PT expense, we’ll probably actually spend more on medical costs than our FSA limit. I still need new contacts and new glasses, as does my husband. He takes a few prescriptions and we still pay co-pays for those. I also have to schedule a few doctor visits for myself, so that will push us over the edge.
At first I was annoyed that we might exceed the cap and have to spend our own money, but then I remembered that the FSA is our money. It’s simple to forget that it’s ours because we don’t pay the bill for it at the end of the money, but I also always remember that we have to spend it all by 12/31/2010 or forfeit it. So, I’d rather exceed the cap and have to go out-of-pocket than leave money on the table.
It seems impossible to spend $2500 on medical care in a year, and in a normal year it might be, but even in a normal year it wouldn’t be that hard to spend $1000. It’s amazing how quickly these things add up.
Six months ago I wrote a post about calculating the benefits of dual coverage. At the time, my employer was switching health insurance plans so that my husband and I would both have Anthem through our employers, and he would have dual Anthem coverage with different benefit levels. Once we learned he was scheduled for surgery, I called to find out how the benefits would be coordinated under two Anthem plans. What Anthem told me was completely incorrect, but it worked in our favor. So here’s how it really works.
Coordination of Benefits Under Competing Insurers
Previously, my employer offered United and my husband’s employer offered Anthem. Under that plan, United paid for anything Anthem didn’t cover, except doctor and prescription co-pays. Under those plans, he paid the Anthem co-pay level, which was sometimes higher, sometimes lower. We ended up paying nothing for tests and treatments beyond the initial co-pay.
Coordination of Benefits Under the Same Insurer with Different Plans
When I called Anthem to find out how it would work, I was told that he’d need to pay the higher co-insurance and deductible on his Anthem plan before my Anthem would cover anything. This is completely incorrect. Instead, it works exactly as if they were competing insurers. We pay doctor and insurance co-pays, but nothing else. So far the hospital bill alone has come to $277,000 (cost before insurance). To date, we’ve paid $60 in doctor co-pays and $200 in prescription co-pays, which is coming out of our FSA.
Here’s how it works:
Hospital submits claim to Anthem A (husband’s plan). They pay 70% of the bill up to the out-of-pocket max, after which they pay 100%. His out-of-pocket maximum is $4000 and his deductible is $2000.
Anthem A pays the hospital 70% of the negotiated rate. So, if it was a $1000 negotiated rate, they would pay $700. Since it was $277,000, they paid $100,000 of the negotiated rate of $104,000. If we didn’t have secondary insurance, we would have been billed for $4000.
The hospital sends the entire claim to Anthem B (my plan). Anthem B pays 90% of the negotiated rate. If it was $1000, they would pay $900, except Anthem A already paid $700, so Anthem B would pay $300. Since the negotiated rate was $104,000 and the Anthem A paid $100,000, Anthem B paid the remaining $4,000. We get billed for nothing.
Now that the $4,000 out-of-pocket max and the $500 deductible on my husband’s plan have been exceeded, Anthem B won’t receive any more bills. Anthem A will pay it all.
So, if my husband’s employer didn’t generously provide him with free health insurance, and my employer didn’t generously provide both us with free health insurance, we would have either been responsible for $4500 (his plan) or $2500 (my plan.) We were actually responsible for $0.
The downside is that we relied on what Anthem told me when setting our FSA contribution for the year and now have to figure out how to spend $2000 by December 31. We’ll find a way, it just wasn’t something we planned on.
Coordination of Benefits Under Same Insurer, Same Plan
If you both work for the same company, then you have the same plan and are only covered once each. You can’t double up under the same plan. If you have a $4,000 out-of-pocket max, that’s what you have to pay.
Doing Your Own Insurance Calculations
So, if one or both of your employers offer free insurance for one or both of you (and dependents), there’s no reason not to take it. If they offer you a bonus for declining coverage (and the declining spouse and dependents have alternative coverage), figure out if the bonus would cover the deductible gap if you did have a major medical bill. For example, if you’re offered $300 a month to decline coverage for the your spouse and two dependents, and have a $4000 out-of-pocket max under the other plan, you’d almost break even in the event of one major medical event. You’d come out ahead if there are none.
However, if you have to pay a premium for coverage from one or both employers, the premium cost may exceed any benefits you’d receive through coordination of benefits. For example, if you have to pay $2500 a year for an extra $4000 in coverage, you’d be better off putting the $2500 in your emergency fund.
My husband has been on surgery disability for several weeks now and we’ve learned a few surprising things about the process, the first of which is that it’s really not that much of a financial strain. Of course, we earn more than we spend, so it might be more difficult for families that are on the edge.
Total Reduction in Income
My husband’s income, after taxes, is reduced by about 25%. State disability income isn’t taxable, but the 5% bonus we’re receiving through his employer’s private disability plan is. If you’re planning a disability, find out if your benefits are taxable and budget accordingly.
I’m still working, so the total reduction in monthly income is closer to 15%. It’s something, but not so much that we really feel a pinch. I will also be interested to see how this affects our Federal taxes. We planned our withholding around our full incomes. If my husband is out for three months rather than the initial six weeks we estimated, that’s a full quarter of his annual salary, which may bring us into a lower tax bracket. If that’s the case, our total reduced income will be closer to 12%.
Total Reduction in Spending
We figured we’d see some reductions in spending, but we were stunned by the size of the reduction. We’re spending anywhere from 33%-50% less on our credit cards each month. Not only is my husband not eating out at all, or driving, or getting dry-cleaning, but I’ve also been seen some of my expenses go down. I expected our grocery bill to go up a lot, but it’s only gone up $15 a week or so. In addition, we have an FSA this year, so we’re no longer paying for prescriptions or co-pays.
The weather has been relatively mild, which has helped from an energy perspective. We had to use the heat during the day for about a month, but it was only heating the house an additional 3-5 degrees, so it wasn’t a big jump.
Planning for the Reductions by Stockpiling Cash
Once we knew the surgery was coming, we immediately put all major purchases on hold. We had planned to buy furniture, have some work done on the house, and buy me a car. None of that happened. Instead we funneled all our excess income into savings. Combined with our emergency fund, we had more than enough to cover the lost income and the gap between applying for benefits and receiving them. We’d expected that to be four weeks, but it was only three.
Pre-Pay Bills Whenever Possible
Before my husband’s surgery, he scheduled most of our bills for payment through our online banking. That way I didn’t have to worry whether a bill was due while sitting in the hospital. We were very glad he did that when his computer died the day before he went into surgery. Yes, I could access online banking from other computers, but I couldn’t use Quicken or access our budget. Let me tell you, not having access to Quicken or our budget for three weeks was very upsetting for me.
Between the FSA, reduced spending, and reduced income, we’re only falling about $600 a month short of our usual budget. That means we’re saving a little less, but far more than we were expecting. Recovering from surgery is tough, but the financial aspect doesn’t have to be if you plan carefully.
I’ve mentioned a couple times that my husband is receiving disability insurance while recovering from surgery. However, I was startled to discover recently that California is one of only five states with a state-run disability program. If you don’t live in one of these states (California, Rhode Island, Hawaii, New York, New Jersey), you should pursue other options for getting this insurance.
How State Disability Programs Work
In states that offer disability programs, your employer deducts your contributions through payroll deductions. Some organizations and government agencies are exempt, but may have a similar internal program. If you’re self-employed, you may be able to buy benefits through the state program.
Once you have a disability, you apply for benefits through the disability program, which is usually operated by the unemployment department. The specifics vary by state, but in general, you’re paid 55% of your previous salary per week, based on your highest-earning quarter out of the last five quarters. There is a cap, however. In California it’s $987. Disability income is not taxable, so even though you receive about half your salary, you’re not losing as much income as it seems. In California, there is a 52-week cap on benefits.
If you’re unemployed when you become disabled, you may also qualify for benefits, which will be higher than your unemployment benefits. Unemployment payments are low to encourage workers to return to work quickly. Disabled workers obviously can’t do that. You can’t receive both benefits at the same time.
How Employer-Provided Disability Programs Work
If you don’t live in a state with a government disability program, your employer may offer it privately as an employment benefit. Many employers provide it as a free benefit, but some ask employees to contribute. If your employer asks you to contribute, do it. It’s much cheaper to buy coverage through a large group plan than through an independent plan.
Unlike state plans, which are the same for everyone in your state, you should check with human resources or your insurance provider for information about eligibility, waiting periods, and filing a claim. Most plans cover up to 60% of your salary. My husband’s employer provides a state supplemental for 60% of his income. If your employer pays for the coverage as a benefit, the income may be taxable. Ask your employer.
How Private Disability Insurance Works
If your state or employer doesn’t offer disability insurance, you can acquire it privately. You’ll most likely be required to undergo medical underwriting as part of the application process. You may also be subject to a longer waiting period before benefits become available.
If you’re a high-earner, you may want to supplement your existing state or employer disability plan with a private plan. Private plans will usually cover 70-80% of your income. It can cost $600-1800 a year, so review your plan carefully to make sure you have adequate coverage and that it includes an “own occupation” rider. Without that, benefits may stop if you can return to any work. You want to be covered until you can return to your current occupation.
How to Apply for Disability Coverage
In order to apply for disability, you and your doctor must complete the form that proves your disability. Contact your state, employer, or insurance company for the proper forms and follow the instructions carefully. Be sure to notify the insurer when you return to work in order to stop the payments. Failure to do so is insurance fraud.
Worker’s Comp vs. Disability Insurance
Disability insurance is for injuries or illnesses that occur outside the workplace. If you’re injured on the job, then you should file a worker’s comp claim. All employers are required to maintain proper worker’s comp coverage. You don’t have to opt-in or pay for the benefit. Benefits and the claims process will vary depending on your state, so contact HR for advice.
State/Employer Disability vs. SSDI
If you’re disabled for more than a year, then you will most likely qualify for a Federal program known was Social Security Disabled Insurance (SSDI). SSDI is part of your FICA contributions. The benefit amount is based on your lifetime average earnings. If you expect to be disabled for more than a year, contact Social Security or speak to your doctor’s office about filing a claim.
Sources of Disability Insurance
If you live in one of the five states that requires disability insurance through the state program, then you probably already have it. If you’re employed and don’t live in one of those states, ask your employer about it.
If you’re self-employed, contact your insurance agent for information about applying. It’s vital that a self-employer person by coverage because you’ll have absolutely no income if you become injured.
If your employer doesn’t offer insurance, you have a few options. If you’re a member of a union or trade group, contact them to see if they have a group program. My husband bought a small, cheap plan through his professional organization. It has a 3-month waiting period, so we won’t be tapping it for his current injury, but at $80 a year, it’s worth it in case of future emergencies. If you don’t belong to a trade group, contact your insurance agent for information and q
I’ve only recently begun filing FSA (flexible spending account) claims, but I’ve learned a few things about the process.
Use Your FSA Debit Card
If you have an FSA card, swipe it first. My HR department recommends using it in the pharmacy, rather than at the checkout. If you need to buy over-the-counter items, wait until you need to pick up a prescription and ring up the whole thing at the pharmacy counter.
Save Itemized Receipts
If you’re buying over-the-counter items and don’t have a card, keep the itemized receipt for filing your claim. I’ve noticed that both CVS and Costco list the FSA-eligible total at the bottom of the receipt. If you use the card, save the receipt anyway in case they need verification. Basically, save the receipt until at least the end of the tax year.
Save Prescription Detail Receipts
In addition to the itemized register receipt, save the slip of paper stapled to your prescription bag that lists your name, the medication, the date, and the price. Some FSA programs require more details for prescription reimbursement than the cash register receipt will show.
Get Itemized Receipts from Doctors
The IRS doesn’t allow FSA programs to accept the credit card or cash receipt for doctor co-pays. You need to get a copy of the appointment sheet where the doctor marked off the visit codes or wait for your explanation of benefits to arrive, which will list what you have to pay.
Notify HR If You Have a Problem
I had two problems with my first claim: first, the claim form crashed before I could print it. Once I got it to work again, it refused to accept claims for $10. I could enter any other number except $10. I notified HR again, but no one could figure out why it was doing that. I tried with two different computers on two different days!
Arrange for Direct Deposit of Reimbursements
If you file claims, you probably have an option of being reimbursed by direct deposit rather than check. You’ll get your money faster and won’t have to worry about lost checks if you set that up.
Keep a Copy of Your Claim
Keep a copy of your claim form and documentation if you have to mail your claims. Don’t send your original receipts – only copies. My FSA prefers faxed documentation, so I filed the fax with my other documents until my reimbursement comes.
If you use them properly, FSAs can save you a lot of money. Just make sure you file all your claims properly to reduce the hassle!
The end of the year is just over two months away, and at least three weeks of that will be gobbled up by various holidays. So, take the time now to assess what you need to do to maximize your money by the end of the year.
Spend Down Your FSA
If you have a flexible spending account, any unused funds will vanish January 1, 2010. Remember, this is your money that was magically whisked from your paycheck before you received it. To avoid losing it, you need to use it up. So check the current balance and then start scheduling doctor visits, refilling prescriptions, and stockpiling supplies. Review your plan to make sure which appointments/purchases qualify.
Reassess Next Year’s Contributions
Take a look at your budget and expenses. Did you need to scramble to use up the FSA funds? Then perhaps contribute less next year. On the other hand, does anyone in your family have a major medical expense coming up? Maybe you should increase it. Look at it this way, you’ll spend this money either way. If you put it in an FSA, it will reduce your tax base and actually save you money.
Take Stock of Your 401K
If you stopped contributing during the crash, take a good look at your accounts and see if it’s time to get back in. This is also a good time to rebalance your portfolio. The economy has drastically changed – it might be time to get out of some sectors or into others. If you hold a variety of mutual funds, see if one has grown faster than the others and is now out of balance.
Estimate Your Taxes
If you’ve received a raise, run a small business in your spare time, had a major life change, or a major life issue, take a look at your tax bill. You can go to IRS.gov to use the withholding calculator. It’s not perfect, but it will give you an idea of whether you’ve under- or overwithheld. If it’s the former, change your W-2 to withhold additional funds and avoid a penalty. If you’re latter, decide whether you want to that money back now, and change your W-2 to withhold less, or plan ahead for how you’ll use that refund when it comes.
Maximize Your Tax Deductions
If you’re going to owe more than you thought, look into maximizing your tax deductions. For example:
- See if you have any real stock losers that you can write off against capital gains or $3000 of ordinary income.
- Are you just shy of the 7.5% of AGI minimum to deduct health costs from your taxes? Go see the doctor. If you have something big coming up next year that will put you over the limit, delay all other health costs until next year, too.
- Are you debating whether to buy a car now or in January? Buy before the end of the year for that one-time new car tax deduction.
- Make a few charitable donations or clean out your house and donate the decent stuff to a charitable thrift store.
- Take advantage of Cash for Appliances. Upgrade your HVAC or water heater to also take advantage of the related tax credit (make sure it qualifies for both, first.)