Deductibles, coinsurance, and copayments – Lions, tigers, and bears, oh my!

Episode 20: Deductibles, Coinsurance, and Copayments – Lions, Tigers, and Bears, Oh My!

In our last episode, we talked about the best strategies for collecting money over the front counter. Today, we’ll talk about how payers are shifting more costs to patients, and what that means for your practice finances.

As we’ve said in previous episodes, we are seeing a greater percentage of the cost of healthcare being shifted to the patients. Where this used to average about 20% of the total, in many practices, we’re seeing it shift up towards 25%. That’s a trend that’s likely to continue, so it’s important to have systems in place to identify or predict what portion the patient is likely to owe, and to assist them in making it easy to make those payments.

Let’s talk about some of the insurance products and terminology. First, we hear a lot about deductibles. This is a set amount that is part of your benefits plan, and when you are the patient, before you meet the deductible you pay all of the costs, and after you’ve met your deductible, you share costs with your health plan on some kind of split, perhaps 80% to the plan and 20% to you or 70/30 or some other split. Coinsurance is what happens after you’ve met your deductible – it’s the 20% you pay on the 80/20 split or the 30% if you’re structured on a 70/30 plan.

So, if we put that to numbers, if you have a $1,000 deductible with an 80/20 plan and you have a medical expense early in the year that totals $2,000, you will pay $1,200 out of pocket and the plan will pay $800. This is the sum of your deductible of $1,000, plus 20% or $200 for the remaining $1,000. After that, if you had another medical expense that was for $500, you would pay 20%, or $100 since you’ve now met your calendar year deductible and your plan would pay $400 or 80% since that’s their part of the split after the deductible.

Copayments are usually a nominal amount, which were originally designed to make sure that there was SOME barrier to entry, otherwise, insurance companies feared that patients would run into the office for every little hangnail. These were really born at the height of the time when capitated or pre-paid plans were prevalent, and they’ve remained a part of the plan design.

Typical amounts of copayments currently are:​

• For routine, in network care from a primary care physician: $15-$25​
• For care at a Specialist’s office, it’s $30-$50​
• For Urgent Care copayments are typically: $75-$100​ and if care is being provided in the
• ED, patients will pay between $150-$300​ for their copayment. Again, the amounts are set to encourage patients to seek care first at the least expensive place to receive it.

Sadly, many patients now see the copayment as the total “value” of the care they are receiving, and they don’t understand the underlying value and that their visit is typically worth several hundred dollars. In many consumers’ minds, the value of their care has been “dumbed down” to a mere 25 bucks, which they perceive as the price of admission.

A note here – we’ve said this in previous episodes, but it bears repeating – please be sure that your front office has a policy of collecting copayments AT THE TIME OF SERVICE! I go into so many offices as a patient who just say, “We’ll bill you for the copay.” Please don’t do this. There is good research out there that shows that it costs you somewhere between $18-25 in staff time, printing and postage costs to collect that copayment, which makes the exercise a complete waste of money. If you’ve trained your patients over the years that it is okay not to make their copay on the day they’re seen, it’s okay, but you’ll need to help your team to retrain them. Fortunately, more groups are making this a hard and fast policy, so they should be used to it from other offices that they visit. Again, make this a policy at your office, so there won’t be much pushback.

More costs are being shifted to patients, as payers are trying to maintain their profit margins. When employers go to buy health insurance coverage for their employees, they are frequently met with double digit increases, which means more than a 10% increase in cost of the premiums from one year to the next. When the employers push back on this, insurance plans have to figure out a way to lower their costs, so they come out with more and different plan designs that shift costs to patients in a variety of different ways.

We see high deductible plans, which work well for young, healthy people who rarely go to the doctor. We’re seeing more plans going to 70/30 splits or putting more services “out of network.”

How does this impact you as an employer? If your group offers medical insurance as a benefit for your employees (and I highly recommend that you do), you or your finance folks are likely reviewing premium increases each year in the fall when open enrollment season rolls around. If you’re like me, you’re pretty appalled when your benefits broker tells you that it’s going to cost you say 9-14% more to keep the same level of benefits for your hard-working staff. So, you begin to look around and get creative…and the plans are ready to offer you some creative options, with lots of different moving parts and pieces. There are riders for vision coverage, sometimes for behavioral health, differences in prescription coverage amounts or higher or lower copayment or coinsurance amounts, and on and on it goes. Even those of us who are industry insiders can be dazed by all of the options.

Now, think for a minute that your patients’ employers were faced with the same circus when they chose their health plan for this year, and there’s a very good chance that your patients’ benefits have changed in some way from what they were used to from last year. Add to that fact that no one really reads all the way through that nice benefits statement that human resources gives them… and then your patient appears in your office with a new problem. You might need diagnostics, or a new prescription medication, or a referral to a subspecialist. Or maybe you are the subspecialist. Regardless, one thing is true: your patients expect you and your team have “magical and omniscient plan knowledge” and that you’re completely dialed in to all of the nuance of their particular plan design. They expect that you are only going to order tests or write prescriptions or make referrals for things that are covered on THEIR specific plan. I know it’s not fair. I know it’s ridiculous. And, they will still have that expectation.

You may not hear the fallout from this as much as your billing team does, but if I had a nickel for every time I heard a patient say, “Well, why did the doctor order it if it wasn’t covered by my plan?” I’d be retired on a tropical island somewhere.

So, there are several things you can do about this – I find the easiest is to say to the patient, “I’ve ordered the following test/prescription/referral as the next step in your care. I highly recommend this as our course of action, and I ask that you let our office know if any of these are not covered by your plan. We will do our best to assist you in maximizing your insurance benefit.” This simple statement clearly places the responsibility back on the patient (where it belongs) for knowing what their benefits are, and it gives you a gold star for assisting them in maximizing their insurance benefit, which they all expect from you, but never actually give you credit for doing.

When we talked about getting a credit card on file for EVERY patient in our last episode, I meant it! Be kind, customer-oriented, and FIRM. You should establish this as a policy for your clinic. Many times, when something is stated as a policy, no one questions it, not staff, not patients. They just get out their credit card!

This is especially helpful as your practice goes through the first quarter of each calendar year, which we affectionately refer to as “Deductible Season.” At this time of year, if you’re not managing cash and collecting over the counter, your cash flow will slow greatly, which may create financial hardship for your clinic. We highly recommend using a tool at your front desk that tracks patient accumulators, which means that your staff can see where any given patient is with respect to having paid their calendar year deductible. If they have only met $250 of a $3,000 deductible, and they have a visit with you tomorrow, chances are very good that it will be applied to their deductible. If you don’t know that, and you don’t collect it up front, your billing team will send a claim, the insurance company will respond in a few weeks, paying nothing and informing you that the patient is responsible. Then, your billing team will send a statement to your patient, and hopefully the patient will pay in a couple more weeks. Now you’re 6-8 weeks out, with no payment for the service you rendered 6-8 weeks ago. And, this is happening with a majority of your visits!

Instead, arm your team with the tools to track accumulators (there are several good ones on the market) and script them to have an intelligent conversation with the patients about it, and to collect a deposit at a minimum. As we said in our last episode, as the practice owner, one of the things you can do is to make it VERY easy for patients to pay you – have multiple ways in which they can do so: on-line payment portals, credit cards on file with advance authorization to use them, and as a last resort, checks or cash.

This shift does ask a bit more from your front office, and as we have been talking about in our previous episodes, the front office is frequently a tough place to work. Please make sure you have good systems in place, good training, good scripting, and above all, excellent support of your front office folks when they’re trying to do the right thing.

Join me for our next episode, where we’ll talk more about managing patient due amounts, and how and when to send patients to Collections.