Insurance rarely covers everything.
Home and auto insurance have deductibles. Disability insurance has a waiting period and often only covers a percentage of lost income.
The same goes for health insurance. Whether it’s a visit to your family doctor to diagnose an ear infection or heart bypass surgery, health insurance policies typically only pay a percentage of the total cost that health care providers bill. What insurance doesn’t cover is billed to you, the insured.
What makes health insurance more frustrating for some people is the lack of transparency on how much care will cost. The complexity of health insurance also leaves many patients sometimes unsure of what treatments are covered and how much is covered.
In general, health insurance will cover any treatment deemed medically necessary to prevent or treat sickness or injury. It typically does not cover elective, cosmetic, or experimental treatments.
Most health insurance plans do not cover 100 percent of the total cost of any treatment, with the exception of preventative care. There are three main areas of out-of-pocket costs that you may have to pay, including:
- Deductible. This is the amount you have to spend for covered health services before your insurance company pays anything.
- Copayments. This is a flat dollar amount required for you to pay a provider at the time of service. For example, your plan may dictate you pay $40 for every regular office visit.
- Coinsurance. This is a percentage of the total cost of a provider’s bill that you will be required to pay. For example, your plan may state that it will cover 80 percent of a certain treatment, meaning you must pay the remaining 20 percent.
In addition, policies typically have an annual out-of-pocket maximum, which is the most you would have to spend for covered services in a year. After you reach this amount, the insurance company pays 100 percent for covered services.
Also, keep in mind that many health insurance plans have “in-network” providers. These are providers with whom the insurance company has previously negotiated costs on certain services. The insurance company will therefore pay a greater percentage of the cost of service when you use an in-network provider than it will for an out-of-network provider. Companies typically keep a list of in-network providers on their websites, or providers can tell you if they are in a certain insurer’s network.
The difference between in-network and out-of-network providers is a leading cause of surprise medical bills.
Many health care procedures are ones you plan for and make appointments for ahead of time. Therefore, you can ensure the provider is part of your insurance plan’s network.
But even if you think you’ve chosen the right providers, you may still inadvertently be under the care of a non-network provider.
For example, most patients don’t get to choose the anesthesiologist for their C-section or back surgery. In another example, you may see an in-network provider who sends you to the in-house lab for blood work or a radiologist for X-rays, who are not in the insurance carrier’s network.
Any provider who bills your insurance carrier and who isn’t in-network will leave you paying a larger percentage of the overall bill. In some cases, insurance companies will not pay any out-of-network costs.
Surprise medical bills often arise during emergencies, when a patient isn’t able to choose a provider. For example, the ambulance that picks you up after you’ve had a heart attack may take you to a non-network hospital that was closer to your home.
According to the Kaiser Family Foundation, an estimated 1 in 5 emergency claims and 1 in 6 in-network hospitalizations include at least one out-of-network bill.
Legislation called The No Surprises Act was passed at the end of 2020 to address this problem. It contains key protections to protect consumers from surprise medical bills. However, it will not take effect until January 1, 2022.
Patients with health insurance can also be shocked by the out-of-pocket costs for serious illnesses.
According to statistics on annual per-patient costs of chronic diseases in the U.S., the minimum and maximum costs for:
- Heart failure is between $29,300 and $52,000
- Cancer is between $29,400 and $46,200
- Diabetes is between $17,500 and $28,000
Alcohol-related illnesses, smoking-related illnesses, obesity, strokes, and asthma are also among the most expensive chronic diseases to treat.
If your health insurance covers 80 percent of this cost, you would be responsible for the other 20 percent. Therefore, your share of heart failure treatment could run from $5,860 to $10,400. It would be roughly that much for cancer treatment and less for diabetes care.
If you have not met your annual deductible at the time treatment is needed, that will add to your out-of-pocket cost.
For many, this highlights the value of supplemental insurance. For example, a critical illness insurance policy will pay a lump sum benefit if you are diagnosed with cancer, heart attack, stroke, or another serious condition. It's money to use for out-of-pocket expenses your health insurance won't cover — plus, anything else you need during a difficult time.
Below are a few less common treatment options with an explanation of whether health insurance plans generally do or do not cover them.
Many large private insurers cover it, though there may be restrictions. Many plans only cover acupuncture when people choose it instead of anesthesia. Some plans will also cover acupuncture for pain, nausea, and migraine headaches.
Most health insurance policies will cover car accident injury bills, at least up to a point. However, in most cases, the first payments are supposed to be charged against an auto policy in place.
Therapy and mental health
All plans sold through the government’s Insurance Marketplace cover mental health and substance abuse services. Outside of the Marketplace, chances are good that your policy provides some level of coverage.
Most health insurance plans do not cover dental care. You would need dental insurance to cover dental expenses. Health insurance may cover dental care in emergency situations.
Health insurance plans rarely cover elective cosmetic surgery done solely to improve appearance. If there are medical reasons for a cosmetic procedure, it should be covered. These would include correcting congenital conditions, breast reconstruction after breast cancer surgery, or reshaping the nose to improve breathing.
Lasik eye surgery
Lasik eye surgery is typically a non-covered treatment.
Past medical bills
Some health insurance policies can cover to up to three years in the past depending on your coverage. This does not apply if you have a different health plan. Only bills incurred since the day your policy went into effect will be covered by your current plan.
Most health plans don’t cover treatments they regard as “experimental.”
These costs usually aren’t covered by health insurance.
Because of the potentially high out-of-pocket costs for health care, you may want to consider supplemental insurance plans to bridge the gap.
Joel Palmer is a freelance writer and personal finance expert who focuses on the mortgage, insurance, financial services, and technology industries. He spent the first 10 years of his career as a business and financial reporter.
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