Overview:
Health insurance policies typically contain a deductible. A deductible is the amount of money you must pay for your medical expenses before your insurance will cover the costs of your medical care: hospital stays, emergency room visits, doctors visits etc. Your deductible is met on an annual basis and the annual time frame is either based on the plan year or a calendar year. There are two different types of deductibles: traditional also called embedded or an aggregate deductible also known as non-embedded. You may have some benefits (ie. preventative care) which the deductible does not have to be satisfied first before your insurance will pay the costs of your visit.
Embedded Deductible
If you are on a family medical plan with an embedded deductible, your plan contains two components, an individual deductible and a family deductible. Having two components to the deductible allows for each member of your family the opportunity to have your insurance policy cover their medical bills prior to the entire dollar amount of the family deductible being met. The individual deductible is embedded in the family deductible.
For example, if you, your wife and daughter are on a family plan with a $3000 family embedded deductible, and the individual deductible is $1000, if your daughter incurs $1000 in medical bills, her deductible is met and any subsequent medical bills for your daughter that year, your insurance will help pay even though the family deductible of $3000 has not been met yet.
Non-embedded
On the other hand, if your insurance policy contains a non-embedded family deductible. There is not an individual deductible embedded in the family deductible.In this situation, before your insurance helps you pay for any of your medical bills the entire amount of the deductible must be met first.It can be met by one family member or a combination of family members however there are no benefits until expenses equaling the deductible amount have been incurred.
Embedded warning
There are numerous insurance plan types and each type can have either an embedded or non-embedded deductible. There is one plan type called the high deductible health plan (HDHP), where a minimum annual deductible amount is required by the Internal Revenue Service (IRS).Members on a HDHP are allowed to open a tax free health savings account (HSA), hence the IRS involvement in the plan design.
If your HDHP family plan has an embedded deductible and one person in your family meets their individual deductible amount, but it is lower than the minimum annual family deductible required, then the plan does not qualify as an HDHP and you are not eligible for the tax savings.
For example, if the family annual deductible required by the IRS is $3500, and the plan has an embedded deductible allowing an individual deductible of $1500, the plan does not qualify as a HDHP because the deductible can not be less than the deductible required ($3500) for a family plan.
Having a non-embedded deductible, or no individual deductible within the family deductible would ensure the correct minimum annual deductible amount is met for income tax purposes.
How do I know?
There are 3 ways you may be able to find out what type of deductible your insurance plan has.The first is to obtain a copy of your insurance benefit book and look at the definition section. The deductible definition may detail embedded vs. non-embedded.>If the booklet is not available, and you are on an insurance plan through your employer, you could ask your human resource representative which type of deductible your plan has. Or, if they do not know, or you are not on a group plan, call the member services phone number located on your id card and ask a representative at your insurance company for the details.
Next Blog: Government Health Programs and Social Insurance
Friday, April 16, 2010
Friday, April 9, 2010
More Alphabet Soup - - EOB what is it & why do I need one?
Explanation of Benefits (EOB) is the document you receive from your insurance provider for each medical visit. It explains what services and procedures were performed, and details the dollars paid by your health insurance company towards your medical claim vs. how much you, the patient must pay.
An EOB is not a bill but it shows information that could save you money (more on this when we go over an EOB).
When you visit a medical provider, the office staff uses standard CPT medical codes which are codes updated and distributed by the American Medical Association, to note every service you receive. Then the doctor’s office staff sends your insurance carrier an itemized bill containing service codes and the charges for the service. At that point your medical bill becomes a request for payment based on your insurance policy benefits.
Your insurance provider assigns a unique number to the claim and sends it to their service center for processing. The majority of claims are processed automatically also known as "auto-adjudicated". If there is something unusual about the claim, like a missing code or charge, the claim is “pended” and a processing specialist takes a closer look. The major carriers (UHC, Humana, BCBS) each process over 22 million claims a year.
Definitions
Standard Medical Codes are the procedural and diagnosis codes published by the American Medical Association Deductions. The purpose of the coding system is to provide uniform language that describes medical, surgical and diagnostic services.
CPT code (current procedural terminology) is a five digit numeric code that is used to describe medical, surgical, radiology, laboratory, anesthesiology etc. There are approximately 7800 CPT codes.
ICD-9 code (International Classification of Disease, 9th revision)is a coding system used to code signs, symptoms, injuries, diseases and conditions.
ICD -9 codes are diagnostic, CPT codes are procedural. The relationship between the two is critical. The ICD-9 code is the diagnosis that supports the medical necessity of the procedure/CPT code. .
Learn to read your EOB
Charge: Amount the provider billed for the service
Excluded amount: The amount not eligible for benefits under your plan. (Refer to excluded amount remarks for details)
Provider Discount: If your provider is a participating provider, your insurance company has an agreement with your provider to pay a certain amount for a service, this column shows the reduced amount based on that agreement.
Deductible: the dollar amount you are responsible for paying before your insurance starts to pay
Copay: the amount you are expected to pay at the time of service
Coinsurance: The percentage of costs you pay after you’ve met the deductible. The plan always pays a higher percentage when you use in-network providers.
Benefit Amount: Amount insurance company will pay to your provider (within 7-10 days of issuing the EOB)
Estimated Member Responsibility: The amount you owe the provider. This amount includes copayments, deductible and coinsurance and excluded charges if applicable. (ie. OON provider, experimental procedures)
Amount paid by Health Insurance Company: the benefit amount minus what other insurance paid (if applicable)
The second page of your EOB generally contains a section showing notes & explanations. Such as:
Service codes/descriptions—short description of the service you received
Remark codes/descriptions—if part of your providers charge was excluded, this section explains why. If this section says “letter to follow”, your insurance company sent an Explanation to your provider and you may not receive a copy
Benefit Information—this section provides your accumulation information for your plan.
Special Messages: general information
Why do I need my EOB? You should use the information on your EOB to coordinate your payments to your providers. If a provider charged you more than your EOB states you owe....a flag should go up telling you something is not correct. If the provider is in the network for the insurance company you use; your EOB tells you the maximum amount you are liable for with the provider. If they are charging you more, or you paid more than your EOB shows you should have, call the billing office to see if you can get additional information regarding what is going on. If you are not successful in resolving the issue, or do not feel the issue was handled correctly, you may want to obtain the services of a billing advocate.
Here's a link to another very detailed look at reading an EOB from BlueCross BlueShield http://www.bcbst.com/members/eob/eob.pdf
8 out of 10 medical bills contain errors not in the patient's favor. Do not simply pay what the providers bill says you owe. Make sure to review, or have someone review them for you; comparing your bills with the corresponding EOB first..........it just may save you money.
Next
Blog: Embedded vs. Non-embedded deductible
Saturday, April 3, 2010
FSA, HRA, HSA.....LMNOP what are they talking about?!
Healthcare alone is confusing much less throw in some more acronyms into the soup. What exactly do FSA, HSA, and HRA mean in the healthcare world?
FSA=Flexible Spending Account
HRA=Healthcare Reimbursement Account
HSA=Healthcare Savings Account
WHAT IS A HEALTHCARE FLEXIBLE SPENDING ACCOUNT (FSA)?
A healthcare FSA is an account that can be used to pay for medical expenses not covered by your insurance. It is a reimbursement account offered by employers that allows you to set money aside from your paycheck before taxes and it is put into an account by your employer, similar to a checking account.
The funds are not portable which means the money can not be taken with you if you should switch jobs or quit (the money is no longer yours) and the money does not accrue interest. FSA's come with one important rule: if you don't use the money with in the plan year, you will lose it. The money in your FSA account can be spent on health care expenses that are not covered by your health insurance, such as:
Why would I want to put money into a healthcare FSA?
The advantage of putting money into an healthcare FSA is that when you use the money to pay for qualified medical expenses, you are spending pre-tax dollars, so you end up paying fewer taxes on your salary and end up having more to spend. Plus, from the first day of your company’s benefit plan year (most often 1/1) you can spend the entire amount of money you have elected to put away.
For instance, let’s say you signed up to put $1200 into an FSA account over the year or $100/month. When the new plan year started, you could go to the doctor that very same day and spend $1200 (if you needed too) even though the entire $1200 had not been taken out of your paycheck yet. It in a sense is a way to “loan” yourself money and then during the year pay the loan back by having money from each paycheck going towards the $1200 you already spent.
Please note: If you have a high deductible health plan that is eligible for a Health Savings Account (HSA), you may have what is known as a Limited-Purpose FSA (LFSA) but you are not allowed to have an FSA. Please see below for HSA information and more about LFSAs.
WHAT IS AN HEALTH REIMBURSEMENT ACCOUNT (HRA)
A Health Reimbursement Arrangement (HRA) allows your employer to set aside money to help you pay for out-of-pocket healthcare expenses. You don't make any contributions to an HRA, and you don't pay taxes on the HRA money you receive.
Each employer decides what type of expenses will be eligible for reimbursement. This may include deductibles, co-pays, prescription medications, dental services, and health-related expenses that may not be covered under the health care plan. Some HRAs even cover over-the-counter medications.
If you don't use all of the money in your HRA during the year, some HRAs are designed to allow you to carry over the remaining HRA dollars to the next year. Again, you should check with your employer to see how unused HRA dollars are treated in your plan.
Unlike the limitation with an FSA account and a HSA account, you can have an HRA and an FSA at the same time. However, if a particular medical expense is covered by both the FSA and the HRA, the money in the HRA account must be used first before any money can be used from the FSA.
WHAT IS AN HEALTH SAVINGS ACCOUNT (HSA)?
A Health Savings Account (HSA) is the newest form of medical savings accounts. It was first made available in January 2004. If you are enrolled in a qualifying high deductible health plan (check with your employer to find out), you can set aside pre-tax money in an HSA for healthcare costs (as defined in IRS publication 502), the same as an FSA.
A health savings account is a tax free investment account you open through a bank and is allowed only when you are enrolled in a high deductible health plan (HDHP). {See blog 2/23/10 Types of Medical Insurance Plans for HDHP information.) A HSA earns interest like a regular savings account, and the money can also be invested in stocks, bonds, mutual funds, and certificates of deposit.
Unlike the HRAs which are owned by the employer, HSAs are owned by the individual employee and offer the most advantages to the individual. Both employer and employee can make contributions to the HSA account, there is no minimum contribution required, contributions by an employer are not taxable to the employee, and employee contributions may be made on a pre-tax basis. There is a maximum combined amount (total money put in by employer + employee) allowed to be put into an HSA account each year, as determined by the IRS. For 2010, the amount is $3050 for an individual, or $6150 for a family
If you participate in a qualified HDHP (check with your HR department to see if your plan is a qualified HDHP.) you can contribute to an HSA from your paycheck or via tax-deductible payments. When you take money out of your account, it's tax-free as long as you use it for eligible healthcare expenses. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.
Also, unlike the money you set aside in a FSA, the money you put into a HSA receives interest and is portable (the money is yours to keep if you change jobs or quit). Plus, if you do not use all of the money in your account during the year, it carries over to the next year. You never lose the money you elect to put into an HSA account. An HSA account always goes with you, so you can continue to use the money to pay for healthcare expenses in the future—even during retirement—on a pre-tax basis.
Why would I want to put money into a HSA?
If you use your HSA to pay for healthcare expenses throughout the year, the advantage is that you're spending pre-tax dollars, so you end up paying fewer taxes on your salary and having more money to spend. (However, unlike the FSA account, the money is NOT able to be used until it is actually taken from your paycheck and deposited into your HSA account.)
In addition to the tax savings advantage for putting money into an HSA the money deposited also grows interest free and you never pay interest on it as long as you use the money for medical related expenses
A wonderful resource for all you ever wanted to know and more about HSA accounts can be found at: http://www.treasury.gov/offices/public-affairs/hsa/
Finally, your employer may also offer a Limited-Purpose Flexible Spending Account (LFSA) to use along with your HSA.
A Limited-Purpose Flexible Spending Account (LFSA) is a reimbursement account available through many employers that offer a qualified high deductible health plan (HDHP) where the participants are eligible for a Health Savings Account (HSA). It usually allows you to set aside money from your paycheck for out-of-pocket costs for preventive care, dental, and vision before taxes are taken out. Because LFSA plans vary by employer, it is important that you talk with your LFSA administrator or your Human Resource department to find out what expenses are eligible under your LFSA.
The Limited-Purpose FSA is similar to a "traditional" Healthcare FSA, but it is for people who are enrolled in an HSA-eligible High Deductible Health Plan (HDHP). It works the same way, except the Limited-Purpose FSA usually allows you to pay for eligible out-of-pocket preventive care, dental, and vision expenses only.
Next blog: More alphabet soup, EOB, what is it and how to read one.
FSA=Flexible Spending Account
HRA=Healthcare Reimbursement Account
HSA=Healthcare Savings Account
WHAT IS A HEALTHCARE FLEXIBLE SPENDING ACCOUNT (FSA)?
A healthcare FSA is an account that can be used to pay for medical expenses not covered by your insurance. It is a reimbursement account offered by employers that allows you to set money aside from your paycheck before taxes and it is put into an account by your employer, similar to a checking account.
The funds are not portable which means the money can not be taken with you if you should switch jobs or quit (the money is no longer yours) and the money does not accrue interest. FSA's come with one important rule: if you don't use the money with in the plan year, you will lose it. The money in your FSA account can be spent on health care expenses that are not covered by your health insurance, such as:
- Copay and deductibles (for doctor office visits)
- Eyeglasses, contact lenses and LASIK surgery
- Chiropractic treatment and alternative therapies
- Dental work and orthodontia
- Some over-the-counter medicines such as antacids and cold medicines
Why would I want to put money into a healthcare FSA?
The advantage of putting money into an healthcare FSA is that when you use the money to pay for qualified medical expenses, you are spending pre-tax dollars, so you end up paying fewer taxes on your salary and end up having more to spend. Plus, from the first day of your company’s benefit plan year (most often 1/1) you can spend the entire amount of money you have elected to put away.
For instance, let’s say you signed up to put $1200 into an FSA account over the year or $100/month. When the new plan year started, you could go to the doctor that very same day and spend $1200 (if you needed too) even though the entire $1200 had not been taken out of your paycheck yet. It in a sense is a way to “loan” yourself money and then during the year pay the loan back by having money from each paycheck going towards the $1200 you already spent.
Please note: If you have a high deductible health plan that is eligible for a Health Savings Account (HSA), you may have what is known as a Limited-Purpose FSA (LFSA) but you are not allowed to have an FSA. Please see below for HSA information and more about LFSAs.
WHAT IS AN HEALTH REIMBURSEMENT ACCOUNT (HRA)
A Health Reimbursement Arrangement (HRA) allows your employer to set aside money to help you pay for out-of-pocket healthcare expenses. You don't make any contributions to an HRA, and you don't pay taxes on the HRA money you receive.
Each employer decides what type of expenses will be eligible for reimbursement. This may include deductibles, co-pays, prescription medications, dental services, and health-related expenses that may not be covered under the health care plan. Some HRAs even cover over-the-counter medications.
If you don't use all of the money in your HRA during the year, some HRAs are designed to allow you to carry over the remaining HRA dollars to the next year. Again, you should check with your employer to see how unused HRA dollars are treated in your plan.
Unlike the limitation with an FSA account and a HSA account, you can have an HRA and an FSA at the same time. However, if a particular medical expense is covered by both the FSA and the HRA, the money in the HRA account must be used first before any money can be used from the FSA.
WHAT IS AN HEALTH SAVINGS ACCOUNT (HSA)?
A Health Savings Account (HSA) is the newest form of medical savings accounts. It was first made available in January 2004. If you are enrolled in a qualifying high deductible health plan (check with your employer to find out), you can set aside pre-tax money in an HSA for healthcare costs (as defined in IRS publication 502), the same as an FSA.
A health savings account is a tax free investment account you open through a bank and is allowed only when you are enrolled in a high deductible health plan (HDHP). {See blog 2/23/10 Types of Medical Insurance Plans for HDHP information.) A HSA earns interest like a regular savings account, and the money can also be invested in stocks, bonds, mutual funds, and certificates of deposit.
Unlike the HRAs which are owned by the employer, HSAs are owned by the individual employee and offer the most advantages to the individual. Both employer and employee can make contributions to the HSA account, there is no minimum contribution required, contributions by an employer are not taxable to the employee, and employee contributions may be made on a pre-tax basis. There is a maximum combined amount (total money put in by employer + employee) allowed to be put into an HSA account each year, as determined by the IRS. For 2010, the amount is $3050 for an individual, or $6150 for a family
If you participate in a qualified HDHP (check with your HR department to see if your plan is a qualified HDHP.) you can contribute to an HSA from your paycheck or via tax-deductible payments. When you take money out of your account, it's tax-free as long as you use it for eligible healthcare expenses. Individuals under age 65 who use their accounts for non-medical expenses must pay income tax and a 10% penalty on the amount withdrawn.
Also, unlike the money you set aside in a FSA, the money you put into a HSA receives interest and is portable (the money is yours to keep if you change jobs or quit). Plus, if you do not use all of the money in your account during the year, it carries over to the next year. You never lose the money you elect to put into an HSA account. An HSA account always goes with you, so you can continue to use the money to pay for healthcare expenses in the future—even during retirement—on a pre-tax basis.
Why would I want to put money into a HSA?
If you use your HSA to pay for healthcare expenses throughout the year, the advantage is that you're spending pre-tax dollars, so you end up paying fewer taxes on your salary and having more money to spend. (However, unlike the FSA account, the money is NOT able to be used until it is actually taken from your paycheck and deposited into your HSA account.)
In addition to the tax savings advantage for putting money into an HSA the money deposited also grows interest free and you never pay interest on it as long as you use the money for medical related expenses
A wonderful resource for all you ever wanted to know and more about HSA accounts can be found at: http://www.treasury.gov/offices/public-affairs/hsa/
Finally, your employer may also offer a Limited-Purpose Flexible Spending Account (LFSA) to use along with your HSA.
A Limited-Purpose Flexible Spending Account (LFSA) is a reimbursement account available through many employers that offer a qualified high deductible health plan (HDHP) where the participants are eligible for a Health Savings Account (HSA). It usually allows you to set aside money from your paycheck for out-of-pocket costs for preventive care, dental, and vision before taxes are taken out. Because LFSA plans vary by employer, it is important that you talk with your LFSA administrator or your Human Resource department to find out what expenses are eligible under your LFSA.
The Limited-Purpose FSA is similar to a "traditional" Healthcare FSA, but it is for people who are enrolled in an HSA-eligible High Deductible Health Plan (HDHP). It works the same way, except the Limited-Purpose FSA usually allows you to pay for eligible out-of-pocket preventive care, dental, and vision expenses only.
Next blog: More alphabet soup, EOB, what is it and how to read one.
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