Health Insurance Basics - Lesson 2: Eligible Medical Expenses
Welcome to the second installment in my series about the ins and outs of health insurance. You can find Health Insurance Basics - Lesson 1: Deductible here: https://steemit.com/healthcare/@simplysara/health-insurance-basics-lesson-1-deductible.
Today's topic is Eligible Medical Expenses (EME). This is sometimes referred to as reasonable and customary (R&C) or Usual and Customary Rates (U&C or UCR). This is the amount health insurance companies use as the "allowed amount" for out of network (also known as non-participating/non-par) providers. These are the doctors and other healthcare providers who have not agreed to a negotiated rate for their services and signed a contract with the health plan.
Health Plans use EME rates to keep themselves or their employer group customers from going out of businesses. If they paid every claim that came in the door at the billed charge, then healthcare prices would quickly even further out of control than they already are.
It's similar to the way automobile insurance doesn't necessarily reimburse 100% of a billed amount from an auto shop. An adjuster determines what is a reasonable amount to pay for the restoration of your wrecked car.
How to health plans arrive at their EME rates? It varies. Some insurers use vendors to collect data on millions of healthcare claims every year to determine a common rate. Others will use Medicare rates. In some cases they will tack on an extra percentage of one of those two options.
Why does EME matter to you? This is a very important aspect to understand when obtaining healthcare services outside of your health plan's network! It means you could be stuck with the difference between the billed charge and the Eligible Medical Expense.
Example:
Non-participating provider bills $300 to your insurance plan. Your out of network benefits apply. The EME rate is $125. Assuming your deductible is already met and the non-par coinsurance is 60%, the plan pays $75. Since the provider is not obligated to write off the difference between the billed charge and the allowed amount/EME, you may be responsible for $225.
Oh by the way, only part of that applies to your out of pocket max, which I will cover in another post. Only covered medical expenses apply to the out of pocket. That means that amount over EME, $175 in this case, does not apply to your out of pocket. Only the different between the allowed amount ($125 in this scenario) and the amount paid by the plan ($75) applies to the out of pocket maximum. So, even though you paid $225, you only get credit for $75 on the virtual ledger that tracks your out of pocket expenses.
You can imagine how quickly this can add up with hospital bills or high dollar diagnostics such as MRIs.
Whenever possible, always stay within your healthplan's network of providers. Your plan negotiates a discount with these providers. Let's apply the same scenario above to a participating provider:
$300 claim
$75 contract rate (contract rates are usually considerably lower than EME rates)
$30 copay (in-network benefits are usually much better for the member, resulting in lower out of pocket expenses)
$30 applied to out of pocket maximum.
In this example, you are only responsible for the $30 copay for staying within the network. What you paid applied to the out of pocket maximum. You, the patient, do not have to pay the difference between the $300 billed amount and the $75 contract rate. The provider (doctor, lab, etc.) has agreed to accept $75 as payment in full. The plan pays the remaining $45.
I hope you found this lesson in health insurance helpful! I know it can get confusing sometimes, so I'm trying to help untangle it a bit for you. I have a growing list of topics to cover in this series. If you have a particular question about health insurance, drop it in the comments.