Let's start by examining a couple of the more significant billing regulations that are set by the Centers for Medicare and Medicaid Services (CMS) and are generally followed by most private insurers. CMS sets rules regarding what ICD diagnosis codes are acceptable to be used to justify medical necessity for reimbursement of specific procedure codes. These rules are known as local coverage determinations (LCD's). Provider's use LCD's to determine which diagnosis codes are appropriate for certain procedures and which are not. CMS also sets rules for what procedure codes can and cannot be billed together; these are known as National Correct Coding Initiative (NCCI) edits and mutually exclusive edits. For the most part, these edits are meant to ensure that providers do not bill for procedures that are medically unlikely to be performed together and do not bill for multiple procedures when a lower level procedure is provided as part of a higher level procedure. These rules protect patients from receiving unnecessary care and from being overcharged for multiple procedures.
Another benefit of health insurance coverage is the fact that insured individuals are protected from excessive costs by their health insurance plan's contracted reimbursement rates. Generally, providers can set their own charges for services (UCR charges) and can charge uninsured patients whatever they feel is an appropriate price for services. However, when a provider contracts with a health insurance plan and becomes an in-network provider, the provider must accept the insurer's negotiated fee as payment in full and write off the difference between that and their UCR as a contractual adjustment. Medicare refers to this as accepting Medicare assignment. So even if a patient has a large deductible and must pay the entire amount owed for a visit, their health insurance plan's negotiated rate with the provider is usually going to be lower than what the provider would charge on their own.
Medicaid typically has the lowest reimbursement rates followed by Medicare and other government payors, but private health insurance reimbursement can vary quite a bit. All reimbursement is based in large part on Medicare rates, but private insurers decide how much they're willing to pay above the Medicare rates, and they negotiate with providers on reimbursement. This brings up two interesing points. First off, it would be possible to minimize the amount of out-of-pocket costs one would owe by finding the health insurance carrier that has the lowest fee schedule. In other words, if two carriers offer plans with the same exact benefits and one carrier pays $100 for a procedure while the second pays $80 for the same procedure, the out-of-pocket cost to the patient would be lower under the second carrier because the carrier's payment to the provider is lower. Secondly, providers that have a large amount of bargaining power have more leverage to negotiate higher fees from the insurance carriers. So large and powerful providers that are vital in their communities and are needed as in-network providers have quite a bit of bargaining power and use it to maximize their reimbursement rates. Thus, they can be more expensive than providers who offer the same services but have less leverage with the health insurance companies.
Having health insurance offers a variety of benefits in terms of medical billing and minimizing patient costs, and informed patients that really do their homework can reap major benefits. Some insurance carriers may provide a sample fee schedule if requested during the purchasing process, and this may be worth doing to compare reimbursement rates between carriers. Once health insurance has been purchased, patients can usually call provider offices and ask what the average reimbursement rate is for whatever service the patient is in need of. This allows the patient to compare providers on cost. In addition to these strategies, it's always important to utilize an in-network provider whenever possible, and if you happen to have secondary insurance coverage, be sure that the provider's office bills your secondary coverage before sending you a bill.
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