Navigating health insurance coverage is a monumental task. There is something different about healthcare that creates an agency problem among the many different participants in the system, the most striking being that the consumer has no say in what services are rendered, what services are covered and how much he or she will ultimately be responsible for paying. It is not an uncommon scenario that a doctor requests a service, the patient follows the doctor's orders, insurance either pays only a portion or none at all and the patient is left holding the bag – and the bill.
Another common scenario is a patient who calls his or her doctor to ask for the price of a particular test or treatment, only to be told the price is unknown. Or who calls his or her health insurer to ask what's the customary fee for a service – to determine how much of it will be covered – only to be told "it depends." No one would go into the local electronics store and buy a TV without being told the price – but in medical care, this is basically what patients are expected to do.
To be fair, the health insurance companies, traditionally known as a sort of gatekeeper to healthcare, have recognized this and in recent years have tried to improve price transparency. Despite these efforts, there are many pitfalls associated with health insurance coverage and learning how to navigate around these should make for a more educated healthcare consumer.
Medicare - The Roadmap
Medicare provides the most insight into covered benefits for consumers. The Medicare system is a federally run health insurance system granted primarily to U.S. citizens age 65 and older. In general, the basis for all health insurance benefit design is the Medicare system. Many commercial health insurance model basic plan benefits after those benefits granted to Medicare recipients. The focus is on health and wellness rather than sickness; annual physical exams are not fully covered by Medicare and treatment for severe ailments also usually requires a co-pay or co-insurance payment. After the basic plan design is set, other benefits are added depending on the plan's sponsor's (such as an employer) requirements.
To understand the basics of what is covered under the Medicare plan, you can visit the medicare.com website. Medicare is not an "early adopter" system; therefore, most new technologies are typically not covered at all, or as robustly as other, more time-tested technologies. An example is drug eluting stents versus bare metal stents in cardiac procedures or ceramic hip replacements versus traditional metal. It is much easier to obtain coverage for proven procedures rather than those which could potentially be deemed as "test procedures." Similarly, covered lab tests are often lagging the newest technology; an example is the thinprep pap test.
Services Usually Not Covered
Although each benefit plan is different, depending on the sponsor's needs, and depending on state regulations (each state has its own insurance commissioner), there are services that are typically not covered by most plans.
- Beauty Costs
Many services that improve the exterior appearance of a person, such as plastic surgery and some dermatological procedures, are often not covered by typical plans. Interestingly, because consumers elect to have these procedures, there is great price transparency for them. If a consumer wants laser hair removal, he can call any number of providers and each one will be able to immediately quote a price.
- Fertility Treatments
These costs are not usually covered by health insurance, although health insurers are required to pay for all the testing required to make a diagnosis. However, this is one of the treatment areas that differ among states.
- Off Label
Prescription drugs are tested and approved for specific disorders, such as autoimmune diseases. At times, these drugs can be prescribed for disorders not listed on the "label." In some cases, the insurance company may reject paying for these off-label uses.
- New Technology in Products or Services
Covering these costs often happens slowly, particularly if the technology does not demonstrate added benefit for the added costs. Medical companies are tasked with proving that a new drug, product or test provides a measurable benefit to the consumer such that the cost will improve mortality or morbidity rates. Since Medicare is not an early adopter of new technology, other insurance plans generally follow suit and wait for more data before including it in the covered benefits.
Although there are services not typically covered, there are "special cases" where insurance companies do make exceptions and cover these services. However, in many instances where services are not covered, there are several other courses of action that consumers can take.
- In cases where a new technology provides additional benefits vs. the older technology, consumers try several things to get the insurance company to pay. Many insurance companies require doctors to "prove" why the costlier procedure or product is more beneficial. Additionally, often an insurance company may pay a specific amount for a procedure and the patient can pay the difference to get the new technology – in other words, partial coverage is available. The first step in this process is to discuss the coverage with the insurance company, determine what will be covered, and have an agreement with the physician for the total cost and what will be required to be paid by you.
- Many new drugs or services introduced in the market undergo trials to test additional benefits or uses. Consumers can try to get into one of the trials and get the service or product as part of the trial. However, although each trial is designed differently, many have a group of participants that receive a "placebo," a fake treatment, so you are not guaranteed the drug or service. Your physician should be able to help you learn of any trials available as the FDA requires the listing of drug trials (clinical trials.gov).
- Health insurance companies provide the option of insured persons to purchase a rider, an added policy feature, for a specific covered benefit. However, these riders can be costly and may not be able to be purchased for all treatments.
- Covered persons can contest a denial by an insurance company. Each insurance company is required to provide an insured person with the procedure required to appeal. In addition, if the appeals process results in another denial, the insured consumer can appeal to the state insurance commissioner for a review of the case. The process can be somewhat lengthy, but is often without cost to the insured person.
Other Insurance Pitfalls
Some doctors' offices will help consumers navigate through the insurance maze to determine coverage. However, as the consumer, it is recommended that you speak directly with the insurance company to validate that the procedure is covered. Despite this recommendation, insurance companies will sometimes not speak with the member, and only with the physician's office, a rather frustrating experience. However, persistence generally pays off.
There are many other pitfalls of insurance coverage consumers need to be aware of. Some of the most common are:
- Pre-approval is one area of importance to pay attention to, as many insurance plans require it for particular procedures.
- In-network vs. out of network: Many insurance plans are designed with in-network doctors and facilities. These in-network providers often have a contract negotiated with the insurance company to pay an agreed-upon price for various services. Ensure that all components for a procedure are covered. For example, check that not only a surgeon and the hospital are in network, but also the anesthesiologist. Make sure the tests are sent to an in-network or preferred lab.
- The cost and coverage of prescription drugs vary, depending on a plan's formulary. The formulary, typically found on a health insurer's website, details cheaper drugs via tier 1 vs. tier 3, substitutes, or generic versions of the drugs. Also some specialty drugs, such as injectable drugs, may require additional pre-approval before the insurance company will pay for them.
The Bottom Line
Understanding and working within the guidelines of health insurance is complex. Many companies provide members with access to a vast amount of information on secure websites. This information can help members select a doctor or facility, review the drug formulary, and learn other interesting information. But to understand what is a covered benefit, having a live discussion with an insurance representative is the best course of action. As more and more of the health care costs are being pushed to the member, more and more of the "shopping" decision should also be made by the member.