December 1, 2023

Health Insurance

Follow Your Health Insurance

How to Avoid Going Broke From Surprise Medical Bills

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There have been a few times in my life when I’ve had a concerning health issue but skipped visiting the doctor. Even when intense stomach cramps left me doubled over for hours, or a shooting pain in my foot felt like a stress fracture, I decided to wait and see if things would get better rather than risk a potentially costly hospital visit. (Fortunately, I healed at home.)

I’m not the only one who’s made this choice. In 2020, a survey of more than 2,500 American adults found that 32% of respondents avoided seeking medical care because of cost.

There is a real fear about the cost of seeing a doctor and how it can impact your finances. Millions of Americans receive surprise medical bills each year. That includes insured individuals, according to research by the Peterson-KFF Health System Tracker. A new federal law, The No Surprises Act, went into effect Jan. 1, 2022, banning most unexpected medical charges.

This is a good start, but there’s still a lack of understanding about how our insurance systems work. We’re never really taught the basics of figuring out what is covered, what is considered in-network, how to better advocate for ourselves, and how to read and dispute itemized medical bills. Until our health system does a better job of educating us, it’s important to adopt our own strategies to get insurance-literate. 

Being insured is the first step in protecting your balance sheet from a health crisis. In many cases in the U.S., health insurance is tied to employment. Other options include Medicaid (for those who qualify based on low-income), COBRA for a limited time if you lose your job and are searching for a new one, or Medicare for retirees. The self-employed can go through the Affordable Care Act health-care marketplace or private companies to secure a plan.

Once you determine how you’ll get coverage, it’s time to figure out what type of coverage is best for your needs.

Traditional health insurance usually offers lower deductibles (how much you pay for a medical service before insurance covers the rest), but higher premiums (monthly payments). A high-deductible plan (HDHP) has lower monthly payments, but it can have bigger financial ramifications in the event of a health crisis since you’ll pay more out-of-pocket before insurance kicks in. Still, it is better to have an HDHP than be completely uninsured — you never know when an accident or illness will leave you needing care.

Next, you need to know what is covered by your plan, including which doctors and hospitals are in-network. Your insurance company may not cover a visit to an out-of-network doctor, meaning you could get a large bill later. And you should understand what is considered part of your annual or routine check-up, and what might end up triggering an additional bill. For instance, getting bloodwork done or a biopsy on a suspicious mole may not be fully covered, even if it happened during a routine annual physical.

The best way to confirm what is covered is to ask your insurance provider. You can also ask the doctor about how a medical procedure, such as a blood draw, will be coded for billing purposes. 

There are certain medical conditions that run in my family, which means I fall into the demographic for whom a blood test would be considered preventative care. I always ask the doctor or nurse before my blood draw, “will this be covered by my insurance?” That is usually a good reminder to them to code it correctly in their system so it gets billed to my insurance as preventative.

Being proactive is particularly important for planned procedures such as non-emergency surgery. You want to make sure everyone with whom you interact at a doctor’s office or hospital is in-network. If even one doctor in the room, like an anesthesiologist, is out-of-network, you could end up with an unexpectedly high bill. (Granted, the No Surprises Act is supposed to prohibit this.) You can also research what is a fair price to pay for your procedure. Healthcare Bluebook is one option for a price transparency tool.

Don’t understand a term on your bill? Call and ask your insurance provider. Call the hospital or doctor’s office if you haven’t received an itemized bill for a visit. Once you have one, walk through each item and confirm that it’s a service you received — did you really use a wheelchair to leave the hospital? You may discover that while your insurance said it would cover a particular procedure, the hospital put in a different billing code, resulting in your insurance rejecting the claim and the hospital billing you for the full amount. 

If things that don’t add up, you can file a formal appeal with your insurance provider. Information about how to appeal should be on the Explanation of Benefits (EOB) you receive from the insurance company. (It’s that letter that says “This is not a bill” on top in bold.) You should also call the hospital billing department to share that you’re disputing your insurer’s decision so your bill isn’t sent to debt collections. Check for any potential miscoding yourself with an itemized bill from the hospital or doctor. Many companies also contract with experts who will dispute surprise medical bills for you.

Spending hours on the phone fighting a bill might be costly in terms of your time, but it’s usually worth negotiating larger bills. Call the financial assistance department of the hospital to ask about income-based programs or a payment plan. Or you could ask for a discount if you paid the full bill up front instead of through a payment plan. Sometimes there’s an even bigger discount if you pay in cash.

It’s wise to include your deductible, or even your out-of-pocket maximum, as part of your emergency savings fund — especially if you have a high-deductible health plan. Those with an HDHP should consider using a Health Savings Account (HSA), which is a tax-advantaged way to set money aside for future medical costs. You can use this to save — and invest — your deductible and out-of-pocket costs while lowering your taxable income. In some states, HSAs are even triple-tax advantaged because they lower your income, grow tax-free and distributions can be tax-free. In 2022, an individual can contribute up to $3,650 and a family on a HDHP can contribute up to $7,300.

Flexible Spending Accounts are another tax-advantaged way to save up for future medical expenses by putting pre-tax dollars into your account. But these come with a use-it-or-lose-it policy each year, whereas HSA funds can be held for future medical expenses. 

Unfortunately, in the U.S., it’s entirely on us as individuals to safeguard our physical and financial health. Taking the time to understand your particular insurance plan — or to get insured in the first place — is the best way to start. 

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This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Erin Lowry is the author of “Broke Millennial,” “Broke Millennial Takes On Investing” and “Broke Millennial Talks Money: Stories, Scripts and Advice to Navigate Awkward Financial Conversations.”

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