Becker's Hospital Review: Insured Patients are Responsible for Paying More Out-of-Pocket
Nearly all Americans overestimate their health insurance knowledge. That’s not an exaggeration, but rather based on the results of a recent survey of 2,000 health plan members.
When asked if they could identify all four of these basic terms: deductible, co-insurance, co-pay and out-of-pocket maximum, 96 percent of those surveyed said they could, but were incorrect.
Not long ago, this lack of knowledge would not have been concerning for hospitals and health systems because they could always expect to collect most or all of their revenue from the health plan. Third-party payment, however, is rapidly being overtaken by direct payment from patients younger than 65, especially considering the staggering growth of high-deductible health plans (HDHPs).
To prevent escalating bad debt, healthcare organizations must educate patients either before services are delivered, at the point-of-care, or at checkout. These conversations are not easy, but neither is collecting from a patient who does not understand why he or she is being asked to pay potentially thousands of dollars in hindsight. If informed with real-time data about the patient’s own financial responsibility, combined with an affordable payment plan option, then that discussion can be much more collaborative and successful.
The shift away from third-party payment is not because patients are uninsured, but rather their HDHP means the patient is paying for a large portion of their care out-of-pocket. On average, a HDHP in 2016 carried an out-of-pocket maximum of $5,762 for individuals and $16,737 for families. To make matters worse, the number of Americans under age 65 with such coverage increased from 39.4 percent in 2016 to 42.3 percent in the first three months of 2017.
These large HDHPs present two common patient collection challenges for healthcare providers:
For patients with several chronic conditions who have numerous physician office visits, tests and treatments each year, organizations often have to collect the entire out-of-pocket maximum from the patient.
For patients who access very little healthcare, which is roughly half of the population, the healthcare organization has to collect the entire outstanding balance because these patients likely haven’t touched their deductible. As a result, healthier patients may be irritated that they are required to pay anything out-of-pocket considering they have as much as $12,448 deducted from their paycheck each year for HDHP family premiums, if they are fortunate enough to have employer-sponsored coverage.
If organizations are unwilling to face either collection scenario, they will continue to write-off these accounts and accumulate bad debt, which reached $35.7 billion in 2015 among nearly 5,000 hospitals participating in an American Hospital Association survey. Educating patients, offering concrete data about their responsibilities and offering payment options can be a way out of this seemingly no-win situation.
Healthcare organizations have many opportunities for initiating patient financial conversations. For example:
at registration or pre-registration;
after a pre-procedure or pre-treatment consultation;
at discharge if it was an emergency event or complex admission; or
at check-out if in an ambulatory environment.
Regardless of when the conversation occurs, real-time data about the patient’s full financial responsibility, including the health plan’s actual deductible, co-insurance, co-pay and out-of-pocket maximum, must be the focus. Such data can be securely and instantly accessed with only the patient’s driver’s license or their name and zip code using an information technology tool available today. A business office or front-office representative can then present the information to the patient, who in many cases may have no or limited understanding of these costs.
Before having this discussion, the hospital representative should research the allowable charges amounts for the services the patient plans to have or has already received. The allowable charges data should be easily accessible for the organization for their largest health plans.
With concrete data about the patient’s financial responsibility, the organization can talk to the patient about the ability to pay and offer payment options, based on the organization’s internal philosophy and policy. One option may be an interest-free, monthly-installment payment plan for the expected outstanding balance.
Outsourcing the payment-plan option to a vendor further reduces the organization’s financial risk because providers would receive the full payment immediately while the vendor collects the monthly installments from the patient. This arrangement also reduces an organization’s accounts-receivable time burden and business operational expenses.
Together with an understanding of their financial responsibility, an interest-free payment plan helps patients leave the hospital or clinic with greater certainty over their budget and out-of-pocket costs, leading to less stress and greater satisfaction.
Transitioning from third-party to direct payment will not be easy for any stakeholder in healthcare, but it is a reality. Health insurance will continue to shift from covering nearly all medical care to only covering low-cost preventive services and high-cost catastrophic events while the in-between will fall to the patient. Hospitals and health systems must become proactive in educating patients about their financial responsibilities and explaining their health plan benefits using real-time, accurate and reliable data.
Once an understanding is reached, patients and providers can agree to fair and affordable payment arrangements that ensure patients receive the care they need and the provider is compensated for its services.
By William “Todd” Andros: The founder and CEO of tevixMD Corporation.
The views, opinions and positions expressed within these guest posts are those of the author alone and do not represent those of Becker's Hospital Review/Becker's Healthcare. The accuracy, completeness and validity of any statements made within this article are not guaranteed. We accept no liability for any errors, omissions or representations. The copyright of this content belongs to the author and any liability with regards to infringement of intellectual property rights remains with them.