Claims, Deductibles and Premiums: Understanding Your Rehab Insurance Coverage

Claims, Deductibles and Premiums: Understanding Your Rehab Insurance Coverage

Health insurance has its own set of terms and definitions, and misunderstanding even one of those can make a huge difference in the cost of any health services

Going into rehab for addiction is difficult enough without considering the financial implications, but once insurance is added into the mix it can feel downright overwhelming. Knowing the difference between a co-pay, a deductible and an out-of-pocket maximum is very important to understand, but it can feel like a different language.

Let’s Define Some Terms

Health insurance has its own set of terms and definitions, and misunderstanding even one of those can make a huge difference in the cost of any health services, particularly those are more expensive such as rehab services. The following are plain English definitions for a few key phrases:

  • Preauthorization – Certain health services require a preauthorization in order for insurance to cover the services at all. Typically, a preauthorization can be as simple as a phone call, either from you or from the provider of services. A good question to ask any potential rehab services provider is whether they will obtain any necessary preauthorization or if you need to so this yourself.
  • In-network – Insurance companies contract with health service providers to become network providers, also referred to as in-network. Both these terms means a variety of things to different people, but only one thing that matters to you—you will almost always pay less. Insurance companies will pay more to in-network providers, and as a result you will invariably pay less. To whatever degree possible, you will want to stay with in-network providers for your rehab services.
  • Insurance Premium – This is the amount you pay to keep your health insurance policy active. Similar to vehicle insurance, your premiums essentially keep the policy open, but do not cover any activity against the policy. If you are employed, you may share the cost of your insurance premiums with your employer.
  • Deductible – A deductible is the amount of money, usually reset each calendar year, you need to pay out of pocket before your health insurance will cover any health services. It is important to note that a deductible typically does not include any co-pays for physician visits or prescriptions.
  • Coinsurance – Once your deductible has been met, under nearly all insurance plans, you will still be responsible for a certain percentage of the allowable charges for any health services. The coinsurance is usually represented as two numbers with a slash between them, such as 80/20. With an 80/20 coinsurance plan, this means that your insurance will pay 80% of the balance of allowable charges after your deductible is met, and you will be responsible for 20% of the balance, up the maximum out-of-pocket.
  • Maximum Out-of-Pocket – The maximum out-of-pocket is the upper limit of money for which you will be responsible. Similar to the deductible, this figure is typically reset annually though there is also a lifetime maximum out-of-pocket (the lifetime maximum is typically not relevant for most individuals, for a variety of reasons). Once you have reached the maximum out-of-pocket figure with your deductible and your portion of the coinsurance, your insurance will pay the remainder of the cost associated with any health services. It is important to note the maximum out-of-pocket does not consider insurance premiums or co-pays but only the deductible and coinsurance paid.
  • Co-Pay – A co-pay is a flat fee you pay as the insured for certain services. This co-pay does not count against your deductible or your maximum out-of pocket.

 

Putting It All Together With an Example

While it can be helpful to read these definitions, an example is typically a better way to examine how these costs are connected. Below is an example, but please note that these figures do not represent either true costs of rehabilitation services or any promise of payment from any insurance provider:

Robert Jones has insurance through ABC Insurance. His bi-weekly insurance premiums are $200 for a plan with a deductible of $5,000, 80/20 coinsurance and a maximum out-of-pocket of $15,000. There are various co-pays as part of this insurance plan, but these are not considered in this example.

Robert seeks rehab services, and the cost of the rehab services are $25,000 for a 28-week program. The costs to Robert and ABC Insurance would be as follows:

Robert ABC
Deductible $5,000.00 $0.00
Remaining Balance = $20,000
Coinsurance $4,000.00 $16,000.00
Total $9,000.00 $16,000.00
   

Consider how different Robert’s financial responsibility would be for the same services if his insurance had a deductible of $3,000, 70/30 coinsurance and a maximum out-of-pocket of $10,000.

Robert ABC
Deductible $3,000.00 $0.00
Remaining Balance = $22,000
Coinsurance $8,800.00 $12,000.00
Total $11,800.00 $12,000.00

The total coinsurance above would actually be capped at $7,000.00 because of the maximum out-of-pocket. In other words, Robert’s final out-of-pocket cost in scenario one would be $9,000.00 and $10,000.00 in scenario two even though the services provided were identical.

You may still find yourself a bit confused, and if so, that’s okay. You can call your insurance provider and ask them to provide you exact breakdown of anticipated costs for any services. We can also help you find what you are looking for and give you advice for beating your addiction to drugs at our 24 hour, toll-free helpline. Please call now.