Calculating Your Patient’s Out-of-Pocket Expenses Accurately
Patients are increasingly worried about healthcare costs. Receiving a large healthcare bill is one of the largest worries expressed by Americans. One survey found that two-thirds of people are either “very worried” or “somewhat worried” about their ability to afford unexpected medical bills for themselves or family members. Over half of respondents (53%) reported they are concerned about the affordability of health insurance deductibles.
Adding to this challenge is the fact that over half of people (57%) have received an unexpected healthcare bill they thought would be covered by health insurance. The most common cases of these surprise bills were physician services and lab tests. Practices can help ease patient stress by helping them understand out-of-pocket expenses with greater accuracy. A patient who understands their portion of the cost and patient responsibility upfront can better anticipate those expenses and create a plan to pay them, which in turn increases patient collections.
Breaking Down Patient Out-of-Pocket Expenses
Helping patients understand out-of-pocket expenses starts with having that conversation sooner than in the past. Medical practices can start having that discussion at the time of service. But to make this possible, practices need the right elements to estimate exactly what a patient will owe out of pocket for their care. Patient expenses are typically influenced by the following.
Eligibility information. The most basic element of determining what a patient will pay is in the patient’s insurance plan’s eligibility details. A practice can typically submit details to the insurance provider to determine whether the person has coverage. This process also provides critical information that affects out-of-pocket expenses such as copayments, coinsurance and any remaining deductible amounts.
Current health plan fee schedule. A current health plan fee schedule lets you know how much the insurance company will pay for various services. If you’re attempting to use management software to automate patient estimation at your practice, ensure that you have the most recent fee scheduled loaded into the software in order to deliver accurate details to the patient.
Copayments. Many health insurance plans have copayments, which are due at the time of service. Having current copayment details will ensure that you charge the patient the right amount during the visit and won’t need to bill them any additional balances after the service.
Coinsurance. The coinsurance is based on the coverage that the insurance provider offers. For example, insurance coverage might cover 90% of office visits. In this case, the patient is responsible for 10% of the visit. However, it’s important to remember that coinsurance calculations are based on the contracted fee schedule, and not the retail rate of the practice. For example, let’s say the health insurer’s contracted rate is $150 and the coinsurance is 10%. In this case, the patient would owe $15.
Health insurance deductible. The health insurance deductible is a large reason why patients get unexpected bills. For example, let’s say that the insurance plan covers 90% of office visits after the patient meets the plan’s deductible. However, the patient hasn’t met the deductible, so the patient owes the entire visit amount. Take the example of a health insurer contracted at a rate of $74. The patient has a $150 deductible amount left to meet. In this case, the patient would owe the entire balance of $74. Alternatively, let’s say that the patient has a remaining deductible of $25 and the cost of the visit is $74. The patient would pay the $25 and the insurance company would pay the rest of the medical expenses.
Most practices understand the various elements that go into what the patient owes for care. But getting a more accurate picture of each of these elements and calculating them with greater accuracy are what allow for more accurate out-of-pocket expense calculations.
Understanding Calculation Options
Practices have a wide variety of tools that help determine out-of-pocket expenses at the time of services—everything from automated systems to traditional pen-and-paper calculations. Understanding all available options can help with selecting the right one for your practice and giving your patients more accurate payment details.
Manual calculation. Manually calculating copays, coinsurance and deductibles was common in the past. The downfall of manual calculations, however, is the risk for human error, so it’s worth considering more advanced options for greater accuracy.
Health plan estimation tools. Many health plan providers offer estimation tools on their websites that allow practices to quickly add up a patient’s out-of-pocket expenses. Service details are entered, and the tool provides an estimate of potential coverage and out-of-pocket expenses to the patient. Some tools even provide the ability to personalize details specific to the patient account, including a better understanding of real-time remaining deductibles. When using these tools, it’s important to know that they aren’t guaranteed, and patients should be made to understand it’s an estimate that could change.
The Benefits of Estimation Software
Estimation software is a tool that allows you to communicate your patient’s healthcare billing responsibility so they quickly understand their financial responsibility at or before the point of service. For example, this tool might model provider contracts with payers, load details about charge information and then input personalized patient benefit information to determine the total amount owed. The tool is helpful in providing the following:
- Quick understanding of out-of-pocket expenses. Patients get a fast and accurate understanding of what they owe after their insurance pays.
- Support for patients. Patients can better understand the financial aspect of medical care by learning the cost information during the appointment.
- Details so patients can make informed decisions. Accurate information upfront helps patients make wise choices on how to best manage medical expenses.
Estimation software is a helpful tool to connect with patients about out-of-pocket expenses, but also to reduce receivables and bad debt. Starting the conversation early using this type of tool opens an opportunity to discuss resources if a patient can’t afford the expenses. Because not all patient estimation software is created the same, it is important to research your options.
A comprehensive solution might also provide a payment plan, which gives people flexible options to spread payments out over a longer period and make medical care bills more affordable.
When Patients Cannot Pay For Services Upfront
Telling patients an accurate figure regarding out-of-pocket expenses allows them to quickly see what they owe at the time of service. But for some patients, this amount will feel overwhelming. For example, perhaps they have an unmet deductible and therefore must pay the entire medical bill out of pocket. If patients can’t afford to pay the balance, they might need payment options.
Working with a partner that provides patient financing allows people the flexibility to customize payment options to fit their needs. Look for a partner that has a 100% patient approval rate, which means that all patients can get access to financing options.
Partners that provide payment plans may also offer receivables funding, which doesn’t require your practice to wait to get paid. Instead, upfront payments can be made, even if your patients are still paying off the balance of what they owe. A program that accepts a wide variety of payments, including mobile pay, is also important because it streamlines the patient experience and allows people to pay using the tools they already know and enjoy.
Moving Into The Future
Patient expectations are fast changing. They now expect the same convenience and ease they receive in other sectors of business, such as retail, in the healthcare environment. Building more transparency into your processes by providing accurate and easy upfront estimates about medical care costs allows people to better understand their financial responsibility and create a plan to pay those balances. As a result, you can build stronger relationships with patients and improve the success of your medical practice in the future.