Charges(Fees)

MIC Logo

Charges(Fees)

Medical charges can be confusing at times, to say the least. Providers (doctors, hospitals, pharmacies etc.) charge for their services. Sometimes these are referred to as actual charges, approved charges, contracted fees or reasonable and customary charges. How is one to know how much money they owe the provider after the insurance company gets done processing the claim? Just what is your liability? In this article we will explain the difference between the various charges, and what your out of pocket liability can be for each type of charge. How you are charged for medical services depends on the type of insurance plan you have.

If you are dealing with a preferred provider organization (PPO) or an HMO, your provider has signed a contract with the insurance carrier and has agreed to provide services at a reduced rate. This reduced rate is known as a contracted fee. On your insurance explanation of benefits, it is usually referred to as an ‘eligible charge.’ If your insurance plan pays 80 percent after the deductible, it means your insurance company will pay 80 percent of the eligible amount. For example, the provider charges you $230 but has signed a contract and is willing to accept $140. Your insurance company will pay 80 % of the $140 and you will be responsible for the 20 percent of the $140. The difference between the actual charge of $230 and the contracted fee of $140 is $90. The provider must write that off. You are not responsible for paying the difference between the charge and the eligible amount when you see a provider who is in the insurance company’s network.

The actual charge is what the provider actually charges you. If you do not have any health insurance, you are responsible for paying the actual charge. There are some insurance companies that will base their reimbursement on the actual charge, but these companies are few and far between. Most insurance companies will calculate reimbursement based on ‘reasonable and customary charge.’ A reasonable and customary charge represents a charge for healthcare services that is consistent with the going rate or charge in a certain geographical area for identical or similar services. For example, the reasonable and customary charge will be much higher in New York City than in the middle of Kansas or Iowa. Reasonable and customary charges are based on the geographic location and on the charge that most providers of the same medical specialty charge in that area.

Medicare actually tells the providers what they can charge. A Medicare provider has no control over his/ her charges. Each year they are given a list of what they can charge for each service they render. Then Medicare will approve all or part of that charge. The actual charge cannot be more than 115 % of the Medicare approved charge. For example, if the charge is $345, the approved amount cannot be less than $300. If your provider accepts assignment, you cannot be charged for that $45 difference. The provider must write that off. As most of you know, Medicare pays 80 percent of the approved amount and you are responsible for the remaining 20 %. The provider must charge you 20 percent and hopefully you will have insurance that will pay the remaining 20 percent for you.

Charges can certainly be confusing, especially when you are trying to figure out if the provider billed you correctly. Always study the explanation of benefits from your insurance company and read the little footnotes that are printed on it. The insurance company usually tells you how much you owe the provider. Medicare sends you a Medicare summary notice and they have a column that tells you exactly how much you may be billed. The amount in the ‘you may be billed’ column is the amount that you will send to your Medicare supplement or to your major medical insurance carrier for reimbursement. If you organize your medical claims file according to dates of service, and match the medical bills to the insurance statements, you will make life much easier for yourself!

Irene Card & Betsy Card Chandler share the responsibilities of running Medical Insurance Claims, Inc. a health insurance services company . If you have questions relative to this column or other related topics, we invite you to call (973) 492-2828, or visit our contact page.