Insurance Algorithms and Paying the Price

Working in the office of a medical practice I often hear how healthcare costs, insurance premiums and co-payment amounts are rising and how the U.S. is the most overpriced country when it comes to paying the price of being happy and healthy. However, what you’re not hearing, is the story behind all of it. That’s why I’m here to break down the billing process and help you understand how it all works between the provider’s office and your insurance company.
See, your insurance company has a willingness to pay a certain dollar amount for certain types of procedures. For example: If you go to physical therapy, and the therapist completes fifteen minutes of manual therapy, they are going to bill the insurance company minus any co-pay that you may be responsible for.
The insurance company already has a formula for calculating what they will pay for manual therapy. So no matter what the Physical Therapist actually bills, as long as they are participating, the insurance company will pay up to their maximum allowable amount. So, if the bill is $55.00, and the insurance company’s maximum payout for that therapy is $35.00, the therapist will receive payment in the amount of $35.00 and will be forced to forgive the rest. However, if the bill the insurance company receives is $15.00, they will not pay their maximum payout of $35.00, they will only pay the $15.00 that the provider’s office asked for.
Now you can see why many providers don’t know how much money they will receive from a visit with a patient until they are reimbursed from the insurance company.
What this means for you as the patient. If you ask how much you can expect to be billed for each visit/follow-up appointment providers will not have an exact dollar amount for you. This is because each procedure, exercise or treatment must be billed for the exact amount of time that you spend on that particular thing. Once you have finished with the therapist he/she will complete a daily note that shows what procedures were done and the amount of time spent on each procedure. This allows the insurance company to then pay the provider based on their calculated fee schedule.