One of the most common questions we get asked is, “my health insurance was supposed to cover a procedure, but it didn’t. Now I’m in collections. Is this legal?” The short answer: yes, it is legal, though you may be able to fight back. The long answer, however, requires a bit of context about how insurance companies operate.
Here’s the basic concept behind insurance: a group of consumers essentially pool their money together through an insurance company or agency. This pool is used to cover the needs of each person who has paid into it. The hope is that everyone won’t need to dip into the pool at once, so that when a need for coverage does arise, there’s plenty of money for the person who needs it. This comes with a major caveat, however. And that is your coverage agreement.
When you purchased your insurance plan, you likely had several different options to choose from through the same provider, including a health maintenance organization (HMO), or traditional insurance plan. Each of these plans is designed to offer a different level of coverage, and you can choose the one that best fits your health and overall lifestyle. For example, a younger person in their 20s with no serious medical issues would likely be just fine if they selected the cheapest option available, since younger folks don’t have to visit the doctor as often as a person in their 60s or 70s might. Oftentimes, these less expensive plans have a much higher deductible, which means that the policyholder will have to pay the first $500-3,000 of their medical bills for the calendar year. After that, insurance will kick in and pay up to the plan maximums. While insurance companies and their offerings vary, most plans range within the same average deductibles and coverage limits across the industry. (The exception is the high-deductible health plan [HDHP], usually paired with a health savings account, which are on a whole different level).
Regardless of whether you choose an HMO, HDHP, or another traditional plan, you will still be tied to some sort of agreement about the specific services to be covered or not covered by your provider. Oftentimes, these are fairly general guidelines, since there are simply too many variables that can come into play as far as illness, age, heredity, genetics, and more. Furthermore, every person’s health is so different, they could never outline every possible scenario.
When a claim is submitted, the medical procedure and any related services (such as anesthesia during a surgery) will be compared against your policy to determine if the claim falls within the guidelines set forth by your provider. Some insurance companies are more generous than others, but it’s not uncommon to see a claim denied.
When this happens, however, that could leave you with a sizeable medical bill. You have several options at this point:
- Pay the bill
- Appeal the decision through your insurance provider
- Make arrangements with your healthcare provider for a payment plan
- Apply for a medical credit card (such as CareCredit)
- Involve your state insurance department (after exhausting your provider’s appeals process)
- Ignore the bill
Obviously the last option isn’t a good one, but it’s something many people choose to do because of their financial situation. However, this will send you headfirst into the collections process, which will harm your credit if not immediately resolved.
Appealing the denial of your claim is a good first step. Sometimes, all it takes is a phone call to your insurance carrier. Your doctor may also be able to help you appeal the denial by simply re-submitting the claim. It’s not uncommon for different health insurance company employees to review different claims from the same person and come back with totally different decisions.
If your claim is still denied, you must then find a way to pay the owed amount yourself. While this may seem unfair, and sometimes it really is, it’s usually preferable to falling into serious debt and having your credit negatively impacted.
In the event that your claim is rejected for something you KNOW was supposed to be covered, and your appeal was denied, it might be time to involve your state’s insurance department. This is a state government agency designed to help protect consumers from being taken advantage of by insurance companies. They may be able to help you fight to have your claim properly processed and paid for.
In the event that your claim is still denied and you want to escalate the matter further, you could pursue legal action against your insurance provider. But, be warned: for most people, the cost of legal fees is much higher than the cost of the medical bill and isn’t worth the hassle.
At the end of the day, it’s important to remember that insurance companies are a business, not a care provider. They can be picky about which services they will cover. That’s why it’s imperative that you check with your insurance provider before undergoing any major medical procedure (though this is not possible in cases of extreme emergency, such as a traumatic accident or sudden illness). They can offer a pre-approval on many procedures, and if your request is denied, you can always work with your healthcare provider to keep submitting these requests until you reach an agreement with your insurance company.
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