In healthcare, just like other aspects of life that involve money, reimbursement is the process by which the service provider (a hospital, for instance) is paid by the consumer (patient). Unique to healthcare, however, are the stipulations involving insurance companies and the processes by which the companies and the service providers “square up” financially.
Not all employee-employer health insurance set ups involve reimbursement, but for both inpatient and outpatient services, traditional health insurance plans are being steadily challenged in the industry by these reimbursement-based arrangements. Here is a guide for understanding the differences in insurance styles, and a closer look at reimbursement practices.
Reimbursement v. Traditional Insurance
Traditional employer-funded insurance plans involve employees selecting which packages fit their health needs the best, and dealing with the copays, deductibles, and other previously determined monetary aspects of those plans. The options for these plans are determined by an employer, and said employer is responsible for updating them accordingly and dealing with any caveats that arise from a given employee’s medical needs.
Healthcare reimbursement plans generally involve a third-party service responsible for the insurance processes related to a company’s eligible employees. An example(s) from the public sector would be Medicare and Medicaid. Technically, the U.S. government is the largest healthcare payer in the country, as 25% of medical services in the U.S. are paid for via one of these social services.
For the private sector of healthcare reimbursement, the process is very similar, but the money paid to the providers is from a private entity rather than Uncle Sam. When an individual who is part of a reimbursement insurance plan receives care, the providers will bill their insurance company and, depending on what the business’ stipulations are, the company will pay for all, some, or none of the procedures. The plans are determined by the third-party payers, rather than employers, meaning issues generally happen between the insurance company and the individual, rather than an individual and another person within the company who controls insurance proceedings (for traditional insurances).
Using a series of government-assigned codes, payers are provided a list of what procedures and services were given to an individual, and the payer (aka the insurer) makes a determination whether to cover the costs or not. If not, another code is sent to your employer to explain why a part of your hospital visit was not covered. Due to the coding system, disputes are generally pretty cut-and-dry, making for quick (though not always in favor of the patient) determinations when payment issues arise. Sometimes the reasons for non-payment are simply due to being submitted too quickly, and patients can get their reimbursements paid at a later date.
It should be noted that though called “reimbursement,” a given patient does not have to front money for a procedure or service and then wait to be paid back. It is a slight misnomer, and easier to think of the provider getting “reimbursed” for their services, rather than someone getting paid back.
Many reimbursement insurers focus on value-based care, which, in short, is a method of providing quality care based solely on patient need, rather than care based on a given quantity of visits. Non value-based care models are paid out depending on how many instances of a given procedure or service were performed by a given doctor over a set period of time, regardless of success. For instance, Dr. A may be paid under a model where he or she receives more money from an insurer for every instance of a procedure, which can lead to ethical questions regarding whether a procedure was necessary.
Value-based models hold care providers responsible for the quality of their work, not the quantity, and these insurance companies have pretty good track records of winning in situations where they determine that a service rendered was not needed, and simply added on by a provider, which automatically meant more money in a traditional model.
Generally speaking, reimbursement models mean less direct out-of-pocket costs, but may involve larger pay-ins from your paycheck. For those individuals who don’t really use health insurance except in emergencies, neither model is a gamble nor a guarantee that you won’t have some out-of-pocket costs, and even if it’s not regularly used, you should have an understanding of your copays and deductibles.
For individuals, families and veterans who do utilize their healthcare insurance providers regularly, the reimbursement model generally means better care, and more personal care, at similar prices, ultimately meaning better overall value.
Shifts in insurance happen regularly, and with things like universal healthcare being frequently discussed in the government, staying abreast of your company’s relationship with its insurance providers should be a regular part of your discussions with HR, because there is money to be saved!