Lesson 6 - Patient Responsibility (PR)

Previous Next

Patient Responsibility (PR)

Patient responsibility in healthcare refers to the portion of healthcare costs that a patient is responsible and have to pay out of pocket, after their insurance company has paid its share. This concept is essential in understanding how medical costs are shared between the patient and the insurance company. It includes costs like deductibles, copayments, coinsurance, and any charges for services not covered by the insurance plan.
Patient Responsibility (PR) also known as patient liability, patient obligations, patient accountability, patient financial responsibility (PFR) and patient balance.

In short any services and portion of the payment not covered by insurance company is called patient responsibility.

Let's further breakdown the key point:

1. Patient Registration and Insurance Verification:

   The process begins with gathering patient information, including insurance details, to determine coverage and billing responsibility.

2. No Insurance / Self-Pay:

   If a patient has no insurance, they are typically responsible for the full cost of the services rendered, as there is no third-party payer. We called such a patients "Self-Pay Patient".

3. Insurance Coverage and Pre-authorization:

   If patient has insurance, the provider must verify the patient's specific plan benefits, including what services are covered and whether pre-authorization is needed for certain procedures.

4. Payment Process:

   The insurance company (payer) will reimburse a portion of the cost based on the patient's plan, and the remaining balance is then billed secondary insurance if any otherwise billed to the patient.

Components of Patient Responsibility (PR)

1. Deductibles (PR 1)

   Deductibles are the amount patients must pay out of pocket each year before their insurance starts covering medical costs. For example, with a $500 deductible, the patient pays the first $500 of medical expenses that year.
   Once the deductible is met, the insurance begins to pay its share, often alongside coinsurance or copayments. Deductibles reset annually and vary depending on the insurance plan.

2. Coinsurance (PR 2)

   Coinsurance (cost-sharing) is the percentage of healthcare costs that an individual pays after they have met their deductible, with the insurance company covering the remaining percentage. For example, with 20% coinsurance, the individual pays 20% of the bill, and the insurance company pays the remaining 80%.
   Note: coinsurance percentages can vary, with options like 70/30, 60/40, or even higher percentages for the individual, depending on the specific insurance plan/policy.

3. Co-pay (PR 3)

   A co-pay (copayment) is a fixed amount that patients pay at the time of visit or service rendered, regardless of the total cost of care.
   For example, if an insurance plan determines that a patient has a $50 copay for specialist visits, the patient must pay $50 for each visit to the specialist.
   The copay amount can vary and may be applied per visit or per day, depending on the specific insurance plan. However, it remains a fixed amount as determined by the insurance company.

Out-of-Pocket Maximum:

An out of pocket maximum is a cap or limit, on your annual healthcare expenses or the maximum amount you will pay for covered health care services in a plan year. Once you reach this limit, your insurance company pays 100% of the costs for covered care for the rest of that year. Some health insurance companies call this an out of pocket limit. It includes deductibles, coinsurance and copays.

Here are the key points:

1. What's included:

   The out-of-pocket maximum typically includes your deductible, coinsurance, and copayments for covered, in-network services.

2. What's usually not included:

   Monthly premiums, non-covered services, and expenses for out-of-network care (unless it's an emergency) are not typically included in the out-of-pocket maximum.

3. How it works:

   You pay for healthcare costs (deductibles, copays, coinsurance) until you hit your out-of-pocket maximum. Once reached, your insurance pays 100% of the costs of covered services for the rest of the plan year.

4. Why it's important:

   It provides a limit to your healthcare expenses, so you know the most you'll have to pay out-of-pocket in a given year. This helps with budgeting and peace of mind, especially if you anticipate significant medical expenses.

Out of pocket maximum vs Premiums

You can generally choose from a range of plans (offered by insurance) with different out-of-pocket limits. However, plans with lower out-of-pocket maximums normally have higher premiums, and those with higher out-of-pocket maximums have lower premiums.

Out of Pocket Example:

Suppose Hassan has purchased a health insurance policy with the following cost-sharing responsibilities:

1. $5,200.00 - Annual Deductibles
2. 20% Coinsurance
3. $40 Copay per office visit
4. $8,700 - Out of pocket maximum

Earlier in the year, Hassan already paid $4,200 in deductibles through various office visits. Now, Hassan needs surgery that costs $19,000, and the expense is covered under his insurance plan.
According to the expense,

• First, Hassan must pay the remaining $1,000 to meet his full $5,200 deductible.
• After meeting the deductible, he is responsible for 20% coinsurance on the next portion of the cost: 20% of $18,000 = $3,600
• The insurance company covers the remaining $14,400 of the surgery cost.

According to above, Hassan had successfully reach the out of pocket limit for the plan year $4,200.00 + $900.00 + $3,600.00 = $8,700.00.

From this point forward, all covered healthcare services for the rest of the year will be paid in full by the insurance company. Hassan will not have to pay any more deductibles, coinsurance, or copays for covered services.

Non-Covered Services:

Definition:
In healthcare, non-covered services refer to medical treatments or procedures that are not included in a patient’s health insurance plan. Because these services are explicitly excluded from the policy’s list of benefits, the patient is fully responsible for paying any non-covered services.

Key Points Explained

• Excluded from Coverage

  Non-covered services are not part of the patient's insurance plan and are clearly listed as exclusions in the policy. These services are not eligible for reimbursement under any circumstances.

• Patient Responsibility

  When a non-covered services are rendered, the insurance company will not pay for any part of it. The patient must pay 100% of the cost out of pocket.

• Examples of Non-Covered Services

  Cosmetic procedures (e.g., facelifts, Botox for appearance), Experimental or investigational treatments, and certain types of alternative or specialized therapies not listed in the plan normally

When patient is not responsible for non-covered services?

As of learn that non-covered services are those that are specifically excluded from plan's coverage, so service is deem to be non-covered as a result of coding errors, or insurance thinks that it is not medically necessary as per patient's current condition or in some circumstances if provider failed to remind patient about the service will be rendered is non-covered by his / her plan then patient will not be responsible for their cost as per the rules. (We will discuss about non-covered services in dept in later chapters).

Previous Next

Does patient responsibility is paid to insurance company or provider?

As we have learn above, Patient responsibility (deductibles, co-insurance & copay) refers to the portion of a medical bill that a patient must pay out-of-pocket. Therefore, patient responsibility is paid directly to the healthcare provider, not to the insurance company.
After the insurance company processes a claim and pays its share, the remaining balance becomes the patient’s responsibility. The provider then bills the patient for this amount, and the patient is expected to pay it in accordance with the terms of their insurance plan.
However, in previous lesson we have learn that only premiums are the amount that is directly paid to insurance company.