Insurance can be extremely confusing. When someone is in a crisis and trying to find treatment for substance abuse, the frustration of trying to figure out if it will cover the treatment is overwhelming. Most treatment facilities can’t or won’t give you a straight answer, which just adds to the mess. So, what do you do?
I’m going to give you a simple, user-friendly guide to how insurance works in the treatment industry, so you can be prepared and make the best choice possible.
We all feel if we are paying for insurance, it should cover treatment when we need to use it. Unfortunately, it does not always work this way. Insurance companies make money from collecting your premiums and try very hard NOT to pay out when the time comes. Their policies and language are designed to be complex, with clauses that protect their interest.
You usually get what you pay for, and quality treatment is no different. Rehabilitation which is effective and will change someone’s life is not cheap. Many facilities will offer to provide services with no money down, however, you have to be careful to read the fine print. Failing to pay your deductibles and out of pocket costs likely violates your contract with your insurance company. It’s usually hidden in the fine print of your policy, but failing to pay these costs could result in a total denial of your claims.
Despite this, some facilities present a “too good to be true” offer and get someone into treatment, bill the insurance for as much as possible (sometimes fraudulently and then kick them out the first day the insurance doesn’t cover treatment anymore. Then they will bill you for whatever the insurance did not cover. This is done regardless of the progress the client has made in treatment and can wind up damaging a person’s credit if they aren’t prepared for it. Unfortunately, balance billing is completely legal so be sure to read and understand the terms of your financial agreement with the facility.
The first thing I’m going to tell you is that THERE WILL LIKELY BE OUT OF POCKET COST. It does not matter how good your policy is, policies that have no deductible or out of pocket costs for drug rehabilitation are few and far between.
Next, we have the following types of policies:
HMO vs. PPO
HMO policies are cheaper. They usually only cover in your state, and they only pay for treatment that is IN NETWORK. What this means, is they have negotiated low rates with local businesses that won’t charge them very much. The quality of treatment is low. This type of policy dictates where you can go to treatment and is usually very limited. If you choose to go outside of their network, they will not pay.
PPO policies are generally more expensive. They allow you to go out of network while providing limited coverage. What this means, is they will pay for treatment wherever YOU decide but will pay less if you do not choose facilities they have low-cost agreements with. These are the best policies for treatment.
These are basically free, state policies with very little coverage to very restricted networks. They work like HMO’s and give even less coverage.
Now let’s understand some of the basic terms:
This is the amount the policy requires you pay before they even begin covering anything. YOU MUST PAY THIS. Facilities that do not collect this UP FRONT are operating illegally. They will bill you for it later which can be a surprise to most. So, pay this up front regardless of what they say. This is accounted for yearly, so If you’ve already paid part of it, you must pay the remainder before insurance will kick in and pay any part.
Once the deductible is met, Insurance will begin to pay but NOT at 100% of what is billed.
This is a percentage ratio of what they will cover, once the deductible is met. For example; if the Co-Pay on the policy is 60%, that means they will pay 60% of the rate and will require you to pay the remaining 40%. Keep in mind though, they will pay 60% of whatever THEY decide the rate is for that service. So, if you are choosing somewhere IN NETWORK (as discussed above) the insurance company will pay 60% of the rate that is agreed upon with that treatment provider. If you are looking into treatment OUT OF NETWORK, they will pay 60% of what they consider is a “usual and customary” rate for that service.
For example, you want a facility that is out of network. That facility charges $1,000 per day. Your insurance company considers the usual and customary rate for treatment to be $500 per day. So, with a Co-Pay rate of 60%, they will pay THAT portion of $500, so $300 per day. That’s going to leave you stuck with the remaining 40% of the $500 (which is $200) AND the remaining portion of $1,000 rate that the facility is charging, which your insurance is not even recognizing. You pay $700 and the insurance pays $300. Pretty tricky.
OOP (Max Out-of-Pocket)
This is the total amount you pay within a calendar year before your insurance company pays out at 100%. This number is always equal to or higher than the Deductible. It is inclusive of the deductible, meaning that the deductible counts toward it.
So, let’s do an example: Your policy has a $5,000 deductible and a $10,000 OOP. The Co-Pay is 50%. Alright, so you’re paying at least $5,000 no matter what. Now, the facility can begin billing your insurance. Let’s say they bill at $1,000 a day, and your insurance company recognizes this rate as usual and customary (for simplicity’s sake). Okay, so after 10 days of billing ($10,000 worth of treatment) the insurance company will have paid $5,000 and will consider that you owe the other $5,000. You’ve now paid the Deductible and the copay, so you’ve now paid $10k out of pocket. At that point, the insurance company will pay the rest of what is billed at 100% and you should owe no more. Ideally.
Everything I’ve gone over with you above is based on the assumption the insurance company deemed the treatment is medically necessary. There is no way to figure this out without checking the person into treatment. The treatment center will submit the clinical information on the client to the insurance company, with its own team of doctors and clinicians who will review the information and decide whether they feel the client NEEDS the treatment.
What’s sad about this is their “team” is paid by the insurance company so often makes decisions favoring the insurance company. Remember, they do not want to pay! So, they often try to push for lower levels of care which are cheaper, or simply deny the case outright by saying the person doesn’t need treatment and could just get clean on their own. In other words, the worse off the person is, the more likely they are to pay. They rarely approve someone’s first treatment attempt, and who knows the logic in that. Some companies are so tight the person must literally be on death’s doorstep for them to pay and sometimes not even in those circumstances.
Okay, so that is the nuts and bolts of it. As you can see, this system is not designed to favor the policy-holder. However, when you know these things you won’t be caught off-guard and can expect the reality. Some policies are obviously better than others.
PPO policies give you the most flexibility and best coverage. A quality treatment facility will first verify your policy, then give you an accurate idea of what your total out-of-pocket expenses will be based on that. Paying these expenses up-front protects you from future liability and possible denial of claims. To protect yourself from being billed for services your insurance will not cover, make sure you understand your financial responsibilities fully before entering a program.