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Medical Bills • 3 minute read

What You Need To Know About Medical Bills And Insurance

What You Need To Know About Medical Bills And Insurance
By Kristina James
Published by Ruby

Ruby's online tools and app helps you organize your medical bills and save money.

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We’ve all been there. You go to the doctor for a health issue or experience a medical emergency, you receive the care you need, and then you get the bill in the mail with a confusing list of charges and services. If receiving and paying for medical care is so common, why does the process seem so mysterious and complicated? Thankfully, Ruby is here to help explain how care providers and insurance companies determine the costs on your bill.

And if you want some tips on preparing for a medical emergency, check out our article, Medical Emergencies: Planning for the Unexpected.


Healthcare Cost Negotiations

For many patients, the relationship between insurance companies and healthcare providers is murky. They are either unaware of the system hospitals and insurance use to negotiate healthcare costs, or they misunderstand the process.

People often believe that hospitals charge a standard rate for procedures and medications. They think that, following their treatment, insurance companies provide coverage for treatment and any remaining charges become the responsibility of the patient. In truth, the connection between insurance companies and healthcare providers is much more complex.

The cost of care is far from uniform. In an NPR article, Dr. Ezekial Emanuel said that there are more than six different costs for a hospital stay. These discrepancies are the result of price negotiations between insurance companies and healthcare providers. While each hospital has a standard price for treatment (found in their master list of charges), this figure is relatively arbitrary. When it comes time to pay for your treatment, insurance companies use the hospital’s master list amount as a baseline before negotiating a lower price with the healthcare provider.



How it affects you

While the current system sounds good at first, a MarketWatch article claims that it does not necessarily serve the patient’s best interest. Believe it or not, insurance companies actually benefit from the initial, outlandish treatment fees. After insurance groups and healthcare providers agree on a new, lower price, patients only get to see the end result of these negotiations.

When patients compare the original treatment price and the discount, insurance companies seem like superheroes. J.B. Silvers, a former CEO and author of the MarketWatch article, explains that this large discount is what insurance companies and providers want patients to focus on. Although, it is important to note that the initial provider charge and even the negotiated discount are largely arbitrary, as prices vary from year to year and depend heavily on data from insurance claims. This makes it difficult for patients to determine the actual cost of care.

According to Healthcare Consultants Incorporated, the true cost is nearly impossible to deduce because data is often missing from the negotiated rate. Without these missing links, how can patients determine their actual price of care? The healthcare billing system is imperfect to say the least, but you can take certain steps to ensure that your medical bills are accurate and that you are not overpaying for treatment.

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Medical Bills: What You Need to Know

If you have ever paid a medical bill, you know that health insurance plays a large role in how much you spend out-of-pocket on care. By reviewing your medical bill, you are able to determine how much your insurance covers and how much you are responsible for paying. Being comfortable with reading medical bills is essential because you are more equipped to find possible errors, which may be costing you or your insurance company extra money. To avoid potentially overpaying, Verywell Health suggests comparing the following:


Services performed

You want to make sure you were not accidentally billed for a treatment you never received.


The bill from your doctor

It is a good idea to double check that the information on your bill accurately reflects your treatment.


The explanation of benefits (EOB)

This is provided by your insurance and explains which of your healthcare costs it will cover.


If the information in these three documents match, you can rest assured that there are likely no errors in your bill or, in rare cases, fraudulent charges. For an explanation on the parts of a medical bill, check out our article, How To Read Your Medical Bills.

Ruby can help.

Here at Ruby, we know that managing important documents like medical bills and insurance information can be stressful. That’s why we developed a safe place for you to store it all so you can access the information you need any time, anywhere from your computer, tablet, or smart phone. Create your free Medical Information Kit now!

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