Health Care Pricing Is Complicated. Here's A Beginner's Guide.
Figuring out the real price of health care is complicated — even if you've already paid your bills. You can hear just how complicated it is here:
And if health care pricing wasn’t convoluted enough, it’s hard to talk about it without running into some conversation-stopping jargon. Words that mean one thing to the rest of the English-speaking world can mean something completely different in health care — like a “charge” that isn’t the same as the price.
To help clarify, here’s a glossary of common terms in the world of health care finance:
All-Payer Claims Database – A state-run database that tracks what insurers and other payers actually shell out for health care services from different hospitals and providers. Florida’s Agency for Health Care Administration was denied a budget request of $5 million to develop a database last spring.
Charge – The price a health care provider says it is owed for a service; not necessarily what it expects to receive. Insurance companies negotiate with providers for cheaper rates than the listed charge. People who are uninsured may be billed for the whole charge—but even then, it’s frequently negotiable. Appears as the amount billed column on an explanation of benefits.
Chargemaster – A hospital’s list of charges for common procedures. These lists are different from the list of rates negotiated by each insurer. Starting in October, the Affordable Care Act requires hospitals make charges available to the public. Many hospitals plan to satisfy this requirement with the chargemaster.
Contracted rate – The price an insurer and provider have agreed upon for a particular service—usually lower than the charge. This is also known as the reimbursement or the negotiated rate. On an explanation of benefits, it appears as the amount paid by the insurer.
Copay – The standard price paid by an insured patient for a covered service or medication. This is in addition to what the insurance company will pay on behalf of the patient.
Cost adjustment – The difference between the charge and the contracted rate. It’s sometimes presented to health insurance customers as savings.
Deductible – The amount a patient must pay for covered health care before the insurance company picks up the rest of the tab.
Explanation of Benefits (EOB) – A statement from an insurance provider detailing how it covered a patient’s health care. EOBs typically include details like a description of the service and its billing code, the amount the provider charged, the amount the insurer paid (the contracted rate), and what the patient owes. It looks so much like a bill that some insurance companies write, “this is not a bill,” on the statement.
Premium – The monthly price you pay for health insurance. It is separate from the deductible and copay.
Medicaid – Health insurance for people with disabilities and low-income individuals and families. It’s managed at a state level with federal oversight and it’s funded with federal and state money.
Medicare – Federally run health insurance for people over 65.
Self-Insured – When an employer takes on the risk of insuring its employees and pays their health care claims. Self-insured employers, like Miami-Dade County, frequently hire an insurance company to manage the claims process and negotiate rates with providers on the employer’s behalf.