Chapter 2 — Key Takeaways
The five cost-sharing terms
| Term | What | Paid to provider? | Computed on |
|---|---|---|---|
| Premium | price of holding coverage | No | — |
| Deductible | amount patient pays before the plan pays | Yes | allowed amount |
| Copayment | flat dollar amount per service type | Yes | — (fixed) |
| Coinsurance | a percentage of the allowed amount | Yes | allowed amount |
| Out-of-pocket maximum | ceiling on patient cost sharing | — | allowed amount |
The order is fixed: allowed amount → copay → remaining deductible → coinsurance on the remainder → out-of-pocket maximum as a ceiling.
Network status changes four things at once
- Whether a contracted allowed amount exists at all
- Whether the provider may balance bill
- Which cost-sharing tier applies
- What administrative obligations attach — filing deadlines, appeals, audit rights
"In network with the insurer" ≠ "in network for this product." Networks are product-specific.
The plan types, by the three questions that matter
| Out-of-network? | PCP gatekeeper? | Referral? | |
|---|---|---|---|
| HMO | No (emergencies only) | Usually yes | Usually yes |
| PPO | Yes, higher cost share | No | No |
| EPO | No (emergencies only) | Usually no | Usually no |
| POS | Yes, higher cost share | Usually yes | Usually yes |
Plan type predicts access rules, never cost. Cost comes from the eligibility response.
Self-funded plans
The employer bears the risk and makes the rules; the insurer on the card is only an administrator. Governed by ERISA, so state insurance mandates often do not apply. You frequently cannot tell from the card — ask, and write the answer in the notes.
The five contract structures
| Structure | What it puts at risk for the provider |
|---|---|
| Fee schedule | volume |
| Percentage of billed charges | essentially nothing (the only one where raising the charge raises the payment) |
| Case rate | cost per episode |
| Per diem | intensity within a day |
| Capitation | the whole population |
Never set a charge below the highest allowed amount any payer will pay — a payer never pays more than you asked for.
Reading an eligibility response, in six steps
- Is coverage active on the date of service?
- Am I in network for this product?
- What are the accumulators — deductible and out-of-pocket, individual and family?
- What is the cost-sharing structure for what I am about to do?
- Anything administrative in the way — referral, authorization?
- What did it not tell me? (Always: any dollar amount. Eligibility is not pricing.)
Coordination of benefits
- Own subscriber coverage is primary over dependent coverage.
- Birthday rule for a dependent child of married/cohabiting parents: the parent whose month and day fall earlier in the calendar year. Not the older parent. Tie → longer-covered plan.
- Workers' compensation is always primary for work injuries.
- COB denials are almost always a registration failure, and the fix usually runs through the member, not the payer.
Key terms
premium · deductible · copayment · coinsurance · out-of-pocket maximum · in-network · out-of-network · participating provider · fee schedule · UCR · capitation · HMO · PPO · EPO · POS · self-funded plan · third-party administrator · coordination of benefits · birthday rule · workers' compensation · TRICARE
Monday morning
You should be able to:
- Read an eligibility response and predict a claim's patient responsibility to the penny, before the claim is submitted.
- Tell a patient at check-out roughly what they will owe, and be right.
- Look at a denial and say whether it is a benefit problem, a network problem, or a COB problem.
- Determine the order of payers, including the birthday rule, without looking it up.
- Explain to a physician-owner why "115% of Medicare, as amended from time to time" is not the reassuring phrase it sounds like.
The Encounter so far: \$367.00 charged · **\$216.28 allowed · \$150.72 adjusted · \$47.58 patient** · \$168.70 plan. All four numbers, known on day 1, from two documents the practice already had.
And what Chapter 2 could not tell you: whether the codes are right (Parts II–III), whether the plan will actually pay \$168.70 (it will not — Chapter 29), and where \$128.40 came from (Chapter 23).