7 Mistakes to Avoid When Using Health Insurance

Frustrated woman paying bills
Making a mistake when using your health insurance can be expensive. JGI/Jamie Grill/Blend Images/Getty Images

You’ve gone through the hassle of signing up for health insurance. You’ve paid your premiums. Now don’t screw up by making one of these common health insurance mistakes when you use your health insurance.

1) Not Planning for Your Deductible and Coinsurance

Health insurance doesn’t do much good if you can’t use it because you can’t afford your deductible, coinsurance, or copays. Let’s face it, not everybody has an extra few thousand dollars just lying around.

But, deductibles are a fact of life for certain types of health insurance.

You have to make a plan for dealing with your deductible, coinsurance, and copays or you may find yourself fully insured but unable to get the health care you need because you can't afford your share of the cost.

2) Unintentionally Going Out-Of-Network

Most health plans in the United States have a network of preferred health care providers. If you use a provider in your health plan’s network, your copays, coinsurance, and deductible are lower than if you use an out-of-network provider. HMOs and EPOs won’t pay anything at all for care you got from an out-of-network provider, while PPOs and POS plans will pay a little, but not as much as if you'd used an in-network provider.

If you know who’s in-network and who’s not, you can stick to in-network providers and avoid the more expensive out-of-network care. However, this isn’t necessarily as easy as it sounds.

Health plans tweak their networks. Contracts between health plans and their network providers expire and might not get renewed.

Your primary care physician might be courteous enough to notify you if he stops participating in your health plan’s network (or he may not), but your mammogram facility, blood test lab, and pharmacy are less likely to give you that heads up.

Before you get any non-emergency care, check that the provider is still in-network with your health plan.

3) Not Negotiating a Price for Out-Of-Network Care

You have the right to get care out-of-network if you choose, but you’ll probably pay more. However, in some situations, you might choose to pay more because you feel the extra money is worth it to get your care from a particular provider.

If you’re choosing to get out-of-network care, negotiate the price for that care beforehand while you still have negotiating power. Your out-of-network provider understands that if he won’t negotiate, he may lose your business. Also, even though he’s out-of-network for you, he’s probably in-network for another health plan, so he’s giving someone a discount. He might as well extend that discount to you.

By negotiating the cost of the care in advance, you can limit your financial risk and avoid balance billing and other nasty financial surprises.

4) Not Getting Pre-Authorization When Required

Does your health plan require you to get pre-authorization before you have pricey tests, procedures, or treatments?

Most PPOs and EPOs do. If your health plan requires this and you don’t get pre-authorization, you could wind up with a nasty financial surprise.

For example, if your health plan has a pre-authorization requirement for non-emergency MRI scans and you get an MRI scan done without first getting it pre-authorized, your health plan can refuse to pay for the scan. This is true even if you can prove that you really needed the scan. Think of it like a technical foul. You didn’t follow the rules and jump through all of the hoops in the correct order, so you get penalized by having to pay the bill yourself.

To avoid this, if your health plan requires pre-authorization, don’t just assume your doctor will get the pre-authorization for you. She might; but, if she doesn’t, the buck stops with you, not with her. You’ll be the one stuck paying the bill. If you’re unsure if a test, procedure, or treatment requires pre-authorization, call your health plan and ask.

5) Not Following Through on Tiered Treatment Plans

If you have an HMO, PPO, EPO, or POS plan, one of the techniques your health plan likely uses to manage its costs is tiered treatment plans. Tiered treatment plans work like this: if there are three ways to treat your medical problem, the plan will want you to use the least expensive treatment option first. If you try the least expensive treatment option and it doesn’t work, then the plan will agree to pay for the second-least-expensive treatment option. The plan will only agree to pay for the most expensive of the three treatment options after you’ve tried and failed the two less expensive options.

You may suspect that options one and two aren’t going to work for you, and want to skip right to option three. However, unless there’s a medical reason why options one and two would be harmful in your particular situation (for example, you’re allergic to the option one drug), your health plan will refuse to pay for option three until you’ve tried and failed both of the cheaper treatment options.

Why do health insurance companies do this? Because most people will just give up and put up with option one or option two even though it doesn’t work as well as they had hoped. They’re sick and tired of going back to the doctor still complaining about this same problem, so they settle for sub-par results because they caved in. In the long run, this saves health insurance companies lots of money.

If this is happening to you, your job is to keep going back and working your way up the tiers until you get to a treatment option that really works for both your body and your lifestyle.

6) Not Comparison Shopping Among In-Network Providers When You’ll Owe Coinsurance

Do you have to pay a 20 percent, 30 percent, or even 40 percent coinsurance for health care services? Do you need an expensive service? Then you need to shop around, even among in-network providers.

Health insurance companies negotiate discounted rates with their in-network providers, but the discount isn’t necessarily the same for every provider. Sometimes your health plan negotiates a great discount; sometimes it negotiates a lousy discount.

Since your coinsurance is a percentage of the discounted price, make sure you’re paying it on the lowest discounted rate, not on a higher rate because you didn’t shop around among in-network providers. 

Here’s how it works. Let’s say your health plan negotiated a discounted rate of $10,000 for your ankle surgery with Dr. Jones. Your coinsurance is 30 percent, so you’d pay $3,000 out of your own pocket if Dr. Jones did the surgery.

Right across town, Dr. Brown is also in-network with your health plan but isn’t as good a negotiator. Your health plan was able to get him to agree to a discounted rate of $8,000 for the same ankle surgery. You’ll still have to pay 30 percent coinsurance if you use Dr. Brown, but you’ll save money because you’re only paying 30 percent of his $8,000 rate rather than 30 percent of Dr. Jones’ $10,000 rate. You’d save $600 by using Dr. Brown rather than Dr. Jones even though both surgeons were in-network with your health plan.

7) Not Appealing a Claim Denial

There are times when you’ve done everything right but your health plan still denies a health insurance claim. If this happens to you, take a deep breath and look carefully at what’s happened. Have you followed all of your health plan’s rules? Is the care a covered benefit of your health plan? Did you really need the care? If you answer yes to all of those questions, then you should appeal your health plan’s claim denial. 

Although it may feel like you’re David fighting a Goliath insurance company with only a slingshot, remember that David won that fight. A surprisingly large percentage of denials are overturned on appeal. Enlist the help of your physician, get your ducks in a row, and march forth with your slingshot. 

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