Table of ContentsView AllTable of ContentsHow Reimbursement WorksSelf-PayCopay and CoinsuranceHSAHRACapitationBalance Billing
Table of ContentsView All
View All
Table of Contents
How Reimbursement Works
Self-Pay
Copay and Coinsurance
HSA
HRA
Capitation
Balance Billing
Healthcare reimbursement is the payment that your hospital, healthcare provider, diagnostic lab, or other provider receives for providing you with a medical service. The most common method isfee-for-service (FFS)in which the reimbursement is made for each individual service performed.
If you pay the entire amount out of pocket, the reimbursement is known as self-pay.
This article describes the different ways that healthcare reimbursement is made in the United States, including vehicles that allow organizations to pay upfront and others that allow you to make payments or reimbursements yourself.
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How Healthcare Reimbursement Is Determined
The primary model is fee-for-service (FFS), in which each service is itemized and individually billed based on an agreed rate. The FFS is based on a contracted amount that the government payer or private insurer has agreed upon for each service.
Government payers include Medicare, Medicaid, TRICARE, the Children’s Health Insurance Program (CHIP), and the Veteran’s Administration (VA). Examples of private insurers include Blue Cross/Blue Shield, Aetna, and UnitedHealthcare.
Government payers and private insurers also provide their customers with a document called the “Summary of Benefits and Coverage,” which offers a high-level overview of covered benefits, cost-sharing provisions, coverage limitations, and exceptions for their insurance policy.
After services are rendered, a document called theExplanation of Benefits (EOB)is sent describing the services you received, the date you received them, the amount your insurer agrees to pay, and the amount you owe, if anything.
Self-pay is when you have no health coverage and have to pay out of pocket. According to the Kaiser Family Foundation, 25.6 million people in the United States (or roughly 8% of the population) were uninsured in 2022.
For individuals with no coverage, a good-faith estimate of the costs of service must be provided under the No Surprises Act, a federal law that went into effect on January 1, 2022. The estimate must be given at least three business days before the scheduled service or when requested.
Copayment and Coinsurance
Private insurers and government payers may not pay for the entire cost of a covered service. The cost is often shared with the policyholder either in the form of copayment (a set rate you pay for a medical service) or coinsurance (the percentage of costs you pay after you have met your annualdeductible).
The deductible is the set amount you need to pay out of pocket each year for medical services and prescriptions before your coinsurance kicks in. Until then, you may be liable for up to 100% of the service, depending on the terms of your policy.
Health Savings Accounts (HSA)
Ahealth savings account (HSA)is a savings account used in conjunction with a high-deductible insurance policy that allows users to save money tax-free for medical expenses.
The benefit of HSA is that it allows any money you put into the account to accrue interest. The amount also rolls over from one year to the next, and the user can decide how much or little to add at any time.
HSAs differ fromflexible spending accounts (FSA)in which any unspent amount is forfeited at the end of the year (though there may be a grace period, and your employer may allow you to carry over up to $640 each year).
Health Reimbursement Arrangement (HRA)
An HRA can be advantageous if your individual health plan has a high deductible. It allows you to be reimbursed for your medical expenses even before you reach the annual deductible amount. In some cases, yourpremiummay also be covered.
While capitation simplifies billing since payment is made upfront, it tends to provide fewer services and lower levels of healthcare.
If your healthcare provider accepts your insurance, it means that the reimbursement has already been agreed upon with anin-network providerand the only cost you are obligated to pay is your copayment or coinsurance.
Billing for an additional amount, unless informed ahead of time, is calledbalance billing. Also known as “surprise billing,” balance billing is generally prohibited.
The No Surprise Act limits the amount of additional billing for emergency and non-emergency services from an out-of-network provider without prior authorization.
Choosing an Out-of-Network Provider
If you choose an out-of-network provider, you may be fully liable for payment. For some people, this is a reasonable option if there is a specialist or facility they really want.
Summary
When reimbursements are made, you may be responsible for copayment and coinsurance costs. You may also be subject to balance billing, in which an unexpected bill arrives that your insurance company will not pay, typically from an out-of-network provider.
14 SourcesVerywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.Britton JR.Healthcare reimbursement and quality improvement: integration using the electronic medical record: comment on “fee-for-service payment - an evil practice that must be stamped out?".Int J Health Policy Manag.2015;4(8):549–551. doi:10.15171/ijhpm.2015.93Centers for Medicare & Medicaid Services.List of CPT/HCPCS codes.Centers for Medicare & Medicaid Services.Summary of Benefits & Coverage & uniform glossary.Centers for Medicare & Medicaid Services.How to read an Explanation of Benefits (EOB).Kaiser Family Foundation.Key facts about the uninsured population.Centers for Medicare & Medicaid Services.Know your rights when you aren’t using health insurance.HealthCare.gov.Copayment.HealthCare.gov.Coinsurance.HealthCare.gov.Deductible.Internal Revenue Service.Publication 969 (2023), health savings accounts and other tax-favored health plans.HealthCare.gov.Flexible spending account (FSA).Federal Register.Health reimbursement arrangements and other account-based group health plans.American College of Physicians.Understanding capitation.Consumer Financial Protection Bureau.What is a “surprise medical bill” and what should I know about the No Surprises Act?
14 Sources
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.Britton JR.Healthcare reimbursement and quality improvement: integration using the electronic medical record: comment on “fee-for-service payment - an evil practice that must be stamped out?".Int J Health Policy Manag.2015;4(8):549–551. doi:10.15171/ijhpm.2015.93Centers for Medicare & Medicaid Services.List of CPT/HCPCS codes.Centers for Medicare & Medicaid Services.Summary of Benefits & Coverage & uniform glossary.Centers for Medicare & Medicaid Services.How to read an Explanation of Benefits (EOB).Kaiser Family Foundation.Key facts about the uninsured population.Centers for Medicare & Medicaid Services.Know your rights when you aren’t using health insurance.HealthCare.gov.Copayment.HealthCare.gov.Coinsurance.HealthCare.gov.Deductible.Internal Revenue Service.Publication 969 (2023), health savings accounts and other tax-favored health plans.HealthCare.gov.Flexible spending account (FSA).Federal Register.Health reimbursement arrangements and other account-based group health plans.American College of Physicians.Understanding capitation.Consumer Financial Protection Bureau.What is a “surprise medical bill” and what should I know about the No Surprises Act?
Verywell Health uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read oureditorial processto learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
Britton JR.Healthcare reimbursement and quality improvement: integration using the electronic medical record: comment on “fee-for-service payment - an evil practice that must be stamped out?".Int J Health Policy Manag.2015;4(8):549–551. doi:10.15171/ijhpm.2015.93Centers for Medicare & Medicaid Services.List of CPT/HCPCS codes.Centers for Medicare & Medicaid Services.Summary of Benefits & Coverage & uniform glossary.Centers for Medicare & Medicaid Services.How to read an Explanation of Benefits (EOB).Kaiser Family Foundation.Key facts about the uninsured population.Centers for Medicare & Medicaid Services.Know your rights when you aren’t using health insurance.HealthCare.gov.Copayment.HealthCare.gov.Coinsurance.HealthCare.gov.Deductible.Internal Revenue Service.Publication 969 (2023), health savings accounts and other tax-favored health plans.HealthCare.gov.Flexible spending account (FSA).Federal Register.Health reimbursement arrangements and other account-based group health plans.American College of Physicians.Understanding capitation.Consumer Financial Protection Bureau.What is a “surprise medical bill” and what should I know about the No Surprises Act?
Britton JR.Healthcare reimbursement and quality improvement: integration using the electronic medical record: comment on “fee-for-service payment - an evil practice that must be stamped out?".Int J Health Policy Manag.2015;4(8):549–551. doi:10.15171/ijhpm.2015.93
Centers for Medicare & Medicaid Services.List of CPT/HCPCS codes.
Centers for Medicare & Medicaid Services.Summary of Benefits & Coverage & uniform glossary.
Centers for Medicare & Medicaid Services.How to read an Explanation of Benefits (EOB).
Kaiser Family Foundation.Key facts about the uninsured population.
Centers for Medicare & Medicaid Services.Know your rights when you aren’t using health insurance.
HealthCare.gov.Copayment.
HealthCare.gov.Coinsurance.
HealthCare.gov.Deductible.
Internal Revenue Service.Publication 969 (2023), health savings accounts and other tax-favored health plans.
HealthCare.gov.Flexible spending account (FSA).
Federal Register.Health reimbursement arrangements and other account-based group health plans.
American College of Physicians.Understanding capitation.
Consumer Financial Protection Bureau.What is a “surprise medical bill” and what should I know about the No Surprises Act?
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