How Insurance Works: Addiction Rehab Allowable Charges, Non-Covered Expenses
Posted On November 18, 2017
Mental Health Parity and Addiction Equity Act
| While expanding coverage, the ACA did not make the maze of the way insurance companies calculate charges any easier to understand.
Under the Affordable Care Act, insurance plans were also required to provide the same level of care for mental health treatment as provided for physical health concerns.
The Affordable Care Act provides one of the largest expansions of mental health and substance use disorder coverage in a generation, by requiring that most individual and small employer health insurance plans to cover mental health and substance use disorder services. Also required are rehabilitative services that can help support people with behavioral health challenges.
These new protections build on the Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) provisions to expand mental health and substance use disorder benefits and federal parity protections to an estimated 62 million Americans.
Because of the law, most health plans must now cover preventive services, like depression screening for adults and behavioral assessments for children, at no additional cost.
And, as of 2014, most plans cannot deny you coverage or charge you more due to pre-existing health conditions, including mental illnesses.
Allowable Charges and Non-Covered Expenses
Allowable expenses, allowable charges, allowed amount, approved charge– are all similar terms for the same thing: The amount of money your insurance company will pay for a procedure, regardless of what the provider of services (doctor, hospital, treatment center) charges.
Non-covered expenses and excluded charges are items and procedures for which your insurance company will not pay.
Many of these are specifically excluded in your policy – but some are less apparent and may not be known until an EOB (Explanation of Benefits) is provided.
After a hospital stay or outpatient visit, you may get several bills – and at least one statement that says “not a bill.” This is your explanation of benefits, or EOB.
However, insurance companies can deny payment for charges designated as allowable in the Pre-Authorization of Coverage.
If that happens, the consumer is then responsible for those charges. See the Insurance Omsbudsman Resources section, below.
How Insurance Allowable Charges Work
The allowable charge is often a discounted rate of the actual charge. It is a dollar amount that is considered payment in full from your insurance company.
You were at the doctor’s office and were charged $150.00 for the exam, but the insurance company will only allow $100.00 as a covered charge.
It pays its portion of the $100.00 – either to the doctor, or to you. The doctor “writes off” the remaining $50.00 and accepts the $100.00 payment from the insurance company as payment in full.
However, if your policy requires a co-payment, let’s say $20.00, then you are responsible for the $20.00 co-payment to the doctor. Or, if the insurance policy pays only 80% of allowable charges, then it pays the doctor $80 and you must pay $20 of the $100 bill.
Simple – right? Not always.
Let’s say the doctor also charged another $50 for a special procedure done in his office, like a massage. The massage is a non-covered charge, so the insurance company pays nothing. You must pay the doctor $50 for the massage.
Unless a massage is specifically excluded from your policy, you may be able to submit an appeal, based upon medical necessity, in an effort to obtain coverage for the massage. However, the decision on whether or not to cover it is solely discretionary for the insurance company.
Substance Abuse Treatment Insurance Coverage – Even More Complicated
Substance abuse treatment can be even more complicated, although the mechanics are the same.
The provider submits a bill to the insurance company. The insurance company determines if it is a covered expense, then applies its allowable amount to the procedure code being billed to determine how much it will pay for the procedure.
The next step is to apply your deductible, if any; and then apply any co-insurance percentages, per your specific policy plan.
The remaining amount is what insurance policy-holder pays.
If the procedure being billed is either excluded under the policy, or, is considered a non-covered item, then it is denied altogether by the insurance company.
In Network Insurance Claims
The facility must accept the insurance company’s pricing of the procedure if it is in-network with the insurance company.
Out of Network Insurance Claims
If it is an out-of-network provider, you may be liable for the difference between what the insurance company allows and the provider charges.
Please Note: Just because your insurance company considers an item a non-covered item, it does not go away. You are responsible to pay the facility for the charge(s).
Here is a Typical Example:
A treatment facility that is out-of-network with your insurance company bills the insurance company for $2,000 for one day of inpatient/residential treatment.
The insurance company’s allowable charge is $1,200 for one day of inpatient/residential treatment. It pays 50% after the annual deductible is met – of let’s say – $500.00.
Note: Your annual deductible is just that – you pay it once in a calendar year.
In the above example, had the annual deductible already been met – the insurance company would have paid $600.00 to the provider; leaving you with a balance of $1,400 to the facility. (50% of $1,200=$600.00)
Adding a Non-Covered Procedure
Let’s add a non-covered procedure to the above example and see the impact.
The facility charges $1,000 for a lab charge that is not covered. Your cost? The full $1,000, if the insurance won’t pay for it.
Insurance Coverage Summary
If the rehab facility is out-of-network with your insurance company – you will be liable for the difference between what the facility charges and what the insurance company pays.
Also, be aware that all charges from an addiction treatment center may not be covered under your insurance policy.
It is not always possible for the rehab facility to get a complete of what is – and what is not – covered from the insurance company (even when a detailed Pre-Authorization of Coverage is submitted). And most allowable charges are discounted from the original charge.
Insurance Coverage Pre-Authorization
Under the Affordable Care Act, insurance plans are required to provide the same level of care for mental health treatment as provided for physical health concerns.
However, this does not mean that insurance coverage is applied the same in all cases. Your rehab center will submit a detailed Pre-Authorization of Charges to your insurance company.
Consumers Please Note: Even when your rehab center submits a detailed and correct Pre-Authorization of Charges to your insurance company – and your company approves the charges – those charges can still be denied payment when the final bill is submitted.
Yes. Although charges can be 100% approved in a Pre-Authorization of Coverage – insurance companies can (and often do) deny payment of those charges when the final bill from the rehab center is submitted.
The insurance policy holder is then responsible for paying those charges.
An insurance omsbudsman or negotiator may be retained to attempt to get the insurance company to pay the full amount they approved in the treatment pre-authorization. This may result in payment of some of some of the denied charges.
Insurance Omsbudsman Resources
Many states have their own insurance omsbudsman to assist consumers in dealing with dispute of charges with insurance companies. To discover if that is a possibility in your state – do a Google Search on “[insert your state here] insurance omsbudsman”.
There is no insurance industry-wide standard of charges for addiction treatment. Each patient’s treatment plan is considered as an individual case.
This is good – right?
Not always. For example, some addiction treatment charges may be allowed for one patient – but denied for another patient – when both are using the same insurance company policy for the same treatment! For consumers, this is very confusing – and can be very upsetting.
Before Checking Into a Rehab Center Insurance Check
Before you admit into a treatment facility, ask questions about what is covered and what is not covered.
Determine whether or not the facility is in-network or out-of-network.
Read the fine print in the Admissions Agreement before you make the trip to the facility.
Reputable facilities will send you their admissions agreement and/or their financial agreement before you arrive – so you have a clearer understanding of what your potential financial exposure.
If the rehab center does not have an admissions agreement to view and the insurance is not clear to you – go somewhere else!
Arrowhead Lodge Recovery is a residential-only treatment center for men over the age of 30 who suffer from alcoholism, drug addiction and co-occurring disorders. We are an in-network provider for many major insurance companies; and an out-of-network provider of substance abuse treatment for others.
We gladly furnish our prospective clients with an Admissions Agreement prior to their arrival at our facility. Call us today at 1-888-654-2800.
We use an integrated multi-disciplinary addiction treatment approach implemented by licensed professionals. The Arrowhead Lodge Recovery Staff includes a Physician-Addictionologist, Addiction Psychiatrist, Physician Board Certified in Pain Medicine, Doctor of Clinical Psychology, Registered Nurse, several Licensed Therapists, and an addiction Nutritionist.
We assist our clients in finding their personal connection to the spiritual. Through years of experience, we believe in the power of spirituality in the addiction healing process. We assist our clients in discovering their unique path to living a more authentic and joyful life.
Our addiction recovery programs treat the whole person and include Mindfulness for recovery and relapse prevention.
Impaired Professionals Well-Being Program and EAP Programs