Healthcare reimbursement describes the payment that your hospital, doctor, diagnostic facility, or other healthcare providers receive for giving you a medical service.
Often, your health insurer or a government payer covers the cost of all or part of your healthcare. Depending on your health plan, you may be responsible for some of the cost, and if you don’t have health care coverage at all, you will be responsible to reimburse your health care providers for the whole cost of your health care.
Typically, payment occurs after you receive a medical service, which is why it is called reimbursement. There are several things you should know about health care reimbursement when you are selecting health insurance coverage and planning your health care.
Sources of Reimbursement
Healthcare providers are paid by insurance or government payers through a system of reimbursement. After you receive a medical service, your provider sends a bill to whoever is responsible for covering your medical costs.
The amount that is billed is based on the service and the agreed-upon amount that Medicare or your health insurer has contracted to pay for that particular service. You can look up a procedure by a common procedural technology (CPT) code to see how much Medicare reimburses for it.
Private insurance companies negotiate their own reimbursement rates with providers and hospitals. Some hospitals and providers will not accept patients whose insurance doesn’t reimburse them enough— unless it is an emergency.
Co-Pay and Co-Insurance
Your health insurance may require that you pay a co-pay or co-insurance for a medical service, and this amount is typically made very clear in your coverage contract.
If your doctor accepts your insurance for services, that means your payer’s reimbursement for that service has already been agreed upon and that your doctor will accept it without an additional cost to you beyond your co-pay and co-insurance.
Billing you for an additional amount, unless you were informed ahead of time, is called balance billing. Under normal circumstances, balance billing is illegal.
Your Portion of Payment for Extra Services
Even when you are covered by health insurance, you may have to pay out-of-pocket for procedures and services that are not covered by your insurance. This fee is your responsibility and is not the same as balance billing.
If you choose to go out of network, your insurer might not cover the cost of your care, especially if they insist that you have an option for the service within your network. In that type of situation, your provider is permitted to bill you an additional amount above what your insurer pays.
Concierge care, in which you contract with a doctor or practice to get extra attention, usually involves substantial costs that are not covered by your health insurer.
If you are paying for your health care out-of-pocket, your doctor is required to provide you with information about the cost of services. However, keep in mind that there may be some unpredictable costs.
For example, if you have a diagnostic test, you may develop an allergy to the contrast material. This could necessitate another service—treating your allergic reaction. The cost of that service could not have been anticipated before your test if you did not know about the allergy ahead of time.
Health Reimbursement Arrangement (HRA)
Health reimbursement arrangements (HRAs) are an employee health benefit offered by some employers in the United States. They reimburse employees for their out-of-pocket medical expenses. They are not offered as the sole benefit and must be part of a group health insurance plan.
An HRA is funded by the employer and the employer gets the tax benefit, while the employee is not taxed on the money as income.
An HRA can be an advantage if your health plan has a high deductible, allowing you to be reimbursed for your healthcare expenses before you reach the deductible amount.
Understanding Your Medical Bills
Medical bills can look simple or complicated, depending on how many services you have had. In general, you should see the name of the service, the total cost of the service, and the cost to you. However, it can take some time to read through the bill to find these items.
A Word From Verywell
Reimbursement means repayment. Usually, purchases, such as those you make from a store, are paid for in advance, and you are not typically permitted to take the items until you pay for them. Services, including home repair and restaurant service, are often paid for by reimbursement after you have already received the service.
Health care is a service paid for by reimbursement, largely because doctors and hospitals can’t turn you away if you are having a true emergency, and also because the specifics of the service usually can’t be determined with complete certainty in advance.
Whether you receive public assistance or pay for your health care coverage, you can and should look at your medical bills and stay aware of the amounts of your reimbursement.