Insurance Companies and Out-of-Pocket Costs

How do insurance companies determine how much you owe?


Let’s start off with a scenario: Your stomach hurts, so you decide to see your primary care physician. She takes notes and decides that a CT scan would be an excellent diagnostic test for you. Her office obtains the needed authorization and sends you to a radiology facility to have your test done.

At the billing counter, after your test, the radiology facility staff tells you you’re going to owe a $70.00 copay for the visit. They’re very friendly and confident, so you pay the copay, thinking that’s all you’ll have to owe because that’s how it works at the grocery store.

After two months of not hearing anything from the clinic about the procedure, you receive a bill in the mail from the radiology office for $400. What happened?


Now let’s take that same scenario and look at the “back-end”:

Once your doctor decided you needed a CT scan, she lets her office staff know to fax orders to the radiology facility. The Verification team of the radiology facility calls your doctor’s office to determine who is going to obtain the authorization; your doctor’s office decided to get it for the radiology facility.

Before your appointment, the Verification team “verifies” your insurance. This means that the verification department finds out the following: A) if you have coverage, B) what your benefits are (and if there is an authorization needed for your test), and C) how much you MIGHT owe.


What do you mean, what I might owe? Why wouldn’t they know??

Allow me to explain:

A) Coverage is determined based on either a phone call or an online verification tool provided by your insurance company. Neither way of verifying coverage is perfect. This could be due to job loss, spouse coverage, COBRA, coordination of benefits (multiple insurances), and the like.

B) Benefits are determined based on the most recent information available to the provider. Let’s say in this situation, you had a $500.00 deductible with your insurance plan. In the phone call to the insurance, the Verification team is told that for diagnostic scans, you only owe a $70.00 copay. What doesn’t always get translated are exceptions; in this case, the exception would be that diagnostic radiology scans are applied to your deductible. Information that the Verification team doesn’t know before the radiology facility rendering services to you.

C) The Verification team tells the “front-end” team (the sweet, confident people you actually meet and talk to) that you only are going to owe a $70.00 copay, not knowing that your insurance policy has that very minute exception. Not knowing that you’re going to get a nasty surprise in the mail.


I wish it was only $1.

After you have your service done, all your information is sent to the Coding team. The Coding team reviews your medical records, questionnaires, medical history, and medical report. The “code” the service based on what you had done at the facility and your doctor’s reasons for having the test. They see that contrast was used, only the abdomen was ordered, and you have no medical history of abdominal pain. The”CPT” code (the procedure code) they chose would be for a CT abdomen, which is 71260. The “ICD-10” code (the diagnosis code) the Coding team chose (in this case) R10.0, acute abdominal pain.

These codes are entered on a particular form (a “claim form”) that is sent to the insurance for payment. The insurance reviews the final charges and compares them to your insurance benefits. Over two months, your “claim” is processed by the insurance. The insurance representative notices a clause in your policy that diagnostic radiology tests are applied to your deductible. They calculate how much you’re going to owe based on what is called the “allowable” amount.

The allowable amount is the contracted amount of money between the insurance companies and the provider that the insurance is willing to pay to the provider. The retail price of this CT scan (these change per provider) is $757.00, and the allowable for this service (in this case) is $470.00.

It’s determined that you have not met any of your deductibles, and the copay doesn’t apply due to the clause in your policy about diagnostic radiology procedures. Since the allowable amount for your service is $470.00, this will leave you with $30.00 left on your deductible with the insurance company. So if you had another diagnostic radiology test, you would only be responsible for $30.00, and the rest of the service would be covered by the insurance because you’ll have “met” most of your $500.00 deductible with this first CT scan.

The insurance company sends both you the patient and the provider a document called an Explanation of Benefits (EOB). This document tells both the patient and provider how much the provider charges for the service, how much the insurance allowed based on their copy of the “fee schedule” (list of all charges they pay for and how much), and how much total the patient will owe. This EOB says you owe $470.00. Because you paid the radiology facility $70.00 and not your insurance, your insurance won’t have a copy of how much you paid to the provider. It’s up to the provider to send you a bill reflecting the information shown on your EOB.

$470.00 minus $70.00 paid at the time of service equals a $400.00 bill.


The healthcare process in America is atrocious. We all must try to do something. Tell your representative to support healthcare for all Americans, because you never know if you’re going to be the one to get sick and be stuck with a $400.00 bill you can’t afford because of your illness.

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3 thoughts on “Insurance Companies and Out-of-Pocket Costs

  1. Pingback: Patient Advocacy Series – arianneswork

  2. Pingback: An Autistic Reflection of Societal Views of Mental Health – arianneswork

  3. The way you were able to break down the jargon in a way I could understand really eases my apprehension!

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