When it comes to paying for healthcare services, chances are you’ll be paying out of pocket. More and more consumers have high deductible health plans that require you to pay $5000 to $6000 before the insurance company starts paying. Since you’re paying, it’s critically important to find out how much your bill is ahead of time. But to do that, you have to understand the difference between the free market rate and the negotiated rate. It could be the difference in paying thousands of dollars, more or less, for healthcare services.
What’s the difference between the free market rate and the negotiated rate
The negotiated rate is the amount the insurance company “negotiates” on your behalf as a consumer. They negotiate the amount they will pay the doctor or the hospital or X-ray facility for example. How they arrive at these negotiated rates? We may never know!
But here’s the interesting thing. Even if you’re paying for a service out of pocket to an in-network doctor or facility, you would still pay the negotiated rate. Again, the insurance company negotiates this rate for you even if they themselves don’t end up paying for it. We’ve come to expect that the negotiated rate is the best rate, but it’s not. And that’s what brings us to the concept of the free market rate.
The Free Market Rate
The free market rate is what some doctors and facilities (like this one and this one) charge for services. The facility has left the insurance company out of this discussion. They come up with a charge that covers their expenses for whatever services they’re providing, plus a reasonable profit margin. Yes, that’s right, it’s still ok to make a profit without sticking it to the consumer. But at the end of the day, the free market rate will be less expensive than the negotiated rate. Why? Because the insurance company’s bureaucracy has been left out of the decision-making process.
The facility doesn’t submit your claim to the insurance company for payment when you pay the free market rate. The idea is that if you have a high deductible, you’re paying for the service out of pocket no matter what. Might as well pay the most affordable rate – the free market rate. While the facility or doctor doesn’t submit this for insurance, you can still send your receipt to the insurance company so that it counts towards your deductible.
Now, you may be thinking, let’s just submit it to insurance to see if they cover it. Don’t do that! If you try to submit something to the insurance company and they don’t cover it because you haven’t met your deductible, then you’re stuck with the negotiated rate. You can’t go back and ask for the free market, or cash-pay, rate because the facility has already gone through the process of submitting your claim to the insurance company.
Now that you’re armed with this knowledge, your next step is to check pricing from a facility near you, which you can do by clicking here.