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According to the doctors I visit and my health care agent (that takes care of setting up my company health care) it works like this?
Insurance companies have a set rate that they will pay out for certain things. This can be different depending on the insurance company. These rates are 'discounted' compared to the 'rack' rate. For example United Healthcare might pay $850 for a scan, Blue Cross might pay $800. The cash rate may be $1300. Dr's agree to these rates if they want to stay in that carriers network.
The rack rate for individuals without insurance is higher then the discounted insurance rate. This is because for the most part individuals without insurance cannot afford to pay the bill. So the Dr and Hospital know that it doesn't matter if the bill is $200 or $2,000, 90% of these people can't pay it. But the 10% that do pay help to cover the cost of the majority that cannot. As someone posted above, it also helps with receivables. As long as they are collecting something every month ($5 whatever) they can show the high amount as a collectible debt on their books.
If you have a good relationship with your Dr you can usually negotiate an even lower cash rate, depending on your insurance deductible. My eye Dr does this for me routinely since my primary insurance doesn't have very good eye coverage.
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