Costly health insurance traps and how to avoid them

Just because you have health insurance doesn't mean you should stop being vigilant when it comes to paying for your medical care. Only you can be your biggest health- and money-saving advocate.

Click through to see 10 health insurance traps to be mindful of when you are selecting insurance plans and receiving care.

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1. Neglecting the Policy Document

One of the biggest traps people fall into is neglecting to the read their policy documents, said Steve Pritchard, founder of Cuuver, an insurance comparison site. Although an insurance document is no page-turner, it goes back to the old adage, "the devil is in the detail."

"Finding the time to read it is easier said than done, but so many people face issues because they've signed up to a policy that they didn't know the full terms of," Pritchard said. "There can be hidden clauses/terms in the small print if you read the policy document before officially signing it."

See: The Best and Worst States for Health Insurance Costs 

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How to Avoid This Health Insurance Trap

Not reading the small print could wind up costing you major bucks. The obvious answer to avoiding this mistake is to read through your policy document carefully and get any concerns addressed prior to signing off on it. This could save you time, headaches and money — particularly if you realize there are cheap health insurance alternatives. 

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2. Choosing the Wrong Amount of Coverage

Before you read through the paperwork, ask yourself how much insurance you need. Pritchard said people often choose the wrong amount of coverage because they find the options complicated and confusing to interpret.

"You don't want to be oversold and end up paying for more insurance than you need, or worse, be undersold and not have enough cover to recoup your losses," he said.

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How to Avoid This Health Insurance Trap

With many options and policies on the health insurance exchange, it can be hard to tell which one is best for you. Research will help, however. The HealthCare.gov, site suggests that before selecting your healthcare policy, you should understand the "metal" plan categories (Bronze, Silver, Gold and Platinum), your total costs for healthcare and the plan and network types. 

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3. Not Asking If Your Doctor Is in Network

Imagine going to a doctor thinking your out-of-pocket expenses will be minimal because you assumed the physician was in network. Then the bills come in the mail stating that you owe hundreds of dollars more than anticipated.

So what happened?

"Most health insurance companies use doctor networks and structure your insurance benefits so that you have less coverage — or none at all, in some cases — when you see someone outside of the network," said Anthony Lopez, senior director of business for eHealth.com.

If you don't abide by the plan guidelines, you could end up paying for the doctor visit instead of your insurer.

Learn: 18 Medical Expenses You Can Deduct From Your Taxes 

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How to Avoid This Health Insurance Trap

When you make an appointment with a new doctor or book a procedure, make sure the provider is in your network. Confirm the provider's network status with your insurer if you need to. If you find out the provider is not in the network, ask your insurance company for one that is.

To make it simpler, select a doctor from your health insurance plan list. A quick call to member services to ask for in-network doctors can help you avoid surprises down the road. 

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4. Paying Your Medical Bills Too Soon

In any other circumstance, paying a bill right away would be a financially savvy tactic. But a medical bill should be handled differently, Lopez said. Sometimes the insurance discounts haven't been applied yet or have been missed mistakenly. 

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How to Avoid This Health Insurance Trap

To avoid this costly mistake and reduce healthcare costs, Lopez suggests not paying your medical bill until you get the official explanation of benefits (EOB) from your health insurance company. The EOB will show how much of each bill was covered by your insurer as well as any discounts applied. It will also tell you your out-of-pocket responsibility for the bill.

Typically, you'll receive an updated bill from your medical providers, Lopez said. "Make sure everything matches up before you pay it, and contact your insurer and the doctor's billing office if you have any questions." 

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5. Not Getting Pre-Approval When Needed

Don't assume insurance will cover costs just because your doctor ordered a procedure or prescription.

There are certain instances when pre-authorization is required, whether it be for prescription drugs, a medical procedure or a test. This means they require pre-approval before your insurance company will pay for them, Lopez said.

See: Why Prescription Drug Prices Are Rising — And How You Can Save 

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How to Avoid This Health Insurance Trap

As the insured patient, you're responsible for finding out if the requested treatment is covered. If you're worried that something your doctor recommends may not be covered, call your insurer to see if pre-approval is needed.

If so, the pre-approval process is relatively straightforward. It usually involves getting a letter sent from your doctor with any medical notes or test results that back up his or her recommendation, Lopez said.

"The insurance company will make sure the treatment is appropriate for the condition and medically necessary," he said. A coverage determination is usually made within a few weeks. 

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6. Going Without Health Insurance

For those not insured through an employer, there's a nationwide open enrollment period when anyone can sign up for health insurance, but it only comes once per year.

For most states, that enrollment date ended Dec. 15, 2017. Failing to enroll could cost you money should a medical problem arise when you're uninsured. You also might be slapped with a tax penalty in effect until 2019.

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How to Avoid This Health Insurance Trap

If you missed the open enrollment deadline and still need coverage in 2018, your only chance may be to enroll for a qualifying life event. These events include marriage or divorce, the death of someone on your plan that jeopardizes your eligibility, the birth or adoption of a child, loss of employer-based coverage, moving to a new city or state or major changes in your income. There's only a 60-day window to enroll, however. 

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7. Underestimating Your Income to Qualify for Subsidies

Certain individuals and families will qualify for government subsidies when purchasing health insurance on their own through health insurance market exchanges (also known as marketplaces). This is also a potential insurance trap, Lopez said, because you need to properly estimate what your income will be for the current year.

It might be tempting to underestimate your income as a way to qualify for subsidies, but Lopez advises against it. "If you got more subsidy help than you really qualified for, you will typically have to pay it back on your tax return," he said. That could mean paying back some or all of your subsidy.

Discover: Tax Mistakes Everyone Makes — and How to Avoid Them 

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How to Avoid This Health Insurance Trap

Properly estimating your income is the best solution. Marketplace health insurance calculators and tools are available on the HealthCare.gov website to assist with estimating your income correctly. 

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8. Health Insurance Companies May Deny a Legitimate Claim

Have you ever had a health insurance claim denied? If you forked over the cash without hesitation, you may want to think twice the next time it happens.

According to a Los Angeles Times report, health insurance companies intentionally deny claims hoping consumers won't notice or care to argue. They know that many won't. 

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How to Avoid This Health Insurance Trap

Rather than say, "oh well" and pay the money, be willing to put up a fight. This all goes back to understanding your policy. If you believe the claim was denied in error, contact your insurance company to file an appeal for a third party to review. The process may take some time but it could save you money if the denied claim is reversed.

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9. Falling Victim to “Balance Billing”

Imagine a scenario where you have superb health insurance but then receive an enormous bill, maybe costing thousands of dollars, such as after a hospital stay. Balance billing could be the culprit. This is when a provider bills the insurer the difference between the provider's charge and what insurance pays.

"Even though PPO plans cover out-of-network providers, the insurance companies do not have contracts with these out-of-network providers," said John Seltzer, CEO of J. Seltzer Associates, an employee benefits consultancy. "As a result, these providers are not required to accept the insurance companies' allowances as payment in full."

Unfortunately, the burden then falls onto the insurer. This can be quite costly as it's not subject to the limitations of the deductible, coinsurance or out-of-pocket limit. 

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How to Avoid This Health Insurance Trap

To completely ward off the possibility of balance billing, always stay within network. That may mean periodically checking back with your insurer to verify that nothing has changed with the doctor you see or the facility you visit.

If you suspect you have fallen victim to balance billing, try to negotiate with the provider on your own or with help from an advocacy group. You can also contact your human resources department for assistance if your health insurance is through an employer.

Check Out: Simple Ways for Keeping Your Medical Bills Low 

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10. Making Assumptions About Your Health Insurance

If you see a particular doctor or have a regular prescription, don't assume your insurance covers them from one year to the next. Insurers will often change what they approve for drugs, and the next thing you know you're getting a generic pill rather than the expensive name-brand drug.

In addition to your insurer making changes, your doctor might make his or her own choice to drop out of a plan. If you are not vigilant, you can get burned monetarily. 

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How to Avoid This Health Insurance Trap

Several months prior to the end of a year, insurance providers will let you make adjustments during the open enrollment season without being penalized. It's the same for private health insurance or employer insurance. This is the time to do research about potential changes and ask questions so you aren't caught off guard. It's also the perfect time to shop around for affordable health insurance.

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This article originally appeared on GOBankingRates.com: Costly Health Insurance Traps and How to Avoid Them

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