As the bills for my ACL surgery rolled in last fall, I dutifully paid my co-pay, deeply grateful for the fact that I had insurance. Sometime in early November, the PT office called to tell me that I had used up almost all of my insurance benefits for PT for 2013. The issue was ultimately resolved (I wasn’t running out of benefits), but in the course of trying to track down what my benefits were and how much I had left, the billing office admitted they had no idea how much money I had left because they had no idea how much my insurance would cover/pay for each visit.

Excuse me?

They admitted to arbitrarily inflating the amount billed knowing that the insurance company would pay some portion of it. They didn’t know anything about the reimbursement rate. Nothing.

Curious, I decided to sort through my medical bills and insurance statements to see if I could figure it out. Here’s what I learned. In 2013, my medical providers billed a total of $13,792.61 for my ACL reconstruction. This includes doctor visits, medical images, physical therapy, surgery, and misc. things like crutches. (I will still do more PT in 2014, so the total number will continue to climb. It’s an interesting snapshot so far, though.)

The most astounding part of this number isn’t the total amount. That seems more or less reasonable to me. What’s most astounding is the size of the insurance company’s write-down – $8,265.20. That’s more than half of the total amount billed!

Right there, that tells me one of the biggest benefits to having insurance is simply in the actual cost. If I’d had to pay cash for my care, I doubt that I could have convinced my providers to discount their billing rates by 60%. This is especially true, if the providers themselves have no idea what insurance would pay for a particular visit or service. (See above.)

The other thing I was fascinated by was the total amount the insurance company paid – only $3,027.41. If I bought insurance on the open market (under Obamacare), a similar level of insurance would cost me $3,600 a year. I’m relatively healthy and only see a doctor every other year for a checkup. I make use of an emergency clinic maybe once a year. Acute illness – like a torn ACL – is the exact reason I think insurance is worthwhile. It turns out that even after a big surgery like mine, the insurance company is still paying out less than they take in. Huh…

Then I started looking at individual charges to see if I could figure out what the contract rates for things were. I noticed that the charge amounts seem pretty arbitrary. In one instance, the Overlake Emergency Clinic billed $400 for some x-rays. Later, my surgeon billed $92 for the exact same set of x-rays. These were written down to $138 and $42, respectively. Not only did the insurance company pay a different amount for the same set of x-rays, they paid a different percentage of the amount billed. What gives? How else would you the insurance company decide what to pay? What am I missing?

Finally, just for kicks, I totaled the cost of my care in various categories based on the allowed amounts by the insurance company. Physical therapy will easily cost more than the surgery by the time I’m done. In the mean time, the breakdown is curiously interesting.