Are Insurance Payment Adjustments Deductible?

[TheRightInfo]

Can you deduct the difference between what you bill the insurance company and what they pay you? It seems that amount should be a writeoff. Does anyone know?

 

[Shallow Abyss]

Hmmm, good question. I am not sure. I would think you cant, as you never recieved the money in the first place.

I always thought in order to use a deduction, we had to have the money to spend, not just not get it.

Kind of reminds me of a question I asked my accountant when I first started up. I sometimes offer new clients a discount, and wanted to know if the amount of the discount would be deductable. She said no, technically not. There is a way to include it in my bottom line, but it would have to come out of somewhere, so it would have ended up being a wash. I wonder if this same thing would happen for your situation.

Whats the answer from those that do insurance billing?

 

[Ashleypink]

I work for a CPA so I will ask her today but I don't believe it is a deduction?

Afterall, it's only income after you receive the payment, right?? And whatever you receive is what you claim as income. It's not like if you bill at $100/hr and only receive $80 that you are claiming the $100 as income.

I'll get back to you after I get the answer from her.

Angie

 

[Kaidell]

Is there a reason you're not balance billing the client/patient?

Legally the client/patient is responsible for the reminder owed. I know that many people chose to "forgive" the balance but one option is to bill the client.

Ok....I talked to my boss and she explained it this way. If you us a cash based system (which most self-employed people do) of accounting then, no it's not deducible. What cash based means is that you claim something as income when you receive the cash. A client comes in and pays you cash, it's income. You bill the insurance and wait until you are paid before claiming it as income.

The other way is an accrual based system in which you claim the income before you receive it. In that one you would claim the income once you bill it but before you receive payment. Then and only then could you deduct the amount reduced from what you originally billed. An example would be that you billed XYZ insurance company for $100. You immediately claim that as income. Then when you receive the check for $80 (their reduced payment) and you decide not to bill the client for the remainder you would take a loss of $20.

So, assuming you are using a cash based accounting system then your answer would be no, it's not a deduction. However as Pete brought up, you can expect the client to pay the remainder.

Angie