What is Guarantor in Medical Billing, and What are its Types?

A guarantor in medical billing is responsible for paying a patient’s medical expenses, with different types based on relationship and responsibility.

What is Guarantor in Medical Billing

The medical billing process can seem complicated to those unfamiliar with it. The medical bill goes through many steps, from receiving care from a patient to making the final payment. One crucial but often misunderstood component is the role of the guarantor.

Understanding what a guarantor is and its different types is essential for streamlining medical billing and ensuring proper payment.

What is Guarantor in Medical Billing?

In medical billing, a guarantor covers an individual’s healthcare expenses. When a patient seeks medical care, they must provide contact information for a guarantor at the time of service.

If the patient’s health insurance does not fully cover their treatment costs, this individual is the primary point of payment.

For example, if a child under 18 visits the doctor, the guarantor is likely their parent or legal guardian. If an adult receives care but does not have health insurance, they would typically be their guarantor.

Related, Benefits of using a medical billing company

Types of Guarantors

People commonly name several types of guarantors for medical billing and insurance purposes. The specifics depend on each patient’s insurance status and circumstances.

Let’s look closer at some of the most typical guarantor designations:

1. Primary Guarantor

If the primary guarantor cannot pay a medical bill in full, someone else, usually a secondary guarantor, assumes the responsibility for the debt. It is someone who promises to be financially accountable for any medical bills the primary guarantor does not pay.

Common examples of secondary guarantors include:

  • Parents, guardians, or other relatives
  • Spouses or domestic partners
  • Adult children over 18 years old
  • Close friends willing to share financial responsibility

Having a secondary payer guarantees billing resolution. It is essential if the primary guarantor can only partially cover costs due to financial limitations or being unavailable.

2. Secondary Guarantor

If the primary guarantor cannot pay a medical bill in full, someone else, usually a secondary guarantor, assumes the responsibility for the debt. It is someone who promises to be financially accountable for any medical bills the primary guarantor does not pay.

Common examples of secondary guarantors include:

  • Parents, guardians, or other relatives
  • Spouses or domestic partners
  • Adult children over 18 years old
  • Close friends willing to share financial responsibility

Having a secondary payer guarantees billing resolution. It is essential if the primary guarantor can only partially cover costs due to financial limitations or being unavailable.

3. Guarantor for Medical Treatment

If a patient does not have health insurance or is not covered by government programs, the hospital or medical provider may permit them to receive treatment. It is done by designating a specific “Guarantor for Medical Treatment.”

This particular type of guarantor formally agrees in writing before services are rendered. They commit to being financially responsible for covering all costs and medical bills the uninsured patient incurs. The patient borrows the guarantor’s credit history and legal financial accountability.

Common guarantors for medical treatment include:

  • A spouse guaranteeing responsibility for the other
  • Parents thoroughly ensure a child’s medical costs
  • Relatives or friends formally promising to pay for an uninsured individual’s care

This arrangement legally binds the named guarantor to receive all medical bills and pay them in full on behalf of the patient.

4. Tertiary Guarantor

While less common than primary and secondary guarantors, some hefty medical bills may name a tertiary or “third in line” guarantor. These individuals would receive any portions of unpaid medical bills if the primary and secondary parties failed to cover costs fully.

Examples of tertiary guarantors include:

  • Distant relatives willing to contribute funds if needed
  • Additional friends promising financial assistance if necessary
  • Charitable organizations, churches, or other groups that agree to help pay bills if the patient cannot

A tertiary guarantor adds a layer of financial security under challenging scenarios.

5. Financial Guarantor

If multiple guarantors are named on a medical account, someone may specify one as the “financial guarantor. It defines them as having the ultimate legal and financial responsibility for paying all portions of medical bills that the insurance providers don’t handle.

For example, even if the child has primary insurance coverage, someone may list a parent as the financial guarantor on their account. It means the parent agrees to cover anything insurance does not cover.

6. Non-Financial Guarantor

Someone might list a non-financial guarantor as a secondary contact person for administrative purposes, but this person has no financial accountability for paying the medical expenses. They serve as a source of contact for billing inquiries or difficulties.

For example, a family friend may be a non-financial guarantor to assist with medical bill coordination and paperwork without taking on costs.

Types of guarantor's

Why is Guarantor Important in Medical Billing?

Identifying the correct guarantor is fundamental for ensuring the accuracy of medical billing processes and the timely collection of payments. The guarantor plays a critical role throughout multiple aspects of the billing cycle:

1. Financial Responsibility

The guarantor has a legal obligation to pay all out-of-pocket medical costs of the patient. It includes copayments at the time of service, annual deductibles that must be met before insurance coverage kicks in, and any medical bills the health insurance does not fully cover.

Guarantors need to have the financial capacity to promptly pay these potential expenses based on the details and limitations of the insurance plan. Unpaid balances can negatively impact provider cash flow and create additional administrative costs of repeatedly rebilling guarantors.

2. Insurance Verification

Guarantors give healthcare providers direct contact for handling various insurance coverage issues. These include verification of enrollment status, changes in coverage details, denied or delayed claim payments, and procedures needing pre-authorization.

By proactively resolving these insurance-related issues, guarantors help prevent scenarios where providers incur bad debts. It also avoids the need to repeat billing efforts.

What is Guarantor in Medical Billing, and What are its Types?

3. Up-to-Date Billing Address

To correctly mail medical invoices and secure payments on outstanding account balances, providers rely on having current and accurate billing addresses for the guarantor.

Outdated addresses can lead to lost bills, payment delays, and added staff time spent tracking down correct contacts.

4. Follow-Up on Unpaid Bills

Rather than burdening provider billing staff, the guarantor must continually interface with insurance companies when claim problems happen.

They are also responsible for making reasonable payment arrangements on remaining balances after insurance payments and ensuring all bills get addressed rather than going into collections. This follow-up accountability helps divert the focus of internal billing teams to more revenue-driving activities.

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The Final Words

Understanding guarantors is vital to smooth medical billing processes. An adequately defined guarantor manages insurance issues, pays patient responsibilities for deductibles and copays, and handles any medical costs not covered by health insurance.

The key is choosing guarantors who have both the means to pay bills and the willingness to take on financial and administrative burdens. Clarifying upfront the different types of primary, secondary, tertiary financial, and non-financial guarantor roles is crucial. It helps alleviate issues in getting medical bills paid accurately and on time.

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