Have you ever heard of the term ‘guarantor’ in the context of real estate or when buying an automobile on installment plans? They are the ones responsible for covering payments when needed.
Similarly, in medical billing, a guarantor is the person who takes full financial responsibility for a patient’s bill, regardless of the patient’s ability to pay.
In most cases, the medical guarantor is automatically determined, and may be:
- The patient themselves (if an adult and competent)
- A parent or legal guardian (for minors)
- The patient’s spouse
But what significance does a guarantor hold in medical billing?
Significance of Medical Guarantor
According to the California Health Care Foundation, millions of people cannot afford the medical care they need. This places a significant strain on the healthcare system. In this context, a guarantor helps establish who is legally responsible for payment.
A guarantor in medical billing may be closely or distantly related to the patient, such as:
- Spouse
- Parent
- Close relative
- Legal guardian
- Caregivers or organizations (in selected cases, and may require a formal agreement)
However, spouses, parents, and close relatives often serve as guarantors for patients in medical billing, as they have a significant stake in the patient’s well-being and treatment.
If the medical procedure is necessary for survival and recovery, the guarantor assumes responsibility once designated and documented.
Medical Guarantor Types
Medical billers may encounter various types of guarantors, depending on their involvement in covering the patient’s medical expenses. The following are the types of medical guarantors to remember:
Primary Guarantor
The primary guarantor is the first entity responsible for the medical expenses. This is usually an adult patient who pays for their treatment. However, sometimes a parent or guardian may also be the primary guarantor. E.g., in the case of a pediatric patient, the parent will be the primary guarantor, as minors are not legally obligated to pay for medical services.
Secondary Guarantor
The secondary guarantor steps in to cover medical expenses when the primary guarantor cannot afford the treatment costs. This can be a spouse, a sibling, or a close friend, willing to take the patient’s financial responsibility.
Guarantor for Medical Treatment
If a patient does not have medical insurance coverage or an institutional medical coverage plan, providers may require a signed financial responsibility agreement.
Therefore, such guarantors must take the financial responsibility in writing before the procedure or medical intervention.
Note that in this case, the medical guarantor agrees to pay the patient’s bill only for a specific service or procedure, for example, LASIK surgery.
Tertiary Guarantor
Did you know that people in the top 1% of the population who pay out of pocket spend around $23,850 on healthcare annually? Unfortunately, most people are unable to cover a large out-of-pocket expense on their own.
Thus, when patients require expensive procedures, a tertiary guarantor acts as a third layer of financial coverage. This may include:
- Distant relatives
- Friends or acquaintances promising financial assistance
- Charitable organizations, churches, or other groups
Financial Guarantor
Typically, only one medical guarantor is assigned per patient account. However, if there are multiple, one of them may be named as a financial guarantor, who would cover the remaining treatment costs after the insurance payer has paid a significant portion of the bill.
Non-Financial Guarantor
A non-financial guarantor is actually:
- An emergency contact
- Authorized representative
- Healthcare proxy
The non-financial guarantor does not pay the bills; instead, this person acts as a liaison between the patient and the insurance payer to ensure smooth communication.
Role of a Guarantor in Medical Billing
A guarantor in medical billing plays several vital roles in the process. Here is a quick breakdown of what makes them important.
Financial Responsibility
First and foremost, the medical guarantor is responsible for paying the medical bill if the patient’s insurer doesn’t cover the treatment cost. Without a guarantor, the medical service providers are always at risk of losing valuable revenue and facing operational disruption.
Unpaid Bill Payment
Sometimes guarantors may have to cover unpaid bills that require follow-up. They may have to negotiate or pay outstanding dues to the healthcare provider or medical facility. In some cases, they may also contact the insurance payer or arrange payment plans, although this is not a formal responsibility of the medical guarantor.
Insurance Verification
Insurance billing requires verification before a patient can receive medical treatment or services. The guarantor shares details of the coverage with the medical service providers. Similarly, they may assist in communication regarding:
- Denied claims
- Delayed payments
- Patient’s coverage verification issues
Billing Information Update
Sharing the latest billing information with both the insurer and the service provider is essential for accurate billing. This reduces confusion, payment delays, and even claim denials.
For instance, if the patient’s contact details or address have not been updated, they may not receive coverage updates promptly, which stalls their treatment. Therefore, the medical guarantor is responsible for providing the latest information to the insurers.
What is a Guarantor Number?
A guarantor number is an internal identification number that is assigned to the party responsible for covering the patient’s treatment costs.
Note that the guarantor number is not the same as an insurance member ID or a patient’s medical record number.
Medical Guarantor vs. Patient
Understanding the distinction between a medical guarantor and a patient is vital for avoiding billing mistakes. Therefore, here’s a clear difference between the two to remember:
Guarantor
A person or an organization responsible for a patient’s medical expenses, including:
- Parent
- Spouse
- Legal guardian
Patient
The patient is the one receiving treatment or services from a medical facility or a clinic.
| Medical Guarantor | Patient | |
|---|---|---|
| Definition | Person accountable for medical costs. | Person receiving medical care. |
| Main Role | Mainly handles financial obligations. | Receives treatment and care. |
| Responsibility | Financial responsibility. | Health-related responsibility. |
| Who Can Be | Parent, guardian, spouse, or a charitable organization. | Any individual needing medical attention. |
| Legal Role | Signs off on payment agreements. | Signs consent for treatment (if capable). |
| Decision-Making | Usually, no medical decision-making (unless guardian). | Makes medical decisions (if competent). |
Summary
To summarize, a medical guarantor is a person or entity responsible for the payment of a patient’s treatment if the insurance payer fails to cover the expenses. Typically, a single guarantor is assigned per patient account, and this individual is fully responsible for the bill.
However, the guarantor may be primary, secondary, tertiary, financial, or non-financial, depending on the situation.
Nonetheless, a guarantor in medical billing is responsible for bill payments, updating billing information, verifying insurance coverage, and clearing dues. The guarantor also receives a designated guarantor number, which serves as a distinct ID in the provider system.
If your medical billing team struggles with guarantor identification, it may be wise to outsource medical billing and coding services to a third party, such as NeuraBill. These services allow medical practitioners to focus more on patient care rather than billing tasks.
