When you buy an insurance plan, you join a group of other people to combine your healthcare purchasing power. That way, everyone shares the cost of staying healthy. You also agree to pay a monthly fee in exchange for a variety of benefits.
Here are some of the most common terms you’ll come across. Becoming familiar with them will make it easier to understand the details and total cost of the plan:
Benefits: Benefits are payments the plan makes to cover all or part of covered medical expenses. They vary according to the plan you choose and usually include a portion of the doctors’ visits, prescription medicine, hospital charges, ER visits and more.
Premiums: These are the monthly payments you make to keep your health insurance active.
Deductible: This is the amount you’re responsible to pay for covered medical expenses (the medical services that are covered under your plan) before your insurance begins to pay each year. When you hear that someone has “met their deductible,” it means they have paid their part of their healthcare costs. Their plan will begin to pay its portion for healthcare costs; however, you may still have to pay a co-pay or a percentage of the cost of care, called coinsurance. Typically, anything you pay out of your own pocket, except for premiums, co-pays and some prescription drug costs, will go toward meeting your deductible.
Co-pays: Some plans include co-pays, which are paid on the day of service as you checkout. Sometimes your co-pay amount is posted on your insurance card. These are set prices for various services you may need. For example, you may pay a $20 co-pay for a visit to your primary care physician, or a $100 co-pay for a visit to the emergency room. Dr. Saunders is considered a specialist.
Coinsurance: Coinsurance means the costs of covered medical services are shared between you and your insurance company after the deductible has been met. For example, if a plan has 80/20 coinsurance, the plan would pay 80 percent of a covered medical expense, while you would pay 20 percent of the same covered medical expense.
Maximum Out-of-Pocket: This is the most money you will be required to pay in a year for deductibles, co-insurance and co-payments. It is a specific dollar amount that is part of the health insurance plan. After you’ve reached that amount, the insurance company may cover the cost of the rest of your covered medical expenses.
Claims: After you have a medical service, the doctor or facility that provided the service will file a claim with your insurance company. A claim is a formal request asking for payment based on the terms of the insurance plan. Your insurance company will review the claim to make sure it is valid. If so, the appropriate amount will be paid out to the insured person or to the doctor or facility that filed the claim.
Explanation of Benefits: Also known as an EOB, is a statement sent by a health insurance company to covered individuals explaining what medical services were paid on their behalf as well as any amount that may be the patient’s responsibility.
Here’s an example of how insurance works:
Let’s say you develop a serious illness, need surgery and a hospital stay. The costs of your covered medical expenses add up to $50,000.
Without health insurance, you would be responsible for paying all $50,000. That’s a big financial hit! But with insurance, your financial responsibility is much smaller.
For example, we’ll say these are the terms of your health insurance:
*Your deductible is $5,000 *Your coinsurance is 20% *Your maximum out-of-pocket is $7,000
In this case, you are responsible for the first $5,000 in charges. This is your deductible. After you’ve paid your deductible, there are $45,000 of expenses left. You are responsible for 20% coinsurance- that is 20% of the remaining cost, or $9,000. This is more than your maximum out-of-pocket of $7,000. So you pay $5,000 toward the deductible and only $2,000 of the coinsurance. Your insurance plan pays the rest of the covered expenses.
Here’s how it breaks down: *Your payments come to $7,000 *Your health insurance pays $43,000
Prior Approval for Medical Services (Precertification): For certain services (ex. droopy upper eyelid surgery), your health insurer may require Dr. Saunders to obtain approval before the services are rendered to ensure they meet guidelines for payment. Services that require precertification may be found in your insurer’s Guide to Benefits or by calling your insurer’s member services line. Please note that obtaining a precertification does not guarantee payment for services. A precertification only confirms whether a service meets determination of “medical necessity.”
In-Network Versus Out-of-Network Providers: An in-network provider is one contracted with the health insurance company to provide services to plan members for specific pre-negotiated rates. An out-of-network provider is one not contracted with the health insurance plan. Typically, if you visit a physician or other provider within the network, the amount you will be responsible for paying will be less than if you go to an out-of network provider.
If you have any questions regarding your particular health insurance policy please call the member services help line, which is usually posted on the back of your insurance card.