Common Health Insurance Terms

 

Navigating the world of health insurance can seem like a complex and daunting task, especially with the variety of terminology used in policies and contracts. Understanding these terms is key to making informed decisions about your health coverage as an individual and for professionals that have the task of verifying patient/client benefits and submitting insurance claims. This article will break down some of the most common health insurance terms to help with grasping a better understanding of health insurance plans and what is covered.

1. Premium

A premium is the amount paid for health insurance every month. This is a fixed cost, regardless of how much healthcare you use during the month. Premiums are often paid by individuals directly, or they may be partially covered by an employer if health insurance is being received through employment.

2. Deductible

A deductible is the amount of money that must be paid out-of-pocket for covered medical services before the insurance plan starts to share the cost. For example, if the deductible is $1,000, then that amount needs to be paid before the insurer begins to pay its share of the healthcare costs.

3. Copayment (Copay)

A copayment, or copay, is a fixed amount paid for a covered healthcare service, usually when services are received. For example, a doctor’s visit might require a $25 copay, while a prescription might have a $10 copay. Copays are typically due at the time of service.

4. Coinsurance

Coinsurance is the percentage of the cost of a covered healthcare service that's required to be paid after meeting the deductible. For example, if the coinsurance is 20%, then the amount due will be 20% of the cost of medical services, and then the insurance plan will cover the remaining 80%.

5. Out-of-Pocket Maximum

The out-of-pocket maximum is the most that a person will have to pay for covered services in a policy period (typically a year) before the insurance covers 100% of the remaining costs. This includes deductibles, copayments, and coinsurance. Once a person reaches this limit, then the insurer pays all additional covered expenses.

6. Network

A network refers to the group of doctors, hospitals, and other healthcare providers that are contracted with a specific insurance company to provide services at discounted rates. There are typically three types of network plans:

• HMO (Health Maintenance Organization): Requires choosing a primary care physician (PCP) and getting referrals for specialist care.

• PPO (Preferred Provider Organization): Offers more flexibility and allows a person to see any doctor or specialist without a referral, though seeing an out-of-network provider may be more expensive.

• EPO (Exclusive Provider Organization): Similar to PPO but does not cover any out-of-network care except in emergencies.

• 
  

7. Preauthorization (Prior Authorization)

Preauthorization is a requirement from insurance companies to approve certain services or medications before being received. Without prior approval, the insurance plan may not cover the cost of the treatment.

8. Exclusions

Exclusions refer to specific conditions, treatments, or services that are not covered by the health insurance policy. These can vary depending on the insurer and plan but may include things like cosmetic surgery, certain fertility treatments, or experimental treatments.

9. Lifetime Limit

A lifetime limit is the maximum amount of coverage a health insurance policy will provide for a covered individual over the course of their lifetime. While many policies no longer impose lifetime limits on essential health benefits, some plans may still have limits for non-essential services.

10. Preventive Care

Preventive care refers to services that help prevent illness or detect issues early when they are easier to treat. These services are often covered with no out-of-pocket costs to the member under many health insurance plans. Common examples include vaccinations, screenings (like mammograms or colonoscopies), and wellness exams.

11. Explanation of Benefits (EOB)

An Explanation of Benefits (EOB) is a statement sent by the insurance company after you receive a medical service. A copy is sent to the patient/client and to the healthcare provider. This statement can be on paper or sent as an electronic ERA (Electronic Remittance Advice). It explains what was covered, how much the insurance company paid, and what the patient/client may owe, including any deductibles, copayments, and coinsurance.

12. Claim

A claim is a request for payment that the patient and/or healthcare provider submits to the insurance company for services rendered. This request is sent either on a paper claim form or electronically to the insurance company. Once the insurer processes the claim, it will issue payment according to the terms of the member's plan.

13. Out-of-Network

Out-of-network refers to healthcare providers who do not have a contract with the patient's/client's insurance company. If an out-of-network provider is seen, then the cost of services may be a lot more, or your insurer may not cover the costs at all.

14. Urgent Care

Urgent care refers to medical care for conditions that require immediate attention but are not life-threatening. Many insurance plans cover visits to urgent care centers, which are typically less expensive than emergency room visits.

15. Emergency Services

Emergency services refer to medical services received in an emergency situation, such as an accident or a sudden, severe health issue. Health insurance plans typically provide broader coverage for emergency services, including coverage for out-of-network emergency care in some instances.

16. Health Savings Account (HSA)

A Health Savings Account (HSA) is a tax-advantaged account that allows a person to set aside money to pay for qualified medical expenses. The patient/client can use funds from an HSA to cover your deductible, copays, and coinsurance, and the funds roll over from year to year.

17. Flexible Spending Account (FSA)

A Flexible Spending Account (FSA) is another type of tax-advantaged account used to pay for medical expenses. Unlike an HSA, funds in an FSA generally must be used by the end of the year, or they may be forfeited, though some plans may allow a small carryover.

In conclusion, understanding these common health insurance terms is essential for helping individuals make informed decisions about coverage, and be fully aware of any upfront costs that may be due at the time of service. Healthcare providers will also better understand what's covered or not covered prior to services and be able to calculate the amount that a patient/client will owe before they receive services.

REMEMBER: The rule of thumb for healthcare providers is to collect money from the patient/client while they are in the office as opposed to trying to bill them later and collect.