When you were growing up health insurance likely seemed simple. You flash your card at the doctor’s office, and your insurance company pays your bill. You might have been shocked when you first looked into plans. Premiums, deductibles, out-of-pocket and in-network…what does it all mean? No one taught you this in school. Fortunately, it’s never too late to learn important terminology. Here are the top 7 health insurance terms explained.
Health Insurance Terms Explained
Premium is a fancy word that shows up frequently when looking at Obama care plans. It simply means your payment. Premiums are usually due monthly. You must pay your premium on time to keep your coverage active. Autopay is a great way to never miss a due date.
Doctors, as well as facilities, can be in-network or out-of-network. You ideally want to use healthcare providers in your network. Be mindful if your in-network doctor works at multiple locations. Not every location will necessarily be covered. Out-of-network costs may not be covered by your insurance at all or maybe a higher price to the policyholder. You can contact provider offices to verify network coverage.
Your deductible is the amount of money you must pay towards healthcare each year before your insurance company starts to contribute. It is not surprising that deductibles are generally inversely related to premiums. That means the higher your premium, the lower your deductible. If you know that you will have a lot of health expenses, a high premium with a low deductible may make the most sense for you.
Your out-of-pocket maximum shouldn’t be confused with your deductible. Your maximum is the highest amount will pay before your insurance company covers all of your expenses. Look for plans with lower maximums. Your out-of-pocket max does exclude your premiums. That amount will always be payable by the policyholder.
Copay is the copayment that you make alongside your insurance company. For most insurance plans it is a predetermined amount that you pay for certain services. Those services include things like a trip to your general practitioner or prescriptions. Your copays contribute to your deductible and will be completely covered once you meet your out-of-pocket maximum.
Coinsurance is closely related to copay, but they are different. Coinsurance is a set percentage you pay rather than a fixed amount. Your insurance plan might cover 75% of emergency room costs. That means that you would be responsible for the remaining 25% until you meet your annual maximum.
HMO stands for health maintenance organization. HMO is one of four acronyms used for the major types of health insurance plans. The others are PPO, POS and HDHP. PPO stands for the preferred provider organization. POS stands for the point-of-service plan. HDHP stands for a high deductible health plan. Each type varies by the availability of doctors, costs and paperwork. There are advantages to each type, so weigh all the options.
Now that you’ve learned the basic terminology, you’re ready to be an insurance salesman! Ok, maybe not. You are ready to make an informed decision about selecting your own plan though.