Health insurance can be a complex topic, with its own set of jargon and terminology. During Open Enrollment, understanding the key terms related to health insurance is essential in making informed decisions about your coverage. In this article, we give you 10 of the key terms you will see while looking through health insurance plans and help you better understand them.
A deductible is the amount of money that a policyholder is required to pay before their insurance coverage kicks in. For example, if you have a $1,000 deductible, you will need to pay that amount out of pocket before your insurance provider starts covering your medical expenses. It’s important to note that certain services, such as preventive care, may be exempt from the deductible.
The premium is the amount of money policyholders pay on a regular basis to maintain their health insurance coverage. This is typically a monthly or yearly payment, and it ensures you remain covered by your insurance plan. If you’re on a company policy, this money is normally deducted from your paycheck. If you have your own plan, it’s important to budget for your premium as it is a recurring expense.
A copayment, often referred to as a copay, is a fixed amount that policyholders must pay for a specific healthcare service. For example, your health insurance plan may require a $20 copay for doctor visits. Copayments are typically paid at the time of service and do not contribute towards your deductible.
Coinsurance is the percentage of the cost of a covered healthcare service that a policyholder is responsible for paying. Unlike a copay, coinsurance is usually a percentage rather than a fixed amount. For instance, if your policy has a 20% coinsurance requirement, you would be responsible for paying 20% of the cost while your insurance covers the remaining 80%.
5. Out-of-Pocket Maximum
The out-of-pocket maximum is the maximum amount of money that a policyholder is responsible for paying in a given year. Once you reach this maximum, your insurance plan will cover all eligible expenses for the remainder of the year. This includes deductibles, copayments, and coinsurance. It’s important to know your out-of-pocket maximum so you can plan for potential healthcare costs.
A network refers to the group of healthcare providers, hospitals, and facilities that have a contract with your insurance company to provide services at discounted rates. When seeking medical care, it’s usually advantageous to choose providers within your network to ensure that you receive the maximum benefits from your insurance plan. Going outside of your network may result in higher out-of-pocket expenses.
Preauthorization is the process of obtaining approval from your insurance provider before receiving certain medical treatments or services. This is often required for procedures that are deemed to be non-emergency or non-urgent. It’s valuable to understand the preauthorization requirements of your insurance plan to avoid unexpected denials or additional expenses.
A formulary is the list of prescription drugs that your insurance plan covers. Each plan has its own formulary, which categorizes medications into different tiers based on their cost and coverage. It’s important to review your plan’s formulary to understand which prescription drugs are covered and at what cost.
9. In-Network vs. Out-of-Network
When it comes to healthcare providers, in-network refers to those who have a contract with your insurance company and offer services at discounted rates. Out-of-network providers, on the other hand, do not have an agreement with your insurance company and may result in higher out-of-pocket expenses for you. Understanding the difference between in-network and out-of-network providers can help you make informed decisions about where to seek medical care.
10. Explanation of Benefits
An Explanation of Benefits, commonly referred to as an EOB, is a statement that you receive from your insurance company after a claim has been processed. It provides an itemized overview of the services rendered, the amount billed by the healthcare provider, the amount covered by your insurance, and any remaining balance that you may be responsible for paying. Reviewing your EOBs can help you understand the breakdown of your healthcare expenses and ensure accuracy.