Essential Health Insurance Terminology

A rudimentary understanding of some basic insurance terminology is essential in order to avoid finding yourself where the health coverage  you thought you had, covers less than you thought it would. A wise consumer is an educated consumer, especially when so much is at stake.

Understanding these terms and how they apply to your policy is essential. Learning to understand the fine print in a policy can save you a small fortune in the down the road.

Most people lack even a small understanding about their current coverage and no idea what they need to be safely covered in a new policy.

Here are a   few types of plans and simple terms to get you started. Buying health insurance doesn’t have to be confusing. A little knowledge and the learning of simple terms, will save you some grief and enable you to find a plan with  maximum coverage and affordability.

PPO: Preferred Provider Organizations is an arranged network of physicians and hospitals and specialists who charge a lower fee to members of that network. Members of the PPO plans have the option to see a specialist without approval and additional paper work.

HMOs: Health Maintenance Organizations were created for long term care of clients. Clients are limited to specialists within their network and must see a Primary Care Physician first to clear the visit as well. Clearance may even be required for emergency room visits.

HMO’s were popular in the 1990s, created with an emphasis on   preventive care. HMOs are no longer as popular as they had been. Physicians resented the interference, the disincentive to treat patients by the very nature of the system. Clients resented the assembly line treatment and the continuing rising cost of health care and premiums.

Deductibles:   The deductible is the amount of money you your own must pay out of pocket before the insurance company starts to kick in. There is an inverse relationship between your deductible and your monthly premium. The higher your deductible, the lower your premium.

Coinsurance:    Coinsurance can be confusing. Coinsurance is generally expressed in percentages, usually 80/20, or 70/30. It refers to the percentage of the bill, after you pay the deductible, that the insurance company is responsible to pay. The rest is mostly your responsibility – at least, until you reach your “maximum out of pocket” amount.  

Maximum Out of Pocket:  This term refers to the maximum amount that you as an individual, will be responsible to pay in a given year (not including prescription drugs). Make sure you have this figure before purchasing your insurance.

The Co-pay:  Generally associated with physician office visits and prescription purchases, a co-pay is the part of the bill that you are responsible to pay per visit, or purchase. Not all plans have copays. Sometimes there is a deductible which must be met before a co-pay is available and sometimes, as in the case of physician visits, there is a set limit to the number of times per year you may visit a physician at the discounted co-pay rates.

Most plans offer a fixed co-pay for prescriptions, which is the price you will have to pay no matter how much the cost would ordinarily be. There are, however, often exceptions for brand named drugs and special meds. These medications generally also have a separate deductible that must be met before the co-pay plan is activated.  This deductible is separate from the general health insurance plan deductible. 

Remember, as a general rule, a higher deductible/co-pay will result in a lower premium