Understanding Health Insurance Terms

Introduction

The best way to get you familiar with the terms you need to understand in order to make a smart health Insurance plan choice is to walk you through a typical process. For example, if you have appendicitis and you need to have an emergency surgery to remove your appendix, a typical list of bills you could receive might look like this: $25,000 for the hospital bill, $15,000 for the surgeon, $8,000 for the assistant surgeon, $5,000 for the radiologist, bringing your total bill for that appendicitis to $50,000.

Claims Process and Explanation of Benefits

Now, during the claims process, you’ll receive a statement from the health insurance company that will explain what medical treatments and/or services were paid for on their behalf. You’ll also receive an explanation of benefits. This is where you see the most savings with your health insurance plan. Now, though these bills are real, the insurance company has already negotiated these expenses. This process will create a patient savings where 25% to sometimes more is off from the total cost. Although $30,000 is a lot lower than the original $50,000, $30,000 can still throw many people into bankruptcy.

Key Health Insurance Terms

Deductible

Next, let’s take a look at the deductible. Your deductible is the amount that you must pay before an insurance policy begins to kick in and pay for your medical expenses. This brings us to the coinsurance. Now, this is where your policy begins to reduce your cost. It limits the percentage of the total charge. If your coinsurance is 30%, your carrier would pay 70% of the remaining balance of the charges after your deductible.

Out-of-Pocket Maximum

And your policy has another important provision that helps reduce the amount of money you may have to pay for larger claims: the out-of-pocket maximum. It limits the maximum out-of-pocket costs for in-network expenses during any one year. The latest regulation states that the maximum out-of-pocket cost is $3,500 for an individual plan and $7,000 for a family plan. So after our insurance coverage, the initial $53,000 balance for our appendicitis would only end up costing us $3,500. In other words, just under 12.5% of the total cost.

Copay or Copayment

One more benefit that your health insurance plan gives you is your copay or copayment. It’s a fixed amount that you’ll pay for your health care service. It’s independent of the cost of care and is used so you have a known fixed cost for things like doctor’s office visits, getting a prescription filled, an emergency room visit, or for each additional day that you spend in the hospital. The copay amount can vary, and most of the time, copays are included as part of the out-of-pocket maximum.

Conclusion

Now that you’re a little more familiar with what these terms mean, you may want to learn more about some of the other aspects of health insurance. To make sure you can see your doctor, learn about restricted access to your health providers.