Health Insurance 101
Navigating health insurance feels intentionally complicated. Copays, deductibles, out-of-pocket maximums, are all words that can seem confusing and hard to navigate when your doctor is rushing you out the door with a prescription to fill so they can get to their next patient. Trying to understand your insurance offered through your employer, or figuring out how “exchanges” work through the Affordable Care Act (ACA), or navigating the Consolidated Omnibus Budget Reconciliation Act (COBRA), Medicaid or Medicare is enough to want to stick your head back in the sand. If you get a bill, you’re crossing your fingers that it’s covered by whatever insurance you have.
But understanding basic healthcare insurance terms can help arm you for when you go into your doctor’s office. Knowing the basics of your policy and what all those terms means will put you way ahead of most Americans.
The amount of money you must pay each year for eligible medical expenses before your insurance policy starts paying. For example, a $500 deductible means you will pay the first $500 of covered services yourself. Co-pays and premiums usually don’t count towards your deductible.
The fixed amount you pay for each service provided (for example, $15 for each visit to your doctor). Sometimes a plan will have no co-pay, and sometimes you won’t have to pay a co-pay until you reach your deductible.
The amount you pay for services provided after your deductible has been met. This is usually expressed as a percentage that you’re responsible for. Let’s say your coinsurance is 20% – meaning insurance covers 80% of the cost. A doctor’s visit with test costs $100. Once you’ve met your deductible (you’ve already paid $500 in medical expenses for the year, using our previous example), your bill for the doctor’s visit will be $20, while insurance covers the other $80.
This is the maximum amount of money you can pay during a year of coverage. After you’ve met your deductibles co-payments and coinsurance, your health plan will pay $100 of the remaining costs of covered benefits for that year.
Explanation of Benefits
Your insurance company’s statement, an explanation, of how your claim is paid. It will show all the information related to the claim, including how much you’re responsible to pay, how much your insurance company will pay and how much of your deductible has been met.
Most insurance companies have agreements with selected doctors and clinics to provide services at discounted prices. This is known as a “network”, and you’ll pay less for services if you use a doctor or clinic in the network. A healthcare provider that is part of the insurance company’s network is referred to as an In-Network Provider, while Out-of-Network Providers will cost more. Make sure to look up doctors through your health plan’s website to confirm that they are in your network before you visit them.
Health Maintenance Organization (HMO)
HMO plans require that all of your health care services are coordinated through your primary care physician (PCP). This PCP is usually someone you designate and name to your insurance when you begin your policy. HMOs can require that any other doctor you see will need to be a referral from your PCP.
Preferred Provider Organization (PPO)
A PPO health plan won’t require you to coordinate your health care services through a primary care physician, but you’ll still save money by selecting a doctor who is an In-Network Provider. A PPO plan will cost more monthly than an HMO plan but your PPO will cover more services and could have better deductibles.