14.4: Health Insurance - Key Terms
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Part of health literacy is understanding key health insurance terms. This will allow for educated decisions when choosing a health insurance plan. Below are some basic key terms that are helpful to understand when researching health insurance plans:
In-Network Providers: health care providers who are contracted with your health insurance plan to provide services at a contracted or discounted rate.
Out-of-Network Providers: health care providers who are not contracted with your health insurance plan. Out-of-network coinsurance usually costs you more than in-network coinsurance because there is no contracted or discounted rate.
Exclusive Provider Organization (EPO): A managed care plan where services are covered only if you use doctors, specialists, or hospitals in the plan’s network (except in an emergency).
Health Maintenance Organization (HMO): A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won't cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and focus on prevention and wellness.
Point of Service (POS): A type of plan where you pay less if you use doctors, hospitals, and other health care providers that belong to the plan’s network. POS plans require you to get a referral from your primary care doctor in order to see a specialist.
Preferred Provider Organization (PPO): A type of health plan where you pay less if you use providers in the plan’s network. You can use doctors, hospitals, and providers outside of the network without a referral for an additional cost.
Premium: The amount paid for your health insurance every month. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, copayments, and coinsurance.
Deductible: The amount you pay for covered health care services before your insurance plan starts to pay. With a $2,000 deductible, for example, you pay the first $2,000 of covered services yourself.
Many health insurance plans cover certain services such as check-ups, disease management, and preventive services before the deductible has been met. Family plans often have both an individual deductible, which applies to each person, and a family deductible, which applies to all family members.
Generally, plans with lower monthly premiums have higher deductibles. Plans with high monthly premiums usually have lower deductibles. Those who use their health insurance often would probably be wise to choose a plan with a slightly higher premium but a lower deductible, which may save money in the long-term.
After paying the deductible, you will usually pay only a copayment or coinsurance for covered services. Your insurance company pays the rest.
Copayment: A fixed amount ($20, for example) you pay for a covered health care service after you've paid your deductible. Let's say your health insurance plan's allowable cost for a doctor's office visit is $100. Your copayment for a doctor visit is $20. If you've paid your deductible: You pay $20, usually at the time of the visit. If you haven't met your deductible: You pay $100, the full allowable amount for the visit.
Copayments (sometimes called "copays") can vary for different services within the same plan, like drugs, lab tests, and visits to specialists.
Coinsurance: The percentage of costs of a covered health care service you pay (20%, for example) after you've paid your deductible. Let's say your health insurance plan's allowed amount for an office visit is $100 and your coinsurance is 20%. If you've paid your deductible: You pay 20% of $100, or $20. The insurance company pays the rest. If you haven't met your deductible: You pay the full allowed amount, $100.
Out-of-pocket maximum: The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the costs of covered benefits.
Although this is not an all-encompassing list of key terms for health insurance, these are some of the terms you are likely to encounter when shopping for health insurance.
More in-depth information can be found at Healthcare.gov/glossary.