7 Common Health Insurance Terms and Definitions You Absolutely Must Know
Health insurance practically has its own language of specialized terms and definitions.
Nevertheless, with a knowledge of some of the key terms you can keep your head above the confusion and remain informed on the ins and outs of health insurance coverage.
Premium: The premium is the amount you pay monthly to the health insurer to have coverage.
The premium is like a "cover charge" or sign-up fee that you pay on a recurring basis, usually monthly.
Deductible: The deductible is what you pay out of pocket to your health care providers (doctors, hospitals, and so forth) before your health plan begins to pay.
The amount of the deductible may vary a great deal depending on the insurance plan and company.
Typically, plans with lower deductibles have higher premiums, and coverage with higher deductibles have lower premiums.
Copayment: This is a fixed amount that you must pay for a particular service as your share of the charges.
For example, your health insurance plan might require you to pay a 30 dollar copay for each primary care doctor office visit, or it might require a 10 dollar co-pay for each generic prescription you fill.
The copay is typically paid directly to your health care provider.
Coinsurance: Unlike a fixed co-pay, coinsurance is by definition a percentage of the approved, total cost of a service.
For example, an insurance company might agree to pay 80% of its approved charges for certain services and require a you to pay a 20% coinsurance.
Using this example, if the company approves 100 dollars for a doctor visit, then the insurer would pay 80% or 80 dollars, and you would pay 20% or 20 dollars.
Out-of-Pocket Maximum: This is the maximum amount that you pay for services after which the company picks up all costs.
Out-of-pocket maximums are determined by the health plan and may apply to only certain kinds of services, such as doctor office visits or prescription drugs, or the company might say that it applies to all services they cover.
It is important that you understand exactly which services out-of-pocket maximums apply to.
In-network: You often see the term, "in-network" in reference to health maintenance organizations (HMOs) and preferred provider organizations (PPOs).
In health care, the "network" refers to those doctors and hospitals who have a contract with a particular insurance company to provide health services to its members.
The health plan pays more (meaning you pay less) for services received in-network and less or nothing for services received out-of-network.
HMO: An HMO means health maintenance organization.
This is a particular kind of managed care plan that typically requires you to use only in-network providers.
That, in turn, means that you must use only those doctors and hospitals, and other health care providers who have a contract with that plan.
If you go outside of the network, you would be responsible for paying the charges.
Normally, an HMO assigns you a primary care doctor and requires you to get a referral to see a specialist.
Nevertheless, with a knowledge of some of the key terms you can keep your head above the confusion and remain informed on the ins and outs of health insurance coverage.
Premium: The premium is the amount you pay monthly to the health insurer to have coverage.
The premium is like a "cover charge" or sign-up fee that you pay on a recurring basis, usually monthly.
Deductible: The deductible is what you pay out of pocket to your health care providers (doctors, hospitals, and so forth) before your health plan begins to pay.
The amount of the deductible may vary a great deal depending on the insurance plan and company.
Typically, plans with lower deductibles have higher premiums, and coverage with higher deductibles have lower premiums.
Copayment: This is a fixed amount that you must pay for a particular service as your share of the charges.
For example, your health insurance plan might require you to pay a 30 dollar copay for each primary care doctor office visit, or it might require a 10 dollar co-pay for each generic prescription you fill.
The copay is typically paid directly to your health care provider.
Coinsurance: Unlike a fixed co-pay, coinsurance is by definition a percentage of the approved, total cost of a service.
For example, an insurance company might agree to pay 80% of its approved charges for certain services and require a you to pay a 20% coinsurance.
Using this example, if the company approves 100 dollars for a doctor visit, then the insurer would pay 80% or 80 dollars, and you would pay 20% or 20 dollars.
Out-of-Pocket Maximum: This is the maximum amount that you pay for services after which the company picks up all costs.
Out-of-pocket maximums are determined by the health plan and may apply to only certain kinds of services, such as doctor office visits or prescription drugs, or the company might say that it applies to all services they cover.
It is important that you understand exactly which services out-of-pocket maximums apply to.
In-network: You often see the term, "in-network" in reference to health maintenance organizations (HMOs) and preferred provider organizations (PPOs).
In health care, the "network" refers to those doctors and hospitals who have a contract with a particular insurance company to provide health services to its members.
The health plan pays more (meaning you pay less) for services received in-network and less or nothing for services received out-of-network.
HMO: An HMO means health maintenance organization.
This is a particular kind of managed care plan that typically requires you to use only in-network providers.
That, in turn, means that you must use only those doctors and hospitals, and other health care providers who have a contract with that plan.
If you go outside of the network, you would be responsible for paying the charges.
Normally, an HMO assigns you a primary care doctor and requires you to get a referral to see a specialist.