Health insurance policies are complicated and confusing.
It can be especially difficult for patients to decipher health insurance policies because they are written with complicated terms and legal jargon.
To help clear up the confusion and empower patients, here are 12 health insurance terms that every patient needs to know.
Allowed Maximum Benefit
Allowed Maximum Benefit or “maximum dollar limit” is the maximum amount of money that your health insurance company will pay within a certain period of time. That could refer to a lifetime maximum benefit, or an annual maximum benefit.
A copayment or “copay” is the amount you pay each time you use a health care service. Not all services require a copay, but most do. For example, a doctor’s visit usually requires a patient to pay a copay. Some insurance policies do not require a copay for an annual physical exam.
Copays can vary based on the service. Emergency room visits frequently have a higher copay. Copayments are not usually counted towards your out-of-pocket limits.
Coinsurance is the amount of money you pay out-of-pocket after you have met your deductible. Usually, coinsurance is a percentage of a services cost. The amount you pay in coinsurance is applied towards your out-of-pocket maximum. That could be 70 percent for the patient — while the insurance covers the remaining 30 percent.
Before health insurance pays anything, the patient is required to pay a deductible. Different plans set different deductible levels. If you have a $2,500 deductible, you must pay $2,500 out-of-pocket before your insurance covers any health care services.
There are often exceptions to the deductible for certain preventive services, immunizations and health screenings.
Essential benefits are covered by your insurance, regardless of whether you have met your annual deductible.
Under the Affordable Care Act, essential benefits are defined as services that every health care plan must cover. Essential Benefits include the following ten services:
- Ambulatory patient services (aka, outpatient care)
- Emergency services
- Pregnancy Care (including maternity and newborn care)
- Mental health and substance abuse
- Prescription Drugs
- Habilitation and Rehabilitation (includes devices)
- Laboratory services
- Preventive and wellness services
- Pediatric care (includes dental and vision for pediatric patients)
Health savings account (HSA)
A health savings account (HSA) allows patients to set aside pre-tax money into a special account that can be used for health care expenses. Money in a health savings account can go towards copayments, hospital fees, prescriptions. Unused funds in your health savings account can be rolled over to the next fiscal year.
Health Maintenance Organization (HMO)
An HMO is a type of health coverage insurance that restricts patients access “to care from doctors who work for or contract with the HMO.”
If you decide to see a physician outside of the HMO, it likely will not be covered by the HMO, meaning you may be responsible for 100% of the cost. Under an HMO, all services must be funneled through your Primary Care Physician. In other words, you cannot see a cardiologist without a referral from your PCP.
Maximum (Out-of-Pocket Maximum)
A “maximum” is just what it sounds like – the limit on how much either you will have to pay out-of-pocket in an “out-of-pocket maximum.” Maximums can apply to what your insurance will cover for you in a year or a lifetime.
If you see the word “maximum,” pay close attention to the what counts towards the cost.
Insurance companies frequently deny patients access to a medication, service or treatment by claiming it’s not a medical necessity. When an insurance company denies a treatment, the burden of proof falls on the patient to provide proof of medical necessity from their doctor or specialist.
To challenge an insurance denial, a physician will provide a letter of medical necessity.
Out-of-pocket costs are the amount that the patient pays for a service, treatment or medication. If a service is not paid by your insurance, the patient pays for that service entirely — with no amount paid by insurance.
Out-of-pocket applies to any healthcare cost you have to bear, including coinsurance or uncovered services. Some health insurance plans include out-of-pocket maximums, or out-of-pocket limits, which cap a patient’s costs during a period of time.
Every month, a patient pays an insurance premium as the cost of obtaining health insurance.
If you get your health insurance through your job, your employer may pay a portion of the premium. If you have insurance through a state health insurance marketplace, you pay the full premium yourself.
Point of Service (POS)
Point of Service plans, like HMOs, require a patient to see a Primary Care Physician before visiting a specialist. Point of Service plans differ from HMOs in that there is usually a larger network of contracted doctors and providers.
Just like any other kind of network of care, if you go out of the POS network, your out-of-pocket costs will be higher.
Preferred Provider Organization (PPO)
PPOs differ from HMOs in that, you do not need to have a Primary Care Physician. You can see a cardiologist without a referral. You can also see doctors and get services outside of the PPO, though you will pay more out-of-pocket for those services. Services within a PPO network are normally covered with a copayment.