Your Health Terms Glossary (4/17/2007)
“Your Health Insurance Glossary”
With words like “co-pay,” “premium,” and “deductible,” wading through the sea of health insurance terms can be overwhelming. Before you tackle choosing a health insurance plan or deciding if a health savings account is right for you, it’s helpful to understand all of the words that you’ll encounter in the paperwork.
Below you’ll find a list of the most basic health insurance terms along with their definitions and the most important things to know about each.
- Provider - Anyone in the healthcare industry who provides a healthcare service to you, including doctors, hospitals, laboratories, x-ray centers, surgery centers, and pharmacies
- Premium - The amount you will pay each month to purchase a health insurance plan. In many cases your employer will pay a portion of the premium and you will pay the remainder. Most plans with family coverage in 2006 have a premium cost of more than $10,000 a year. Premiums vary by the amount of your deductible (see below for definition).
- In-Network and Out-of-Network Providers - Health insurance companies negotiate with doctors and hospitals to provide services to the people they insure. The doctors and hospitals they contract with are referred to as “in-network providers” because they have agreed to provide services to you at a discounted amount, while “out-of-network” doctors and hospitals do not provide services to insured patients at a discounted price. If your doctor is out-of-network, you’ll pay more for services than if you visit an in-network doctor. Your health insurance company can provide a list of doctors and hospitals that are in-network, and a doctor or hospital can tell you whether they are “in-network” for a particular insurance plan.
- First Dollar or Out of Pocket - the amount you pay from your own funds before any insurance benefits are paid. This term generally applies to the sum of your co-pay ,deductible and any co-insurance you are directly billed for when you receive a medical service.
- Co-Pay - The amount you will pay out of your pocket each time you seek medical service, and almost every health insurance plan includes a co-pay system. For many insurance plans, each time you see a doctor or purchase a prescription drug, you will pay between $20 and $50 before your health insurance will pay any part of the cost – this is the co-pay. You’ll also be charged a co-pay for outpatient x-rays and surgeries and these are often more expensive than a doctor’s visit or prescription. Generally, co-pays are not credited to your deductible or co-insurance (see these defined below).
- Deductible - The amount you will pay before any health insurance benefits are paid. This amount is called the deductible. Deductibles vary but generally are in the amount of $250 to $1,500. Some health insurance policies today are offering deductibles as high as $5,000. Usually the higher the deductible the lower the premium (see below for definition).
- Co-Insurance After you’ve met your deductible, your insurance company begins to pay a portion of all covered healthcare expenses you incur. This is called “co-insurance.” Co-insurance pays until a limit is met, generally $10,000. After your deductible and co-pay, many health insurance programs pay co-insurance of only 80% of expenses up to $10,000.
- How do co-pays, deductibles, and co-insurance relate? Let’s say you have a health insurance policy that has a $50 co-pay, a $500 deductible, and an 80% co-insurance. If you have outpatient surgery that costs $5,000, here’s what you will pay:
- $50 co-pay
- $500 deductible
- $890 co-insurance (20% of the remaining $4550 after co-pay and deductible since your health insurance company only pays 80% of expenses up to $10,000).
- Explanation of Benefits or EOB - the report you receive from your health insurer whenever you receive a medical service from any provider. It explains for each service how much was paid to the provider and what your responsibility will be for the deductible and co-insurance.
Next, we’ll use some of these terms to help you figure out what your estimated medical costs will be for the coming year which calculation is critical in choosing the insurance plan that is best for you and your family.
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