Terms to Know Before Purchasing Health Insurance

Knowing these health insurance terms can help you pick out the right plan and save you the headache of an unexpected claim.

 

  1. Premium: This is what you pay for health insurance. Sometimes you don’t pay the entire monthly premium yourself, for instance, employer provided health insurance or subsidized policies purchased through the state exchange.
  2. Provider Network: Health care providers in the network have agreed to offer care and services at discounted rates. This means you pay less for your covered claims when you see an in-network provider. Some companies have multiple networks, so it’s important to know which doctors are in your network prior to purchasing a new plan.
  3. Prescription Drug Formulary:  Prescription drug cards utilize a drug formulary when determining cost sharing on a prescription drug claim.  The formulary is typically divided into 3 or 4 tiers with some meds not included at all.  Your cost sharing will vary depending on the tier.  Knowing the Rx formulary when choosing a plan can help save you money at the pharmacist.
  4. Prior Authorization: Is a requirement to obtain advanced approval to provide specific services or procedures. Prior authorization is required for many health services. It is a good idea to call the prior authorization number on the back of your card before a scheduled procedure.
  5. Claim: This is simply a request to pay for a health service covered by your plan. Usually, an in-network provider sends all the claim information to your insurance company. However, if you use an out-of-network provider, you may have to send the claim form.
  6. Cost Sharing: In most cases, your health plan only pays part of your covered health care expenses. You’re responsible for paying some of your health care even when you have health coverage. This is known as “cost sharing” because you share the cost of your health care with your health insurer. The three most common types of cost sharing are Deductibles, Copays and Coinsurance.
  7. Copay:  Copays are a flat fee you pay for a claim, such as doctor visits or prescriptions.  If a claim is covered by a copay then you typically are not responsible for anything over the copayment amount.
  8. Deductible: For claims not covered by copays, you are responsible for 100% of a claim until you reach your deductible limit.  A family deductible is usually 2 to 3 times the individual.
  9. Coinsurance:  This is a percentage of a claim paid after your deductible is met and before your out-of-pocket maximum has been met.  Claims subject to deductibles, coinsurance, and out-of-pocket maximums are typically not covered by a copay.  The most common coinsurance would be 80/20; whereas after your deductible is met, the insurance company will pay 80% of your covered claims leaving you with the remaining 20% to pay until you meet your out-of-pocket maximum.
  10. Out-of-Pocket Maximum: Once you meet your health plan’s annual out-of-pocket maximum, your health benefits will pay 100% of your covered health care expenses for the rest of the year, excluding your premium.  Your out-of-pocket maximum usually includes your deductible and coinsurance, but, often times excludes office visit & prescription drug copays.
  11. Enrollment Period:  The time of year when Individual major medical plans can be sold.  There are two periods every year.  The first is the open enrollment period, which occurs in the fourth quarter.  Anybody can enroll during this period.  The second period is the special enrollment period, which is triggered by an event and occurs outside of open enrollment.  See the special enrollment period tab for a list of triggering events.