Understanding Health Insurance Terminology 101
Understanding Health Insurance terminology first will be helpful in understanding Medicare policies!
Premium: A monthly payment for health insurance. If you’re fortunate enough to have employer-provided insurance, the company picks up all or part of the premium.
Copay: Your copay is a predetermined rate you pay for health care services at the time of care. For example, you may have a $25 copay every time you see your primary care physician, a $10 copay for each monthly medication and a $250 copay for an emergency room visit.
Deductible: The deductible is how much you pay before your health insurance starts to cover their portion of your bills. For example, if you have a $5,000, deductible, you must pay $5,000 before your insurer starts covering their portion of costs. The deductible resets yearly.
Coinsurance: Coinsurance is a percentage of a medical charge that you pay, with the rest paid by your health insurance plan after your deductible has been met. For example, if you have a 20% coinsurance, you pay 20% of each medical bill, and your health insurance covers 80% until you reach Out-of-pocket maximum.
Out-of-pocket maximum: The most you could have to pay in one year, out of pocket, for your health care before your insurance covers 100% of the bill. Plans vary from as low as $2,000 (if you have employer-sponsored insurance) up to $8,000 for an individual and $13,700 for a family.
How it all works together
In general, it works like this: You pay a monthly premium just to have health insurance. When you go to the doctor or the hospital, you pay either full cost for the services, or copays as outlined in your policy. Once the total amount you pay for services, not including copays, adds up to your deductible amount in a year, your insurer starts paying a larger chunk of your medical bills, typically 60% to 90% with most policies paying 80%. The difference that you pay is called coinsurance.
You’ll continue to pay copays or coinsurance until you’ve reached the out-of-pocket maximum for your policy. At that time, your insurer will start paying 100% of your medical bills until the policy year ends or you switch insurance plans, whichever comes first.
But there’s just one caveat: That’s how it works only if you always choose the right doctors, clinics and hospitals — those within your health plan’s provider network. If you use an out-of-network doctor, you could be on the hook for the entire bill, depending on which type of policy you have.
Network: The group of doctors and providers who agree to accept your health insurance. Health insurers negotiate and contract rates for care with certain doctors, hospitals and clinics that are generally lower than their cash-pay prices.
Out-of-network: A provider with which your insurance plan is not contracted with.If you get care from an out-of-network provider, you may have to pay the entire bill yourself or just a portion. Your portion of out-of-network charges should be indicated in your insurance policy summary.
In-network: A provider who has agreed to work with your insurance plan and has negotiated lower payment rates. When you go in-network, your bills will typically be cheaper than if you go out-of-network and what you pay will count toward your deductible and out-of-pocket maximum.
Contact me if you are ready to look at Medicare and want to make sure you understand the different options and plans available to you!