Understanding health insurance and the health industry is
much easier if you recognize some of the basic terminology and how it applies
to you and your health insurance policy. If you have a health insurance plan
and aren’t sure how it works or what the terminology means, take a few minutes
to read the explanations below. Knowing these terms and what they mean to you
can greatly aid you in dealing with your health care providers, insurance company,
insurance agent, or during the health benefits shopping process.
Benefit Year
This is the 12-month period in which your benefits are calculated. Most
insurance companies use a CALENDAR year, which is January 1 to December 31, but
a few will use a 12 month period from when your policy goes into effect. For
example, if your insurance goes into effect on June 1, the END of your benefit
year is May 31. Make sure that you understand how your benefit year will be
calculated.
Deductible
Deductible means the amount of money you must pay out of your pocket for
medical expenses EACH YEAR before your health insurance begins paying out.
Deductibles are usually reset to 0 at the beginning of each calendar or benefit
year. Many insurance companies offer health plans that have benefits that are
not subject to having to meet your deductible each year such as doctors office
visits, immunizations, wellness or routine exams, etc. An easy way to remember
what this term means and how it works is this:
When you have incurred medical expenses, all bills must be sent to the
insurance company. When the insurance company looks at your bills, they then
look at your policy and see how things are covered. They will then add up what
the combined medical expenses have been for the year to date: determine what
your deductible is and how much you have already paid towards meeting your
deductible for the year, and pay out according to how your insurance policy
says it will.
So in a nutshell, the insurance company is “deducting” your financial
responsibility for medical expenses each year from the total combined medical
expenses before they have any responsibility to pay out…hence the term
“deductible”.
Co-Pay
A co-pay is an amount that is paid by the patient to a provider at the time of
service. It will either be a flat fee (like $15 or $20) or it can be a
percentage of the service provided. The percentages or fee may vary depending
on the type of service provided. A co-pay is different than “coinsurance” – see
next.
Coinsurance
Coinsurance is the percentage paid by the insurance company after you pay the
deductible. Example: Your health insurance pays 70%, you pay 30%. The insurance
company pays 70% coinsurance, you pay 30% coinsurance. Most health insurance
policies will have a limit on the amount of coinsurance you have to pay out
each year this is known as your “Annual Coinsurance Maximum” or “Stop-loss”.
Annual Coinsurance Maximum
After paying your deductible and after paying your coinsurance (classically 20%
or 30% of medical expenses) to a certain dollar amount, your health insurance
will pay 100% for the remaining costs in the calendar year. Example: After you
pay your deductible, your health insurance pays 70% of medical expenses and you
pay 30%. Once you reach the coinsurance maximum, you no longer pay 30% of the
medical expenses because the insurance pays 100%.
Out of Pocket Maximum or Stop Loss
Stop Loss is the maximum amount of money you will have to pay out of your
pocket in the benefit year.
Lifetime Maximum
This is the limit of the money the health insurance will pay out over your
lifetime. Most major medical health insurance policies will be a $2 million
lifetime maximum, while others will go as high as a $12 million lifetime
maximum. In general, it is not recommended to have a policy with less than a $2
million lifetime maximum.
Office Visits
When you visit a doctor in their office they normally bill the health insurance
company for an "office visit." Most health insurance plans pay office
visit expenses at the coinsurance (generally 70% or 80%) after the deductible.
Some health insurance plans pay office visit expenses at the coinsurance rate
but waive the deductible, which means you don’t have to reach the deductible
amount before they will cover their portion of the expense. Still other health
insurance plans pay office visit expenses in full after a co-pay (usually $25
or $30). It should also be noted that office visits can be classified in two
different categories. One category is usually called “Routine Care,” “Wellness
visits” or “Preventative care” (see definition below). The other type of office
visit is deemed as “Medically Necessary” (see definition below). Certain health
insurance policies cover each of these types of visits differently and other
plans do not cover them at all. If having these types of office visits covered
by your health insurance policy is important to you, make sure you let your
agent know so that they can help find the right plan for you.
Preventive Care
Preventive Care is classically defined as routine exams, immunizations, well
child care, and cancer screenings. These include your yearly exams and checkups
for things such as physicals, pap smears, mammograms, etc. Not all plans cover
preventive care. It may not be a wise use of your money to have preventative
care included in your plan if you never go to the doctor. A good health
insurance agent can help you determine if this is necessary coverage for you.
Medically Necessary
These are the visits utilized for your smaller ailments such as colds, flu, ear
infections or minor accidents. Not all plans cover ‘medically necessary’
visits, so make sure you know if your policy includes these exams if you need
them covered. You may consider purchasing accident insurance or adding a rider
(explained below) to your policy to cover these types of issues.
Diagnostic Lab and X-Ray
These are tests involving laboratory or imaging services (such as x-ray, CAT
scan, etc.) to diagnose a health problem. These services are usually paid at
the coinsurance (typically 70% or 80%) after the deductible.
Chiropractic Care
When you visit a chiropractor for spinal manipulation or other services, these
expenses are customarily paid at the coinsurance rate (70% or 80%) either after
the deductible is met, or by waiving the deductible. Most health insurance
plans limit the number of chiropractic visits/services to 10 or 12 per year –
especially if the deductible is waived. After this, additional visits are not
paid by the health insurance plan, and you will be responsible for the full
amount of the bill.
Inpatient or Outpatient Care
When you receive care from a hospital (inpatient or outpatient services), these
expenses are customarily paid at the coinsurance rate (70% or 80%) after the
deductible has been met.
Emergency Room
When you receive care from a hospital emergency room, these expenses are
customarily paid at the coinsurance level (70% or 80%) after the deductible.
Most health insurance plans also require you to pay additional co-pay (commonly
$75-$100) for each emergency room visit. A number of plans waive this
additional co-pay if you are actually admitted to the hospital through the
emergency room and the plan will pay as an inpatient service. A plan can
sometimes be structured to have separate coverage for accidents as an
additional rider (see definition below) to your policy.
Prescription Medications
Prescription medications can be classified as generic, brand name, or
non-preferred brand name (see below for definitions). Please Note: Not all
health insurance plans pay for prescription drugs, so if you already take
prescription drugs or think you will need help in the future with prescription
drugs, you will want to make sure that you are purchasing a plan that includes
this coverage. Prescription drugs may be covered at the coinsurance rate
(70-80%) after a deductible specifically for prescription drugs is met, other
plans may include Prescription drugs in the total deductible for the plan.
Generic Medications
Drug manufacturers are permitted to sell a generic version of a medication
after the patent expires for the brand name medication (generally 20 years
after the brand name medication was registered). Generic medications are
equivalent to the corresponding brand name medication, but are much less
expensive than the brand name medication. Health insurance plans frequently
provide better payment for generic medications as an incentive for you to ask
for the generic version. About half of all prescription medications filled in
the United States, are filled with generic medications.
Brand Name Medications
Brand name medications are more expensive than generic medications. Most health
insurance plans create a limited list of brand name medications that they will
pay for and many health insurance plans also provide less coverage for brand
name medications than for their generic counterparts.
Non-Preferred Brand Name Medications
Most health insurance plans create a limited list of brand name medications
they will pay for. If your brand name medication is not on this list, it might
be paid at a lower level under "Non-Preferred Brand Name
Medications."
Maternity
Some health insurance plans cover the cost of maternity, which includes doctor
and hospital charges for prenatal care as well as labor and delivery. Maternity
is expensive to add into a health insurance policy because it is considered a
“guaranteed expense” for the insurance company. If a woman becomes pregnant, it
is a safe bet that there is going to be medical expenses incurred! If there are
no complications and the birth goes well, the insurance company will be out a
large monetary portion of the cost of delivery and even more if there are
problems with the delivery or the newborn. Insurance companies price maternity
so that they can still maintain profits. In some cases it may be best to save
your money and pay for the prenatal care and the delivery out of your own
pocket (or on a credit card) and let the insurance cover the catastrophic
events. The difference you save in the monthly cost of having maternity
coverage may be well worth it to you. Remember, once you have a policy that
covers maternity, you can’t just remove the maternity coverage after the
pregnancy is done! You will continue to pay for that maternity coverage for as
long as you have that policy.
Mammography
Mammography is a specific type of imaging that uses a low-dose x-ray system for
the examination of breasts to detect early breast cancer in women experiencing
no symptoms and to detect and diagnose breast disease in women experiencing
symptoms. Current guidelines from the American Cancer Society (ACS), and the
American Medical Association (AMA) recommend a screening mammography every year
for women, beginning at age 40. Various plans will have automatic coverage for
mammograms but some will not. Several states (like Washington State, for
example) have specific guidelines that require companies to have coverage for
mammograms in their policies as an automatic benefit.
Mental Health
Outpatient mental health services include visits to a licensed counselor,
therapist, or psychiatrist. Inpatient mental health services include admission
to a psychiatric hospital. Many plans do not cover mental health services.
Rehabilitation Therapy
Rehabilitation therapy may include physical therapy, occupational therapy,
speech therapy, massage therapy, cardiac rehabilitation, and chronic pain
therapy. Most health insurance plans limit rehabilitation therapy to a certain
number of visits per calendar year or to a certain dollar amount that they will
pay for rehabilitation for either the year or for a lifetime.
Rider
Any thing that changes the way your policy acts by default is called a “Rider”.
A rider can be anything from an exclusion of coverage for a medical condition,
or additional coverage for potential conditions. (As in an “accident rider”
mentioned earlier in this report)
Occupational Coverage/On the job coverage
The largest portion of health insurance plans do not cover occupational related
medical expenses. This can be a HUGE pitfall for self employed people. Always
make sure that if you need to be covered while you are working that your plan
will give you “on the job coverage”. If you get injured or sick while you are
on the job and you do not have Workman’s Compensation or Labor and Industries
accident coverage, you may have to pay for ALL medical expenses out of your own
pocket.
Vision Coverage
Vision coverage is usually broken into two parts: vision exam, and vision
hardware. Vision exam benefits include the cost of a refractive exam used to
test vision acuity (20/20, 20/40, etc.). Vision hardware represents the cost of
eye glasses or contact lenses. A number of health insurance plans do not cover
vision exams or hardware. However, medical issues relating to the health of the
eye (like Glaucoma) are almost always covered under the regular medical portion
of the health insurance plan.
Doctor Directory
Each insurance company will have a list of doctors that the company has
negotiated terms for payment of services with. You can go to the insurance
company's website to find a listing of contracted “preferred providers”.
This information may help you understand a policy that you already have, or aid
you in understanding a policy that you may be thinking about purchasing. The
more knowledge you have about what the industry “jargon” means, the more you
will be able to make informed decisions about the insurance you choose to use.
