Health insurance can be confusing. We’ve gathered common terms & definitions to help you navigate the healthcare process.
Every year adults in the U.S. have to sign up for health insurance. If you choose an agent like Sean the Insurance Guy for health insurance, you gain the advantage of:
- A health insurance expert providing you with plan options that match your specific needs & budget
- A friendly guide to help you navigate the details of your healthcare plan, now and anytime time in the future
- Personal contact when you have questions about costs, coverage, or healthcare plan changes
- The same friendly guide to help you find the right plan for your family again next year
Purchasing health insurance on your own can be a daunting and even frustrating experience. This is true for young adults buying healthcare plans for the first time, new and expanding families who need quality coverage at the lowest price, and seniors whose budgets and healthcare needs change year to year. While the costs of health insurance can seem like a great burden on your wallet, it is absolutely a necessary burden. We are often not grateful for health insurance until illness or injury lands us in the hospital and we see firsthand the difference insurance makes on the bill.
To make sure you get a plan that provides the right coverage for you and your family, you need to understand the buzzwords associated with health insurance. We put together a list of common health insurance terms, definitions, and examples to help you better understand the details of your healthcare plan.
Common Health Insurance Terms
Benefits are the health care services covered under your plan, like doctor office visits, prescription drugs, hospital care, and more. The coverage documents in your health plan will detail what services are covered and excluded by insurance.
Coinsurance is the portion of costs you pay for covered health care services after your deductible has been met. Coinsurance is calculated as a percentage of the cost owed per service as opposed to a copay, which is a set rate you pay for specific services.
How coinsurance works: If a visit to your primary doctor’s office costs $100 and you have a coinsurance of 20%, before your deductible is met, you have to pay the full $100. After your deductible is met, you would pay $20 and insurance would pay the remaining $80.
There are many costs and fees detailed in your healthcare policy; some that take effect before your deductible is met and others that take effect after. Copayment or copay is the fixed amount you’ll owe for covered services after your deductible has been reached.
Example: Before Fred meets his plan’s deductible, he would have to pay $100 for each visit to the doctor. After his deductible has been paid, his copay for visiting the doctor’s office reduces to $25.
Note: like deductibles, healthcare plans with higher monthly premiums often have lower copays, and plans with low premiums often have high copays.
The deductible for your healthcare plan is the amount you have to pay for covered services before your insurance kicks in and helps with the bill. What services are covered before and after your deductible is paid will be detailed in your policy.
Example: Fred’s deductible is $1,600. If Fred is in an accident and spends several days recovering in the hospital, he will be responsible for $1,600 of the services covered under his policy. Once his deductible is met, insurance will help with payments as determined by his policy.
Group Health Plan
A group health plan is health coverage provided by employers or employee organizations like unions.
Individual Health Insurance
Individual health insurance is for individuals and families who are not offered health coverage through their employer.
Your out-of-pocket max or out-of-pocket limit is the maximum amount you will pay within the plan year for covered services. Once payments for your deductible, copayments, and coinsurance reach your out-of-pocket max, insurance will begin paying 100% of covered benefits.
Example: Fred’s insurance plan has an out-of-pocket max of $8,000. After Fred’s emergency visit to the hospital, where he spent several days in recovery, he met his $1,600 deductible and paid enough in co-insurance to reach his out-of-pocket max. That means his next visit to the doctor for covered services will cost him nothing; insurance will pick up the full bill.
Out-of-pocket costs are exactly that, the healthcare costs you pay out-of-pocket for deductibles, coinsurance, copayments, and services that are not covered by your plan. There’s good news, though. Health insurance plans include a maximum amount of out-of-pocket expenses you will pay in a policy year.
Your premium is the amount you pay each month for health insurance. Individuals who purchase a Marketplace healthcare plan can often get a tax credit to reduce the cost of their monthly premium. The premium tax credit is based on household income.
Example: Fred’s premium for his health insurance plan is $274. This fee must be paid monthly to keep Fred’s health insurance active.
It’s really important to note: plans with lower monthly premiums typically have higher deductibles, and vice versa, plans with higher monthly premiums typically have lower deductibles. You need to decide if paying more now in monthly premiums is worth paying less later should you end up with an enormous hospital bill.