Navigating the healthcare system can be confusing, often due to the complex terminology used by professionals in the field. Understanding these terms is crucial for making informed decisions about your health and healthcare options. This article will explain some of the most common healthcare terms, presented in a clear and accessible manner.
Terms you might hear while shopping for insurance
Premium
A premium is the amount you pay for your health insurance policy. This payment can be made monthly, quarterly, or annually, depending on your plan. It is essentially the cost of having health insurance, not including any additional fees you might pay when you use medical services.
Deductible
The deductible is the amount of money you must pay out of pocket before your insurance starts to cover its share of the costs. This figure varies widely depending on the plan and can apply per year, per incident, or per family member. High deductible plans often have lower premiums, but more out-of-pocket expenses when care is needed.
Out-of-Pocket Maximum
This is the maximum amount you will pay during a policy period (usually one year) for healthcare services under your plan. After you have spent this amount on deductibles, copayments, and coinsurance, your health plan will pay 100% of the costs of covered benefits.
Flexible Spending Account (FSA)
An FSA allows you to use pre-tax dollars to pay for eligible medical expenses. This can include prescriptions, deductibles, and other health-related items. An FSA is not insurance. Think of it as a special purpose bank account with a debit card that you can only use for qualifying healthcare expenses. The benefit is that you lower your taxable income, potentially saving money on taxes while covering necessary healthcare costs.
Terms you might hear at your doctor / pharmacy
Network
Healthcare providers that are part of your health plan's network have agreed to provide services to members of the plan at pre-negotiated rates. If you choose to see a provider who is not in the network, you may have to pay more, or your expenses may not be covered at all.
Copayment
A copayment, or copay, is a fixed amount you pay for a specific service or prescription medication. Copays are usually required at the time of the service and are not related to reaching your deductible. For example, you may have a $30 copay for each visit to a primary care doctor or a $15 copay for generic prescription drugs.
Prior Authorization
Prior authorization is a requirement that your physician must obtain approval from your health insurance plan before a specific service is delivered. This process ensures that the service is covered under your policy, preventing unexpected charges and helping manage the costs of care.
Coinsurance
Coinsurance is similar to a copay, but instead of paying a fixed amount, you pay a percentage of the cost of your healthcare services after meeting your deductible. For instance, if your coinsurance is 20%, and the healthcare service costs $100, you will pay $20 while your insurer pays the remaining $80. Your doctor/pharmacist might not know what this amount needs to be, and might bill you after the fact.
Terms you might hear after your doctor's visit
Explanation of Benefits
An Explanation of Benefits (EOB) is a statement sent by your health insurance company after you receive healthcare services. It explains what treatments and services were covered under your insurance, the amount billed, the amount covered, and any balance you owe the provider.
Appeal
If your health insurance claim is denied, you have the right to an internal review and, if necessary, an external review. This means you can ask your insurer to reconsider its decision. Understanding the appeal process is crucial, especially in situations where you believe a service should be covered. Health insurers are required to respond to formal customer appeals by law!
Understanding these terms can greatly enhance your ability to navigate the healthcare system more effectively and make better-informed decisions regarding your health and financial well-being. If you're ever unsure about terms not covered here or specific details about your insurance plan, don't hesitate to contact your provider for clarity and guidance.
