Health Insurance Terms Explained

Confused by all the different health insurance terms and what they mean?

When you buy a health insurance plan, you agree to pay a monthly fee in exchange for a variety of benefits. Here are some common terms you’ll often hear over the course of a medical visit.

Benefits – This is the amount payable by the insurance company to a plan member for medical costs. Benefits vary according to the plan and usually include a portion of the cost of doctors’ visits, prescription medicine, hospital charges, ER visits, and more.

Benefit Level – This is the maximum amount a health insurance company has agreed to pay for a covered benefit.

Claim – After you receive a medical service, the facility that provided the service will file a claim with your insurance company. This claim is a formal request asking for payment based on the terms of your insurance plan. After making sure it’s a valid claim, your insurance company will pay the appropriate amount to the doctor or facility, based on which plan you have.

Coinsurance – This is the amount you pay to share the cost of covered services after your deductible has been paid. For example, if your health plan has 80/20 coinsurance, the plan would pay 80% of a covered medical expense and you would pay 20% of the charge.

Copayment – Some plans include co-pays. These are set prices for various health services. For example, when you visit a doctor you may need to pay a $20 co-pay for a visit, or you may have a $100 co-pay for a visit to the ER. After you pay your portion, your insurance company will pay the remainder based on your plan.

Deductible – This is the amount you must pay each year to cover eligible medical expenses (covered under your plan) before your insurance begins to pay. If you hear you have “met your deductible,” it means you have paid your part of your healthcare costs and your plan will begin to pay its portion; however, you may still have to pay co-pay or a percentage of the cost of care, called coinsurance. Usually, anything you pay out of your pocket (except for premiums, co-pays and some prescription drug costs), will go toward meeting your deductible.

Explanation of Benefits (EOB) – The EOB is your health insurance company’s written explanation of how a medical claim was paid, including what the company paid and what portion of the costs you must pay. After each date of service, you will get an EOB mailed to you, as will your health provider.

Network – This is a group of doctors, hospitals, and other healthcare providers that insurance companies contract with to provide services at discounted rates. You will generally pay less for services received from providers “in your network.”

Premiums – This is the amount you or your employer pays each month for insurance coverage.

Maximum Out of Pocket – Depending on if you have individual or family coverage, this is the most money you are required to pay in a year for deductibles, co-insurance and co-payments. It’s a specific dollar amount that’s part of the health insurance plan. After you’ve reached that amount, your insurance company may cover the cost of the remaining covered medical expenses.

Hopefully, understanding these terms will allow you to make more informed healthcare decisions and prepare financially for any health services you may receive.  

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