Health Insurance Definitions
For anyone that does not have experience dealing with health insurance
, applying for and maintaining coverage can seem to be a dizzying ordeal. In order to fully understand what you are signing up for and to ensure that the insurance company is following through on its obligations to pay a certain amount towards medical costs, it is extremely important to understand the terms.Every health insurance policy has a deductible. A deductible is essentially a set amount of money that the insured person must pay out of pocket before being eligible for all coverage benefits. Deductibles range anywhere from $250 to $5000 generally, and insurance companies vary as to whether some medical care is covered before the deductible is met or not. They must be met on an annual basis, with policies renewing the requirement January 1st of every year.
Co-pays, or co-payments, are a set amount of money that must be paid out of pocket at an office visit or for another service for the health insurance company to pay their part. They are generally required only for a visit to a physician or nurse practitioner, emergency room visit, or visit to an urgent care center. Once this set amount has been paid, the insurance company will pay the remainder of the cost for the visit. However, any extra services administered, such as medications, tests, or even surgeries are considered separate.
Co-insurance is generally calculated in percentages. This is the percent of the final medical cost that a patient will be required to pay once the insurance company has paid their share. For example, for a policy with a co-insurance of 20%, a procedure that costs $100 will be divided accordingly. The insurance company will first receive the bill and will pay $80. Once receiving the bill from the medical office or establishment, the patient will then be responsible for $20, or 20%.
Premiums are the amount the insured person is required to pay for the insurance. Just like the fees for car insurance, premiums can generally be paid on a monthly, quarterly, or annual basis. Without paying the premium amount, health insurance coverage will be terminated.
Prior authorization is required for a number of more extensive tests, surgeries, and planned hospitalization. Minor in-office procedures generally do not require prior approval from health insurance companies, but it is necessary to know your insurance policy well and contact the insurer when in doubt. Without prior approval, planned surgeries and many other expensive procedures will not be covered by the health insurer at all, leaving the patient with an outrageous medical bill.
Out-of-pocket maximums are offered by some of the best health insurance companies, and are a relief to those lucky enough to have them. Usually these maximums include all medical costs, but some exclude the cost of co-pays. Either way the policy is written, once a patient pays a specified amount out-of-pocket for eligible expenses, the health insurance company will then pay all further medical costs for the remainder of the calendar year.
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