Far too many Americans are going without health insurance. According to the United States Census, nearly 28 million people do not carry health insurance. This was an increase of 1.9 million from the prior year.
Health insurance is a complicated subject. Many people struggle with the cost of health care.
They are also confused by how and when coverage occurs. Terms like deductibles and coinsurance are not well understood by the American people.
Read on for a comprehensive guide to health insurance terminology. With our help, you will be able to read a health insurance policy and understand how it works.
The first thing Californians are wondering is when can they apply for health insurance? The answer is commonly referred to as open enrollment.
This event occurs once per year and typically spans many weeks. If you have employer-based insurance, open enrollment will vary depending on your company’s policies. The goal is to have your new health insurance plan ready for the start of the calendar year.
There are a few exceptions to the open enrollment period. They are referred to as qualifying life events. Things like having a baby or getting married allow you to enroll or change your health care plan outside of the open enrollment period.
PPO vs. HMO
The different types of health insurance plans are confusing to some. The two primary plan types are Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO).
Of the two plan types, HMOs are typically more affordable than PPOs. HMOs encourage you to see doctors that are in-network.
They require you to see a Primary Care Physician (PCP) and get referrals to specialists. In general, HMOs do not cover out-of-network doctors and medical facilities.
The reason that PPOs are more expensive is that they provide flexibility. You can see an out-of-network doctor, albeit at a lower coinsurance rate. Also, you do not need a PCP, and referrals are not necessary.
Medicare is a government entitlement program. It provides health care coverage for America’s retirees and other qualified individuals.
One issue is that some doctors do not accept Medicare. These doctors and facilities feel that the reimbursement rate for medical services is too low.
For this reason, many Americans decide to purchase additional coverage through Medicare Advantage. These plans are often referred to as Medicare “Part C.”
Medicare Advantage allows you to expand your health care coverage. It also provides more flexibility. For example, you may not require a referral to see a specialist.
Health insurance premiums are a recurring cost to the consumer. This is the price paid to carry health insurance.
Premiums can be made in a number of ways. Those with employer-based insurance see their health insurance premiums deducted from their paycheck. Typically, this occurs on a biweekly basis.
Others elect to pay their health insurance premiums on a monthly basis. Either way, you have to determine what level of health insurance that you can afford.
Copayments are the responsibility of the policyholder. They are typically assessed when you arrive at the doctor or medical facility. It is a fixed amount that the policyholder pays before receiving a medical service.
The amount of copay required is broken out in your health insurance policy. It varies depending on the type of care you are receiving.
For example, the copayment for a PCP or a specialist is usually different. You may also make copayments for prescription drugs or at a hospital visit.
Many health insurance plans have a deductible. This is an amount that you must pay out-of-pocket.
When the deductible level is reached, your health care coverage kicks in. Up until this point, the insurance company will not be contributing for medical services. You will be able to take advantage of negotiated rates between the medical provider and the insurance company.
The next term to understand is coinsurance. Coinsurance kicks in after your deductible is reached. It is a ratio of the shared payment responsibility between policyholders and insurance companies.
For example, you may see a coinsurance policy of 80:20 in your plan brochure. This means that the insurance company is responsible for 80% of the medical cost. You are left with the remaining 20%.
Explanation of Benefits
After you see the doctor, the insurance company will prepare an Explanation of Benefits (EOB). They will mail you a copy or you can review a digital version on their website.
The EOB provides a breakdown of your insurance coverage. It will identify the allowable charge for a medical service. This is the negotiated rate between a provider and the insurance company.
Then, it will indicate if you hit your deductible or not. Also, it will break down the copay and coinsurance. This results in the member’s responsibility and what the insurance company ultimately paid out.
There will also be some additional useful information on the EOB. For example, if you disagree with the coverage, the EOB provides instructions for filing an appeal.
Most health insurance plans set a limitation on your annual out-of-pocket expenses. This information can be found in your insurance brochure.
When this amount is reached, the insurance company is responsible for all remaining medical costs during the calendar year. These limitations were put in place to protect consumers who face extraordinary health circumstances.
Each calendar year, the out-of-pocket limit is reset. You can find this information on your EOB or on the insurance company’s website.
Most insurance companies require preauthorization before undergoing a complex or expensive medical procedure. If your PCP or specialist recommends a procedure, you should contact your insurance company to see if preauthorization is necessary.
Many medical providers will contact your insurance company for you. Neither the insurance company nor medical provider is interested in putting one over on you. Everyone wants to get paid and this is why your doctor’s office may call for you.
Health Insurance Terminology
It is so important for you to understand insurance terms. Recognizing terms like coinsurance and deductible will help you financially plan for medical procedures.
If you want to learn more about health insurance terminology, contact us today to speak with a specialist.