10 Key Health Insurance Terms To Know

Health insurance is confusing. Deductibles, co-pays, premiums – there’s a lot to learn and keep track of. Especially if you want to avoid buying insurance that doesn’t end up covering you when you need it most.

Luckily, we’ve identified and spelled out the 10 key health insurance terms to know and what to look for when buying health insurance.

In Network: refers to medical providers that have negotiated rates directly with your insurance company. In Network Providers are generally significantly cheaper and more likely to be covered by your insurance plan. Make sure that your health insurance has local hospitals and physicians in-network.

Out of Network: refers to medical providers who don’t have pre-negotiated rates with your insurance company. Out of Network providers generally charge higher rates and are less likely to be covered by your insurance plan.

Deductible: the amount of money you need to pay out of your own pocket before an insurance plan will start paying. This can range from $500 to $10,000 (or more). Generally the higher the deductible the lower the premium, but the more risk you’ll be taking. You want to balance the expected amount of healthcare you’ll need over the next year with the deductible amount when buying insurance.

Co-Payment: Similar to co-insurance, except you’re required to pay at the time of service rather than afterwards. For example, your insurance may have a co-payment of $30 for a doctor’s visit. Most insurance plans have some sort of co-payment. You should watch out to make sure its not too large.

Co-Insurance: The amount of the medical bill that you’re responsible for once your deductible has been paid. This is usually a percentage (such as 20%) of the amount above the deductible. For instance, if you have a $5,000 deductible and 20% co-insurance, and receive a $10,000 hospital bill, you’ll be responsible for paying $6,000 ($5,000 deductible plus 20% of the remaining $5,000, or another $1,000). Be very careful of this number, as some companies will hide a high co-insurance with a low deductible to make a plan seem more attractive than it really is.

Out of Pocket Maximum: The maximum amount of money that you need to spend in deductibles, co-payments, and co-insurance in a given year before the insurance company will cover everything. This is usually a round number and can be as high as $20,000 or more (which means you would need to spend $20,000 before your insurance company covers the rest). Once you hit this, you no longer need to worry about paying for medical care.

Premium: The amount that you pay the insurance company just for the privilege of having them cover you. Usually talked about as a ‘monthly premium’ or ‘annual premium.’

Pre-Existing Condition: Any disease, disability, or condition that you have prior to enrolling with an insurance company. While the ACA made denying coverage for pre-existing conditions illegal in most cases, there are still a few types of insurance where it is allowed. If you are on a ‘short-term’ plan or have to renew your health insurance every 3-6 months – double check your benefits language, your insurance company may be able to deny you for a pre-existing condition.

Referral: An official notice from a qualified physician to an insurer for a patient to see another qualified physician. Often required by insurance plans for patients to see specialty care physicians.

HSA: A health savings account. This allows you to put tax-free dollars into a savings account (you’ll get a deduction on your taxes for the amount you put in), and spent that money on a variety of healthcare related costs – from hospital and physicians visits to drugs and over the counter medicine. It’s always a good idea to get an HSA associated with your plan if you can.