Health insurance is confusing. Deductibles, co-pays, premiums – there’s a lot of health insurance terms to learn and keep track of. Especially if you want to avoid buying health insurance that doesn’t end up covering you when you need it most.
Luckily, to help you better understand health insurance terms, we’ve identified and spelled out the 10 key health insurance terms to know and what to look for when buying health insurance below.
1. In Network
This is one of the more common health insurance terms that you’ll see as a patient. ‘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.
2. Out of 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.
This is one of the more confusing medical insurance terms to know. ‘Deductible’ means 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 health insurance.
You co-payment is 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 is 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.
6. Out of Pocket Maximum
The health insurance term out of pocket maximum is 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.
The premium is the amount that you pay the insurance company just for the privilege of having them cover you. This health insurance term is usually talked about as a ‘monthly premium’ or ‘annual premium.’
8. Pre-Existing Condition
A pre-existing condition is 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.
A referral is an official notice from a qualified physician to an insurer for a patient to see another qualified physician. A referral is often required by insurance plans for patients to see specialty care physicians.
An HSA stands for a health savings account. An HSA 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 spend 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.
We hope these key health insurance terms above are a little more clear and understandable now. If you have questions surrounding confusing language on a medical bill regarding your health insurance or simply need expert help lowering your medical bills, you can contact us at Resolve today or schedule a free consultation with one of our advocates.
Braden founded Resolve after experiencing first hand how unfair the system is for patients. Prior to Resolve, he built and ran Operations for a renewable energy company and then built and ran Product, Growth, and Operations for a VC-funded edtech company. He received his MBA from Dartmouth’s Tuck School of Business and BA in Philosophy from the College of William and Mary. When not trying to lower healthcare costs he can be found outdoors mountain biking, skiing, or hiking with his dog.