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We don’t have to tell you that insurance is hard to understand. It’s flat out complicated, convoluted, and confusing. When it comes to your hard earned money, it’s important to be educated on the insurance lingo, so you don’t get led astray when making medical decisions. Here’s a list of all the insurance terms that are not so self-explanatory.
A deductible is the amount of money you’re required to pay for medical bills before your insurance kicks in. If your deductible is $2000, your insurance won’t cover any medical costs before you pay $2000 yourself. Some insurance companies will have certain services that they will cover the cost of before you meet your deductible, so call your insurance company if you want to find out if that’s the case for you.
Example: Your deductible is $1000, and you have not put any medical bills towards it yet. You just received a medical bill for $1200. You will have to pay $1000 to meet your deductible, and you will pay a coinsurance for the rest of the bill.
If your insurance plan has a deductible, you will have a coinsurance. A coinsurance is the percentage of a doctors bill you pay after you’ve already met your deductible.
Example: If you have a deductible of $2000, and you’ve already met that deductible, you’re now only responsible for your coinsurance for the rest of the doctors appointments you have that year. So if you go to the doctor and it costs $500, if your insurance card says your coinsurance is 25%, you would pay $125. (125 is 25% of 500)
A co-payment (co-pay) is the amount of money that you are required to pay for medical services or medication. Your co-pay can be different for different services, so be sure to check your insurance card before going to the doctor. This is different from coinsurance because a coinsurance is a percentage of your doctors bill, while a co-pay is a flat rate.
Example: If you go to the dermatologist and your insurance card says your copay to see a specialist is $30, you will pay $30 for your appointment. You may receive a bill later for all or a portion of the medical bill. The copay is just the amount you pay in the doctor's office before you leave.
After you receive care from a doctor, either you or your doctor will submit a request for payment from your health insurance company. The insurance company will then review the request, and pay you or your doctor. Sometimes, you will pay the doctor first, and after you submit the claim to your insurance and it gets approved, the insurance company will reimburse you.
A dependent is a child, or any relative, that you can claim under your insurance policy. For a child to be eligible to be your dependent, they need to be under the age of 26, rely on you for their primary source of financial support, and must have lived with you for at least 6 months at one point in time. This includes biological children, stepchildren, adopted children, or foster children. You may also claim your spouse as a dependent, or relative that relies on you for more than 50% of their financial support.
Once someone is your dependent, they will most likely have access to the same insurance plan that you have access to. To figure out what benefits your dependents receive, you can call your insurance company’s customer support number.
The effective date on your insurance card refers to the day when your insurance coverage becomes active. This date will also be representative of when your first premium (monthly cost) is due.
A formulary is a list of medications that your insurance plan covers. These include brand-name and generic medications that you would not need to pay out-of-pocket for.
An in-network provider is any doctor, clinic, hospital, laboratory, or facility that takes your insurance. When you’re looking for a new doctor or doctor's office, it’s best to try to find one in-network, because your costs will be cheaper.
Medical services are classified as inpatient care when you are required to stay in the hospital for one or more days. For something to be classified as inpatient care when it comes to insurance, your insurance company may require your doctor to write a note saying they are requiring you to stay in the hospital.
A cost that would be considered out-of-pocket would be any medical costs that are not covered by your insurance. This includes things like coinsurance, co-pay, and deductibles.
Your out-of-pocket maximum is the maximum amount of money that you are responsible for paying during your insurance contract (one year) before your insurance company starts covering 100% of in-network medical charges. It’s important to note that your insurance premium (monthly charge for coverage) is NOT included in your out-of-pocket costs, so do not include your premium if you’re trying to calculate how close you are to reaching your out-of-pocket maximum.
Example: If your out-of-pocket maximum is $2000, and you’ve already paid $1800 out-of-pocket for medical bills this year, you are $200 away from your out-of-pocket maximum. If you now receive a doctor's bill that is $500, you will only owe $200, and your insurance will cover the additional $300. This means for the rest of the year, your insurance will cover 100% of your medical bills. You will only be responsible for your premium.
*This is not common, most people never hit their out-of-pocket maximum.
Your premium is a monthly payment you make to your insurance company to keep your insurance plan. It doesn’t matter if you received healthcare that month or not, it will be the same for as long as you are within the same health insurance contract (usually 1 year).
Example: You choose a health insurance plan for the year. Your monthly payment for this plan is $60/mo. You pay $60 every month to keep your insurance, regardless of if you use your benefits. This monthly payment is called a premium.
Prior authorization (PA)
Prior authorization requires that your doctor get approval from your health insurance company before they’re able to prescribe you a medication (if you want it to be covered by insurance). Once you are pre-approved for a medication, it ensures the insurance company will cover the cost of that medication.
Some payers require you to initiate use of your benefits through them before you are able to go through a new provider.
We hope this breakdown of insurance terms was helpful for you. If there’s a term that’s confusing you that we didn’t cover here, message us on Instagram, Facebook, or Twitter and we’ll make sure to give you an explanation, and add it to this list for others!
If you are experiencing a life threatening emergency please call 911 or go to the nearest emergency room