In health insurance, several terms are bandied about. In order to understand exactly what you’re purchasing, it’s helpful to understand the terminology. We’ve broken down the jargon so you can move through the picking-a-plan process with ease.
COBRA: A federal law that may allow you to temporarily keep health coverage after your employment ends, you lose coverage as a dependent of the covered employee, or another qualifying event. If you elect COBRA (Consolidated Omnibus Budget Reconciliation Act) coverage, you pay 100 percent of the premiums, including a possible small administrative fee.
Coinsurance: A percentage of costs of a covered service. While a copay is a set dollar amount, a coinsurance will differ by the service. The percentage is set, however, and is typically 15 to 30 percent.
Copay or Copayment: A fixed dollar amount you pay for a service. For instance, an office visit to your primary care physician might have a copay of $20, while a visit to a specialist, such as a dermatologist, can cost a bit more, typically $30 to $50.
Covered Services: The medical care, drugs, supplies, and equipment that are considered payable expenses under health care plans. These services are generally explained under a “schedule of benefits.” Services not covered by a plan are often listed under “benefit exclusions.”
Deductible: The amount a person has to pay annually before the insurance company starts paying. The amount varies by plan, but is usually $500 to $3,000.
Health Maintenance Organization (HMO): A network of providers. Care is managed by a primary care provider, or PCP. Medical care outside of the network is not covered except for emergencies.
Maximum Out of Pocket (OOP) Payment: The maximum payment for services required by the person insured. Once you have paid a certain amount for covered services, the plan pays 100 percent of additional covered charges.
Network: The facilities, providers, and suppliers your health insurer or plan has contracted with to provide health care services. Generally, all your care is provided through the network.
Preexisting Condition: A health condition, such as asthma or cancer, you had before the date that the new health insurance begins. The Affordable Care Act forbids refusal to cover treatment for a preexisting condition.
Preferred Provider Organization (PPO): A plan that allows services outside of a network, but at a higher cost. Some services may not be covered. A PPO does not require a primary care physician or prior authorization for referrals.
Premium: The monthly cost of the insurance.
Prior Authorization: A process used by some health insurance companies to determine if they will pay for a specific treatment, service, equipment, and even medication. It is considered a quality and cost-saving measure. Usually, an alternative service that the insurance company finds comparable is offered instead.
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