Key Terms You Need to Know in Health Insurance

Health insurance jargon reminds me of linguistics and being inundated with new, unfamiliar vocabulary. One way or the other, knowing some basic terms is important so that you know better how to make decisions regarding your health. If you are in the market for a plan or simply trying to understand your entitled benefits, by reading this guide you will know how to use these terms whenever you are dealing with health insurance.

Why Understanding Health Insurance Terms Matters

As healthcare consumers, we make decisions that affect our own financial and physical well-being. Have you ever gotten a hospital bill in the mail and thought, “Is this really what my health insurance pays for!?” That way, you can make educated decisions and effectively communicate with your healthcare providers and insurance reps.

Common Health Insurance Terms and Definitions

Below are definitions of essential health insurance terms that every consumer should know:

1. Allowable Charge: This could also be referred to as your health insurance company. The dollar amount is seen as the “reasonable value” by your health insurance company for medical procedures, as determined by either local rates or predetermined amounts.
2. Benefit: The dollar amount that the insurance company pays a plan member for medical services rendered.
3. Benefit Level: The largest dollar amount a payer will provide for a covered benefit.
4. Benefit Year: The 12-month period over which the health insurance benefits are determined (note that this can be different from a calendar year.)
5. Claim: You or your healthcare professional requests the insurance company to pay for medical services.
6. Coinsurance: Copayment after deductible So if you have 80/20 co-insurance and the claim is covered at 80%, you will be liable for paying the other 20%.
7. Coordination of Benefits: The system that prevents you from receiving the same benefits twice under more than one health plan.
8. Copayment: A system that manages the coordination of benefits to make sure you do not receive the same benefits from more than one health benefit plan.
9. Deductible: The amount of money you pay for a specific service laid out in your health policy while the insurance company pays a part or all the remaining cost.
10. Dependent: What you spend on health services before your insurance covers benefits.
11. Drug Formulary: A list of prescription medications that your health plan covers.
12. Effective Date: The day your insurance starts.
13. Exclusion or Limitation: Services provided that are not covered by your health insurance plan, or some other exclusionary phrases.
14. Explanation of Benefits (EOB): A document that describes how the insurance company processed a claim what they paid and what costs were passed on to you.
15. Group Health Insurance: The Health insurance plan all group members participate in is provided by an employer or other organization.
16. Health Maintenance Organization (HMO) Plan: A form of managed care plan that provides services for a fixed monthly premium through a network of doctors and hospitals.
17. Health Savings Account (HSA): An account that lets you put away pre-tax dollars for medical expenses, typically coupled with high-deductible health plans.
18. In-Network Provider: A healthcare provider or facility that your insurance company contracts with to provide services at reduced rates.
19. Individual Health Insurance: Coverage a person buys for himself or herself and his family.
20. Medicaid: A joint federal and state program that helps with medical costs for some people with limited income and resources.
21. Medicare: A federal health insurance program that pays a portion of hospital and medical care for the elderly, people with disabilities, and people with end-stage renal disease.
22. Out-of-Network Provider: You can visit any doctor or medical facility this is out-of-network care, and it will cost more.
23. Out-of-Pocket Maximum: The most you will pay in a year for covered services, after which the insurance company pays 100% of additional costs.
24. Payer: The health insurance company that has to pay for your treatment.
25. Point-of-Service (POS) Plan: A plan allowing members to utilize out-of-network providers at an increased cost.
26. Preferred Provider Organization (PPO) Plan: A type of health insurance plan that offers more extensive coverage for the services of healthcare providers who are part of the plan’s network but still offers some coverage for providers who are not part of the network.
27. Premium: The money you pay monthly for your insurance coverage.
28. Provider: An entity that provides healthcare services, e.g., doctors and hospitals.
29. Rider: More coverage options you can add to your basic health insurance plan.
30. Underwriting: It essentially refers to the rules insurers use to determine not only whether you are eligible for coverage but what the rates will be.
31. Waiting Period: The time a new employee must wait before being eligible for coverage under an employer’s health plan.

Conclusion

Now that you have these indispensable health insurance terms at your fingertips, you are more empowered to assess your healthcare requirements and obtain appropriate selections. Having health insurance is about much more than just understanding the jargon. It means making sure you can advocate for yourself during your journey through the healthcare process.

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