The introduction of Obamacare means millions of previously uninsured Americans must now choose a health insurance plan. That means lots and lots of unfamiliar terms and concepts to confuse even the savviest of consumers. Don’t despair, however: We have compiled some of the most common health insurance terms, and we explain them here for you in straightforward terms. (The information is available from the Health and Human Services and Employee Benefits Security Administration’s guide).
The allowed amount may also be referred to as “payment allowance,” “eligible expense,” or “negotiated rate.” It refers to the maximum amount your health insurance plan will pay for health care services that are covered by your insurance.
This is another word for the bill either you, your doctor, or health care provider sends to your health insurance company.
COBRA – Consolidated Omnibus Budget Reconciliation Act
It is easier to think of COBRA as a Continuation of Benefits plan. In other words, if you lost your job and had been covered by that company’s health, this law means you can pay to continue your health insurance cover at the company’s pricing for a certain length of time. Your former employer’s pricing may not always be lower than buying insurance independently, so you should always shop around, particularly now that Obamacare (the Affordable Care Act) is in full effect.
Co-insurance is the portion of the cost of a health service that you pay even after the deductible (see below) is met. If, for example, you have a $2,000 deductible and 20% co-insurance, you pay all of the cost of a specific health service up to $2,000, plus 20% of any subsequent costs. Your insurance plan will cover the remaining 80% of the cost.
A co-payment, or co-pay, is the amount you pay for a specific service. If your co-pay to visit your doctor is $25, for example, you pay $25 for every visit that is not for preventive care <link to previous blog>, and your insurance covers the remaining cost. This fee reduces an insurance company’s costs because it discourages people from attending the doctor for even the most minor issues.
The amount you must pay yourself before your insurance benefits kick in. If, for example, you have a $1,000 deductible, your insurance will only start paying when your costs exceed $1,000. Remember, however, that Obamacare stipulates that preventive care (such as an annual check-up) should be covered by your health insurance, so it is funded in most plans.
EOB – Explanation of Benefits
An EOB is a receipt that details your services and charges, what your health insurance covers, what items you must pay for, and other details. It is important to check your EOB for any mistakes and to ensure that the bill is correct.
Essential health benefits
Some health care services must be covered by certain plans. They include the following ten categories: ambulatory patient services, chronic disease management, emergency services, hospitalization, laboratory services, maternity and new-born care, pediatric services such as vision and oral care, prescription drugs, preventive services, and rehabilitative services.
HDHP/CDHP – High Deductible Health Plan/Consumer Directed Health Plan
A HDHP or CDHP is a health insurance plan that offers reduced monthly premiums and higher deductibles than a conventional plan. Monthly premiums can be as much as half the cost of traditional plans. They are best suited to those who are healthy and do not make regular use of the health-care system.
HMO – Health Maintenance Organization
A HMO plan stipulates that you use in-network providers (see below). If you use out-of-network providers, your consultation will not be covered by your insurance. As well as that, you cannot see any kind of specialist without a referral from your primary doctor. Many HMO plans will contact you to ensure you are receiving preventive care and assistance in managing chronic illnesses.
In- and out-of-network
An in-network provider is a health care office that is included on your insurance company’s approved list of doctors or providers. He or she has negotiated with the health insurance company to provide services for people on your insurance plan. An out-of-network provider does not feature on your insurance plan’s approved list, so if you use one of these out-of-network providers, you will pay more, as there are no negotiated prices.
Remember when choosing your Comiere doctor <link appropriately> to ensure that he or she is covered by your insurance company’s list of in-network providers.
Out-of-pocket maximum refers to the maximum amount you will pay during the term of your policy (most policies are valid for a year) before your insurance plan starts to cover the entire of the allowed amount. If your insurance plan has an out-of-pocket maximum of $5,000, the insurance company covers all of the costs for the rest of the plan year once you’ve reached $5,000. This total excludes your premium and any health care services not covered by your plan. Be aware that some insurance plans do not include out-of-network payments, co-insurance payments, co-payments, and other expenses or deductibles when calculating this amount, so it is important to pay close attention to the plan instructions.
PPO – Preferred Provider Organization
A PPO plan gives you the option to use the list of In-Network providers, as well as Out-of-Network providers. Given that using an out-of-network doctor will cost more, you will need a good reason to take that option.
The premium is the price you pay monthly for your health insurance plan.
Preventive care generally refers to routine health care such as annual checkups, patient counseling, immunizations, and screenings (such as mammograms) that prevent disease. Preventive care is completely covered under most insurance plans without the need for co-pays.