Insurance Information

Understanding Health Insurance

Health insurance is one of the most important investments we ever make. Understanding basic terminology pertaining to your individual or family health insurance is important. Listed below are several commonly used terms, definitions, and explanations.

Disclaimer: The following information is intended to be educational, inform readers, and may be different from the terms and definitions in your plan. Some of these terms also might not have the same meaning when used in your policy or plan. Please contact a licensed health insurance agent or health insurance company directly for detailed information regarding your health insurance plan.

Deductible

The Deductible is the amount you pay annually for healthcare before your health insurance pays anything.

The deductible is a fixed amount.

Typically, the deductible does not apply to preventative health checkups and many routine health services.

Example:

If you have a $1,000 deductible, you must pay $1,000 for your own care out-of-pocket before your insurer starts covering a higher portion of costs.

Co-Payment

Co-payment, or co-pay, is the flat fee you pay every time you go to the doctor or fill a prescription.

Co-pay respresents your cost for routine services defined by your plan for which your deductible does not apply.

A co-pay is a fixed amount and the amount can vary by the type of service.

You may also have a co-pay after you pay your deductible, and when you owe co-insurance.

 

Example

A plan may require co-pays as follows:

  • $20 for office visits
  • $40 for specialty visits
  • $100 for emergency room visits
  • $15 for generic prescriptions
  • $30 for name-brand drugs

Co-Insurance

Co-Insurance is the percentage you must pay for medical care, after your deductible has been met.

The co-insurance is a variable amount.

Your co-insurance kicks in after you hit your deductible.

Co-insurance is a healthcare cost sharing between you and your insurance company.

Co-insurance is similar to a co-pay, although co-insurance generally applies to less routine expenses, and is expressed as a percentage rather than a fixed dollar amount.

You may find plans with:

  • No co-insurance requirements
  • Some with 20/80 co-insurance
  • 500/50 co-insurance
  • or other combinations

Examples:

  1. If your plan has a $100 deductible and a 30% co-insurance and uses $1,000 in services, you will pay $100 plus 30% of the remaining $900, up to your out-of-pocket maximum.
  2. If your co-insurance is 80/20, that means that your insurer covers 80% of annual medical expenses and you pay the remaining 20%.

Explanation of Benefits

Explanation of Benefits is not a bill.

Explanation of Benefits is a statement from your health insurance plan giving you an overview of the costs associated with your service or treatment.

Explanation of Benefits typically includes the following:

  • The doctor’s charge
  • The amount paid by your plan
  • The amount you may owe

Prior Authorization

Some plans require that certain medical services are approved in advance, this is referred to as Prior Authorization.

Prior Authorization ensures that you are receiving medically necessary care that is compliant within the guidelines of your health insurance plan.

Example:

A plan may require Prior Authorization of the following, and other services:

  • CT Scan
  • MRI
  • Surgery
  • Certain Medications

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