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Understanding Common Health Insurance Terms

Understanding Common Health Insurance Terms

Whether you are searching for health insurance now or already enrolled in a plan, you may find the plan terms, or coverage descriptions, to be difficult to understand. Don’t worry. You are not alone.

Below is a list of common health insurance terms to help you understand what your health insurance plan has to offer:

Deductible

The deductible refers to the amount of money the insured is required to pay out-of-pocket before accessing benefits from the insurance policy. Deductibles are usually setup on a policy (starting with the effective date of the policy) or calendar year basis, and start over each year. Some services, such as doctor visits and prescriptions, may be available without first satisfying the deductible. Usually there are separate individual and family deductible amounts. Many policies place a cap on the number of individual deductibles that need to be met for a family regardless of the number of family members.

Co-insurance

After an insured’s deductible is met, most policies require the insured to pay a percentage of each claim. For example, with an 80% co-insurance plan, the insured would pay 20% of all bills once their deductible was satisfied.

Out-of-Pocket Max

In most cases, the out-of-pocket max refers to the maximum co-insurance that an insured is required to pay before the policy picks up 100% of eligible costs. Some policies include the deductible as part of the out-of-pocket maximum.

Lifetime Maximum

The amount of money the policy will pay during the life of the policy. This figure is often set at $1 million per insured, or some variation thereof, but some policies offer an unlimited lifetime maximum.

Exclusions

These are items or medical services that are not covered by the health plan.

Pre-existing Condition

A medical condition diagnosed prior to the effective date of the health plan. If someone can document at least 12 months of continuous coverage, most health plans are required under HIPAA to cover pre-existing conditions. Some policies, such as short-term or temporary plans, do not cover pre-existing conditions regardless of whether a person has had prior coverage.

Coordination of Benefits

If the insured has two or more insurance policies, such as being covered by a spouse’s insurance plan along with their own, that would cover payment for certain conditions, the the secondary insurer would pay only for expenses not covered by the primary insurer.

Medical Necessity

A medical procedure or service must be performed only for the treatment of an accident, injury or illness and is not considered experimental,
investigational or cosmetic.

Participating Provider

A physician or other medical provider has agreed to accept a negotiated fee for services provided to members of a specific health plan.  These
providers are often called “in-network.”

Usual & Customary Rate (UCR)

This is a reduction in the payment of benefits on a claim which is justified by the insurance company as “the going rate” in a certain
geographical area.

Allowed Amount

The amount of the billed charge the insurance company covers. For an in-network provider, this would be equal to the negotiated rate. For other providers, this might be based off a usual and customary rate for a given area.

Catastrophic Coverage Saves Dollars and Makes Sense

Catastrophic Coverage Saves Dollars and Makes Sense

For some people, the preventive care options provided by traditional health insurance plans are not a benefit they want or can afford. Instead, a health insurance policy that covers them only in the case of a catastrophic event, such as a car accident or emergency surgery, is much more appealing and affordable. For these people, catastrophic coverage (also called major medical) offers the perfect balance between reasonable coverage and cost.

What is Catastrophic Coverage?

Catastrophic coverage is generally sought out by individuals who do not anticipate needing full health coverage benefits but who do want the security of coverage in the event of an unexpected, emergency need.

Catastrophic health insurance often has a high deductible and low monthly premium, making it ideal for adults in their 20s who are without group coverage and adults between the ages of 50 and 65 who are primarily concerned with financial losses associated with heart attacks, accidents, and other serious illnesses. They are generally healthy, take few or no prescription medications, and would rather pay out-of-pocket for the occasional office visit to save on their monthly insurance premiums.

Deductibles

Catastrophic plans typically cover only major hospital and medical expenses above a certain deductible. The insured is responsible for paying the entire deductible along with follow up doctor visits and any prescription drugs. Deductibles typically start at $2500 and can be much higher-the higher a deductible you choose, the less expensive your monthly premiums. If your treatment costs do not exceed your deductible, the insurer will pay nothing.

Limits

Most catastrophic health plans have lifetime maximum benefits payments. Once the expenses of your treatments have reached the amount of your cap, the insurance company will not pay for additional medical expenses and the policy will be voided.

Considerations

Before you buy a catastrophic health plan, consider:

  • How much of a deductible can you afford?
  • How extensive do you want your coverage to be?
  • Do you need prescription medicines?
  • Can you afford to pay for your own doctor’s office visits?
  • Do you have any pre-existing conditions?
  • Do you get sick often?