Health Insurance Terminology 101

Unfortunately, many of us don’t have the opportunity to learn about health insurance until we’re already into adulthood. You’d think by now school’s would have an Adulting 101 class to teach teenagers and young adults about things like insurance claims- homeowners policies, car insurance, renter’s insurance, and especially health insurance coverage.

At Bosworth and Associates Insurance Agency, we often find ourselves explaining to our clients the various components of health insurance. We wanted to put together a list of the most common terminology to help others who find themselves trying to wade through the confusing world of medical insurance and coverage. Nevertheless, it’s never too late to learn the basics of health insurance coverage, and hopefully, after reading through this list of health insurance terminology, you’ll feel a bit more equipped at your next doctor visit.

Allowed Amount– A maximum amount agreed upon by the insurance company and health care provider that will be paid for equipment or services rendered by those providers. This contracted rate can also be referred to as the “allowed charges,” “eligible expense,” “payment allowance,” or “the negotiated rate.” If a provider’s charges are more than the allowed amount, you may have to pay for some or all of the difference.

Claim – A request for payment submitted from you or your doctor to your health insurance company when you receive service. If you submit the claim, you are often reimbursed for what you paid in the office. If the doctor submits the claim, they are paid by the insurance company directly.

Coinsurance – The amount you pay after meeting your deductible for the year. Once you’ve reached your deductible, you will pay a percentage of the contracted negotiated rate. Some plans split the cost 50/50 or 80/20, where you pay 20% and the insurance picks up remaining 80%.

Co-Pay – Co-pay refers to the amount you are required to pay for certain medical services, equipment, or medication before you meet your deductible as found in your policy documents.

Deductible – 4th term down, and I’ve already mentioned “deductible” 3 times. No surprise, as “deductible” will be a word you’ll hear a lot when dealing with medical insurance and bills. Your deductible refers to the annual amount you are required to pay before your health insurance plan begins to pay. If you have a $1000 deductible, your insurance company won’t start to pay until you’ve paid $1000 on covered medical services, equipment, or medication.

Experimental – Treatments, procedures, or medications that are still under review in clinical studies. Many insurance plans will not cover experimental or investigational treatments.

Explanation of Benefits (EOB) – Your explanation of benefits is a statement from your health insurance plan, usually after your provider submits a claim for the services you received, detailing the allowed amount portion covered by the insurance company as well as the amount you owe. This form is not a bill, but important to read to ensure what you paid in the office aligns with what your insurance says you owe or what your doctor bills you for.

HMO (Health Maintenance Organization) – One of two primary plan types, contrasting PPO. An HMO plan offers access to select network hospitals and doctors at a lower rate. With an HMO plan, you are often directed to specialists through the referral of a primary care physician. This can be a good option for someone when looking for a more affordable plan.

In-Network – In-network refers to doctors, hospitals, pharmacies, laboratories, clinics, and facilities that work with your insurance plan through a maintained contract between the health care provider and the health insurance company. Choosing an “In-network” physician or facility will often save you on out of pocket expenses.

Medically Necessary – When deciding whether to cover a medication or service, the insurance company considers whether the service has a medical necessity. It’s just as it sounds, determining whether the medical service is reasonably expected to prevent, treat, or in some way improve the symptoms of an illness or condition.

Out-of-Network – Out-of-Network refers to doctors, hospitals, pharmacies, laboratories, clinics, and facilities who are not contractually working with your insurance plan’s negotiated rate.

Out-of-Pocket – Once you’ve met your deductible for the year, and begin paying your coinsurance percentage, what you are paying will go towards your yearly out-of-pocket. Once you’ve reached your out-of-pocket for the year, you no longer pay coinsurance, and your insurance will cover 100% of the costs for the remainder of the year. This can be particularly helpful with major surgeries.

PPO (Preferred Provider Organization) – The other of the two primary plan types, contrasting to an HMO. With a PPO plan, you will be given access to more health care providers and specialists, but typically with a higher deductible, out-of-pocket, and premium.

Premium – Your premium is the amount that must be paid for your insurance plan, paid by you and/or your employer monthly, quarterly, or yearly.

Prior Authorization – This is a term used by health insurance companies to convey a process in which certain healthcare services must obtain approval from the insurance company before agreeing to cover the service.

Provider – You’ll often see, “provider,” get thrown around when talking health insurance; this refers to the health care providers. A physician, health care professional, or health care facility licensed, certified, or accredited as required by state law. At Bosworth and Associates Insurance Agency, we are happy to discuss health insurance policies and the various components of each unique policy we offer. We want our customers to be knowledgeable about medical insurance terms, to help to make the best decisions about which type of coverage is best for you, your family, and your employees. We offer a wide selection of policies to cover and protect you when it’s needed most.