It’s important to understand how your health insurance works, and to do that, you need to understand some important health insurance terms. Yet, few of us take the time. If you’ve ever wished you could boil down your health insurance into a few basic definitions, this list is for you.
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Don’t wait until you need your health insurance to understand it. Knowing what these terms mean and the amounts associated with them could save you time and confusion down the road.
Your share of the costs of a covered health care service, calculated as a percent (for example, 20 percent) of the allowed amount for the service. You pay coinsurance plus any deductibles you owe. For example, if your health plan’s allowed amount for an office visit is $100 and you’ve met your deductible, your coinsurance payment of 20 percent would be $20. The health plan pays the rest of the allowed amount. (See deductible and allowed amount.)
A fixed amount (for example, $15) you pay for a covered health care service, usually when you receive the service. The amount can vary by the type of covered health care received.
The amount you owe for health care services your plan covers before your health plan begins to pay. For example, if your deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible. The deductible may not apply to all services.
The most you pay during a policy period (usually a year) before your health plan begins to pay 100 percent of the allowed amount. This limit never includes your premium, balance-billing amounts or charges for health care your health plan doesn’t cover.
Three more minutes here
Take your understanding of your benefits a few steps further. Knowing this terminology helps you understand your medical bills.
Maximum amount that payment is based on for covered health care services. This may be called “eligible expense,” “payment allowance” or “negotiated rate.” If your provider charges more than the allowed amount, you may have to pay the difference. (See balance billing.)
Balance billing occurs when a provider bills you for the difference between his or her charge and the allowed amount (the amount negotiated by your health insurer). For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider cannot balance bill you for covered services.
This is a decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. It sometimes is called prior authorization, prior approval or precertification. Your health plan may require preauthorization for certain services before you receive them, except in an emergency. Preauthorization isn’t a promise your health plan will cover the cost.
A provider who has a contract with your health plan to provide services to you at a discount is referred to as a preferred provider. Check your policy to see if you can see all preferred providers or if your health plan has a “tiered” network. In a tiered network, you may pay more or less, depending on the provider. Your health plan may also have preferred providers who are “participating” providers. Participating providers also contract with your health plan, but the discount may not be as great, and you may have to pay more.
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- Estimate your cost of care for procedures and services before you go
- View detailed claims information, including cost breakdown and status tracker
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- Receive electronic versions of your Explanation of Benefits (EOB)
- Find a trusted provider in your plan's network
- See relevant information related to your specific coverage
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