Common Health Insurance Terms Explained in Simple Words

Common Health Insurance Terms Explained in Simple Words

With all the industry jargon and terms that are frequently used, health insurance can be confusing. Knowing the fundamentals makes the process much simpler, whether you're selecting a plan for the first time or evaluating your existing coverage. Here's a quick reference to the most typical terms you'll encounter in health insurance.

1. High-end

Consider this to be the cost of your membership. It's the monthly (or occasionally annual) premium you pay to maintain your health insurance coverage, whether you use it or not.

2. Deductible

Before your insurance company begins to assist with costs, this is the amount you have to pay out of pocket for medical services. If your deductible is $1,000, for instance, you will have to pay that amount out of pocket before your insurance starts.

3. Copayment (Copay)

Every time you visit the doctor, pick up a prescription, or receive a particular medical service, you must pay a set amount known as a copay. For example, each doctor's visit may incur a $25 copay under your plan.

4. Co-insurance

You might still be responsible for a portion of the expenses even after you have paid your deductible. The percentage you pay is known as your coinsurance; the remainder is covered by your insurance. For instance, if your coinsurance is 20%, your insurance will pay 80% of the bill.

5. Maximum Out-of-Pocket

This is the annual maximum you will have to pay for covered medical expenses. Your insurance will pay 100% of eligible expenses for the remainder of the year after you hit this cap.

6. Network

A network is a collection of physicians, hospitals, and clinics that are typically covered by your insurance plan. While going "out-of-network" can result in higher bills, staying "in-network" typically costs less.

7. Prior authorization, or preauthorization

Your insurance may need to approve certain tests, treatments, or prescription drugs before you can obtain them. Preauthorization helps guarantee that the service is medically necessary.

8. Care Prevention

These are regular medical services that keep you healthy, such as examinations, immunizations, and screenings. When you use in-network providers, the majority of insurance plans provide free preventive care.

9. Make a claim

Requesting payment from your insurance provider for approved medical services is known as a claim. This is typically sent straight to the insurer by your physician or hospital.

10. The formulary

This is a list of prescription medications that your insurance company covers. Your prescription is typically less expensive if it is on the formulary. Otherwise, it might be more expensive or not covered at all.

Concluding remarks

Knowing these terms helps you make better decisions about your coverage and reduces the anxiety associated with navigating health insurance. You'll be more equipped to compare plans, estimate costs, and make plans for your medical needs if you know more.

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