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It probably doesn’t come as a surprise that many of us struggle to understand health insurance. In addition to our own personal experiences, there is no shortage of recent reports and studies to back up this claim.
Poor health insurance literacy is a big deal. Not only does having a basic grasp on how health insurance works make for a more pleasant shopping experience, it also helps ensure you select the appropriate plan for you and your family. Becoming familiar with essential health insurance terms is a big step in the right direction.
Whether you want to buy a major medical health insurance plan that complies with the Affordable Care Act or a non-ACA-compliant short term health insurance plan, here are 10 terms with which you need to be familiar:
1. Benefit: The medical services, treatments and supplies covered by the health insurance plan. The dollar amount or percentage, if any, the carrier pays for benefits varies by plan.
2. Coinsurance: The cost-sharing portion of your health insurance coverage after the deductible is satisfied. The insurance company pays a specified percentage for a specified class of covered services, as indicated in the policy, and the remaining percentage is the responsibility of the insured.
For example: Let’s say your health insurance plan carries a $6,000 deductible. You have accrued enough covered medical expenses that you paid this amount. You visit a network provider and have lab work done. The provider bills your health insurance company $100 for medical care that is classified under professional services, and your benefits specify that you pay 20 percent coinsurance for professional services. That means the insurance company will pay 80 percent—which, in this case, is $80. You will be responsible for paying the remaining 20 percent—which, in this case, is $20.
3. Copay (copayment): This is the flat fee the insured person pays for medical services before the deductible. The amount varies by plan design and benefit; for example, there may be separate copays for ER visits, generic drugs, brand name drugs, physician office visits and more.
For example: You visit your primary care physician, who is an in-network provider. Under your health insurance plan, office visits for in-network providers are subject to a $30 copay, which is due at the time of service. You pay the provider directly. This amount is due regardless of whether or not you have met your deductible.
4. Deductible: The fixed dollar amount an insured individual and/or family must pay each year before their health insurance plan’s benefits before the copay kicks in.
For example: Your health insurance plan carries a $3,500 deductible. One day, you need emergency care for a deep cut in your finger. Your plan benefits specify that you pay 50 percent coinsurance for emergency room services after your deductible has been met. Your total bill comes to $2,500, and you must pay this amount entirely out of pocket—you now have $1,000 in deductible remaining before your plan’s cost-sharing benefits kick in.
5. Dependent: The spouse and/or children that rely on an insured person for coverage; children may remain on a parent’s ACA-compliant health insurance plan through age 26.
6. Effective date: The date on which a health insurance policy begins.
7. Guaranteed issue: The assurance that your application for a health insurance policy will be accepted, and you will automatically receive coverage. Under the Affordable Care Act, all major medical health insurance plans that are not considered grandfathered plans are guaranteed issue. The law states that applicants cannot be denied coverage based on health history, gender and age.
8. Network: A group of clinics, hospitals and health care providers; participants agree to provide medical services at discounted rates. Health insurance plans come with different network types (e.g., HMO, PPO, EPO, POS ) and, depending on the type will treat in- and out-of-network care differently.
9. Policy length: How long a health insurance plan will provide you with benefits.
10. Premium: The dollar amount you pay your health insurance company for a health insurance plan. This amount may be paid monthly, quarterly or annually, depending on your preference and the options available with the plan you select.
These are only a few key terms you will encounter when buying health insurance, but they are some of the most common and essential. For more definitions, see our guide to health insurance terms.
If you need further explanation or guidance in selecting the right health insurance plan, call 888-839-7679 to talk to an IHC representative.
This document is for general informational purposes only. While we have attempted to provide current and accurate information, this information is provided "as is" and we makes no representations or warranties regarding its accuracy or completeness. The information provided should not be construed as legal or tax advice or as a recommendation of any kind. External users should seek professional advice from their own attorneys and tax and benefit plan advisers with respect to their individual circumstances and needs.
About The IHC Group
The IHC Group is an organization of insurance carriers and marketing and administrative affiliates that has been providing life, health, disability, medical stop-loss and specialty insurance solutions to groups and individuals for over30 years. Members of The IHC Group include Independence Holding Company (NYSE:IHC), American IndependenceCorp. (NASDAQ: AMIC), Standard Security Life Insurance Company of New York, Madison National Life Insurance Company, Inc. and Independence American Insurance Company. Each insurance carrier in The IHC Group has a financial strength rating of A- (Excellent) from A.M. Best Company, Inc., a widely recognized rating agency that rates insurance companies on their relative financial strength and ability to meet policyholder obligations. (An A++ rating from A.M. Best is its highest rating.) Collectively, the companies in The IHC Group provide insurance coverage to more than one million individuals and groups. For more information about The IHC Group, visit www.ihcgroup.com.
About IHC Specialty Benefits, Inc.
IHC Specialty Benefits, doing business as Health eDeals Insurance Solutions is a full-service marketing and distribution company that focuses on small employer, individual and consumer products. Health eDeals markets products through general agents online, telebrokerage, advisor centers, private label and directly to consumers. For more information about Health eDeals visit www.HealtheDeals.com.