Why take the time to understand the financial language associated with your health insurance? Simply put – understanding the language will save you money.
Here’s how: Your health insurance costs are comprised of a variety of variables, which you have the ability to control. Ultimately, these variables determine the amount of your monthly premium. Viewed from another angle, the monthly premium you pay will directly impact the other cost components.
Invest a few minutes to learn the financial language of healthcare, and you may end up saving yourself hundreds of dollars per year.
- Claim: A request for payment from an insurance company or managed care plan. A claim may be filed either by you as the patient or by your healthcare provider (e.g. doctor’s office or hospital) after service has been provided.
- Co-insurance: The portion of a medical bill that you have to pay (i.e. the amount not covered by the insurance company). Co-insurance is stated as a percentage. For example, if your co-insurance is 30%, you will pay 30% of the medical bill, and your insurance company will be responsible for remaining 70%. With a fee for service plan co-insurance works as described in the previous example for all healthcare costs. In managed care plans, co-insurance generally refers to the percentage that you are responsible for when visiting out-of-network doctors or when receiving specialized medical procedures.
- Co-payment: The fee you pay when visiting a doctor. Generally ranges from $10 to $50. Depending on your plan, co-payments may apply toward your deductible. Co-payment is also referred to as “co-pay.”
- Deductible: Costs you will have to cover on your own before your insurance begins paying. For example, if you have a $500 deductible and are undergoing surgery that will cost $10,000, when the bill for the surgery arrives, you will pay $500, and your insurance company will pay $9,500. The deductible will reset annually. Depending on your insurance plan, the deductible will only apply to certain types of procedures.
- Lifetime Limit: The maximum amount that the insurance company will pay over the course of your life. The lifetime limit is relevant when considering potential chronic conditions, long-term medications, prolonged hospitalization, or other situations that require ongoing medical costs.
- Out of Pocket Maximum: The maximum amount that the health plan will require you to contribute during any one year. After you have met the deductible amount, your co-payments will count toward the out of pocket maximum. As an example, if your out of pocket maximum is $3,000, after you have paid this much in a given year, the insurance company will cover 100% of the costs beyond $3,000. In practice, some insurance plans structure out of pocket maximums for specific services (e.g. hospital stays or surgeries).
- Premium: The monthly price you pay for your healthcare coverage. Nearly all other variables discussed impact the amount of your premium. Think of your premium as the answer that you get when solving a long, complicated math problem. This is also the amount that you see on your receipt or voucher. It is advisable that you keep all your vouchers with the voucher code on them to easily trace your payment and other concerns in case of emergency.
See our Health Insurance Glossary for a comprehensive list of even more healthcare vocabulary.