Finding cheap health insurance is never easy, but knowing the right questions to ask, and the proper language to use can given you a leg up when dealing with insurance companies, doctors, and other medical providers. Below are some of the key terms to be familiar with relating to your health benefits:
- Allowable Amount: The dollar amount that a managed care company assigns to a particular medical service. Doctors that are part of a managed care organization agree to accept this amount, even if the doctor would normally charge a higher rate. For example, you visit a dermatologist. You are told that the checkup is $150, but your managed care insurance company says the allowable amount is $125. As a member of the managed care network, the doctor accepts $125 less your co-payment from the managed care company. The doctor does not collect the $25 difference. Managed care organizations determine the allowable amount for various levels of medical care based on what they deem to be reasonable, what comparable care would cost in the marketplace, and how much doctors are willing to accept.
- Benefits: Services and payments you receive as part of a health plan.
- Explanation of Benefits: A document prepared by your insurance company indicating the cost of service, benefits received (i.e. the amount the insurance company will pay), and your co-insurance or co-payment amount. For example, let’s say you visit a doctor who charges $100 for the visit. You submit your insurance information and make a $20 co-payment upon leaving the doctor’s office. About 30 days later, you will receive an explanation of benefits from the insurance company informing you of the total amount billed, the allowable amount, your co-payment, and an additional payment required. The Explanation of Benefits is often abbreviated as “EOB”.
- Generic Drug: As described by the Food and Drug Administration, a generic drug is identical in dosage, form, safety, strength, route of administration, quality, performance characteristics, and intended use to its brand name equivalent prescription drug.
- Group Plan: A health insurance plan that provides insurance to a group of people (e.g. employees of a company or members of an organization). Buying insurance as part of a group is theoretically cheaper than buying insurance individually. Insurance companies are able to charge lower rates to groups because they view the group as diversifying risk. Note: COBRA is a form of group insurance.
- Guaranteed Issue: State provisions where health insurance companies operating in the state are required to provide health insurance to all applicants, regardless of medical history, age, or current medical condition. Insurance companies operating in the state must charge the same rates to all members of a given health insurance plan without differentiating based on the personal factors mentioned. As a result of these requirements, guaranteed issue policies benefit older people with medical conditions at a cost to younger people without any health issues.
- HIPAA: The Health Insurance Portability and Accountability Act is a law that was passed in 1996 to protect your right to qualify for health insurance in situations where you have experienced a change in employer, employment status, or relationship (e.g. divorce). HIPPA is important because under the law health insurance companies are required to renew health plans.
- Insurance Broker: An independent company that represents a variety of insurance companies. Insurance brokers can provide you multiple health insurance alternatives for comparison purposes.
- Network: A group of doctors, hospitals, and other healthcare providers who belong to a managed care organization. A healthcare provider who is part of the managed care organization is considered to be “in-network,” while a provider who does not contract with the managed care organization is described as “out-of-network.” Doctors may belong to more than one managed care organization. When applying for a health plan, you will have access to a list of all of the providers in the network.
- Open Enrollment: A 30 day window occurring once per year, during which you can join a managed care plan, regardless of your medical history. Not all states require that insurance companies have an open enrollment period. The benefit of an open enrollment period is that you will be able to qualify for coverage even if you have a pre-existing condition. States that do not require insurance companies to offer open enrollment will likely have a high-risk pool, which provides another alternative for people who would otherwise not qualify for health insurance.
- Policy: The document from your insurance company that provides the details of your coverage, fee schedules, and contact information. Insurance companies also refer to a policy as “evidence of coverage.”
- Pre-Existing Condition: A medical condition that may limit the health coverage that an insurance company is willing to provide. For example, if you have a chronic medical condition, a health insurance company may qualify this as a pre-existing condition, meaning they may do the following:
- refuse to provide you any health coverage
- provide you health coverage, but exclude treatment of this condition
- provide you full coverage
For an insurance company or managed care organization to discriminate based on your medical history or current medical condition may not sound fair, but this is the way the system is structured throughout most of the United States. Exceptions exist in states that have guaranteed issue laws and open enrollment periods. In addition, high-risk pools are another option for people who experience difficulty finding health insurance because of a pre-existing medical condition.
- Preferred Provider: A physician, hospital, or other medical provider who is a member of a managed care network. Visits to these “in-network” medical providers are covered by your managed care plan, meaning that you will generally only pay the co-payment portion of the medical bill.
- Primary Care Physician: A doctor who provides general overall care (e.g. annual physicals), and is responsible for providing recommendations to specialist doctors. In an HMO, your selection of a primary care physician is very important, as he or she is the gatekeeper, determining which specialists you are able to see.
- Prior Approval: Requirement that doctors receive permission from the insurance company before going forward with a certain procedure (typically expensive procedures). Such procedures include imaging services (e.g. MRIs), clinical trials, and certain types of surgeries. Prescriptions (e.g. brand name pharmaceuticals) may also be subject to prior approval. Managed care insurance companies incorporate prior approval procedures to help manage costs. Prior approval is also referred to as “prior authorization.”
- Qualifying Event: An occurrence that would cause a change in your eligibility for health coverage. Qualifying events include the following: change in employment status (e.g. a layoff or a reduction in work hours), change in marital status, or change in number of dependants (e.g. a new child). A qualifying event enables you to make changes to your health plan within a given timeframe (usually 30 days). This is particularly relevant as it pertains to joining your spouse’s health plan.
- Specialist: A doctor who specializes in a certain field of medicine. Many insurance plans allow you to see specialists directly, while HMOs require a referral from your primary care physician prior to seeing a specialist.
See our Health Insurance Glossary for a collection of even more healthcare terms.