Health Insurance Terminology and What They Mean
When you see or hear the term “health insurance,” there’s typically a vague sense of understanding as to what that means. You know that you should probably have health insurance, and that you need it when you see a doctor or seek medical care. The rest of the mystery jargon is left to the professionals to truly understand. The truth, however, is that it pays to know what the difference between a deductible and out-of-pocket maximum is so you know what’s available to you with your insurance plan. Pullman Regional Hospital financial experts help explain the insurance buzzwords, what they mean, and what you should know the next time you visit the doctor, plain and simple.
Premiums, deductibles, and copays, oh my!
Premium, deductible, and co-pay are the most common terms you’ll see related to health insurance. A premium is the monthly amount you pay for your health insurance plan, similar to a subscription. A deductible is the minimum amount you have to pay before your insurance shares the cost of the service with you. Typically, your premium and deductible are inversely related, meaning that the lower your premium is, the higher your deductible, and vice-versa.
Other terms to understand are copay and coinsurance. Your copay is a fixed amount you pay for a health service, such as going to an appointment or filling a prescription; this amount usually covers your cost of a doctor’s visit or medication and is charged up front. Coinsurance is a percentage you split with your insurance plan on the cost of a service, visit, or medication that is billed after the visit. For example, if your plan has 20% coinsurance, this means you’ll pay 20% of the cost and your insurance will cover 80%. When you visit a doctor, specialist, or the Emergency Room, you’ll pay a copay for your visit; if there is a procedure, test, or lab work done at that visit, you may also pay coinsurance.
Deductible vs. Out-of-pocket maximum
People commonly confuse their deductible with their out-of-pocket maximum (or OOP maximum), which is the maximum amount you pay for health coverage in a plan year. After you spend this amount on deductibles, co-payments, and co-insurance for in-network care and services, your health plan will pay 100% of the costs of covered benefits.
Not every amount you pay on visits, tests, and medications is eligible to go towards your deductible or out-of-pocket maximum. Depending on your plan, your co-pay, for example, may not help meet your deductible, but it does go toward your out-of-pocket maximum. If you visit an out-of-network clinic or provider (meaning they aren’t contracted with your health insurance company and therefore not covered), those visits will not meet your deductible or out-of-pocket maximum. If you visit the ER, those visits will almost always be considered in-network.
Dental, vision, and pharmacy benefits
Your dental, vision, and sometimes prescription insurance are separate from your core insurance plan because they are categorized as supplemental, and therefore not essential, benefits by health insurance companies for adults. However, separating vision and dental insurance allows companies to offer more flexible plan choices at lower premiums.
Some insurance plans have a separate prescription deductible which applies only to medication costs. Prescription medications are priced based on your insurance’s drug formulary, which splits the costs of medications by different tiers (the higher the tier, the more expensive and “branded” the medication is). The insurance plan’s drug formulary can be found on the company’s website, or by contacting the insurance company directly.
Alphabet Soup (Health Insurance Acronyms)
There are different types of health insurance plans that are categorized by what they cover, how they’re purchased, and how much they cost. The most common insurance plans are:
- HMO (Health Maintenance Organization)
- Most common marketplace health insurance plan
- Lower premiums and predictable costs
- Referrals are required for specialists
- Limited to in-network providers only (out-of-network providers are not covered except in an emergency)
- PPO (Preferred Provider Organization)
- Most common health insurance plan from employers
- Higher premiums, moderate deductibles
- More flexible coverage for in-network and out-of-network providers
- Referrals are not required to see a specialist
- EPO (Exclusive Provider Organization)
- Lower premiums than PPO plans
- Only covers in-network providers
- Referrals are not required to see a specialist
- POS (Point of Service)
- Moderate premiums, higher out-of-network costs
- Offers flexible coverage for in-network and out-of-network providers
- In-network specialists require a referral from your PCP (primary care provider)
- HDHP (High Deductible Health Plan)
- Lowest premiums, high deductibles
- Provides in-network and out-of-network coverage
- No referral required for specialists
Explanation of Benefits
Another acronym worth defining is the Explanation of Benefits, or EOB. Around the time you receive your billing statement from a service or appointment, you’ll also receive a document called an EOB from your insurance provider. It’s important to note that an EOB is not a bill. Your EOB will break down the services provided at your visit, all the charges from the clinic or hospital, what your insurance will or will not cover, what your insurance will agree to pay, and the estimated amount left for you to pay. Saving your EOB is recommended for when you pay your bill as it will help the clinic or hospital’s billing team bill you accurately.
Government Subsidized Plans
There are two federally funded insurance plans available: Medicare and Medicaid. People often misunderstand the difference between them; to put it simply, Medicare insures individuals over 65 years old or under 65 that have a qualifying disability, and Medicaid insures individuals, families, and children with limited income.
Medicare is composed of different “parts,” which determine their specific coverage:
- Part A: Hospital insurance; covers inpatient stays and hospice care, included in the base plan
- Part B: Medical insurance; covers outpatient services, doctor’s appointments, and preventive services, included in the base plan
- Part C: Medicare Advantage; includes a Medicare-approved, highly subsidized private health insurance plan; this replaces Original Medicare (Part A and B) and usually includes prescription drug coverage (Part D)
- Part D: Prescription benefits, optional add-on
Medicaid is a joint federal and state funded program, but its eligibility and benefit guidelines are determined by each state. Medicaid also often covers services not covered by Medicare, such as nursing home care, transportation to doctor appointments, home-based services, and dental & vision exams. Patients with Medicare also still need to pay out-of-pocket for premiums, co-pays, and a deductible. If an individual is enrolled in both Medicaid and Medicare, Medicare pays first and covers most eligible costs, with subsequent costs being covered by Medicaid.
What is Open Enrollment?
Open Enrollment is the time of year when individuals and employees review their healthcare benefits and make any changes. Alongside changing your health insurance, you can also update your life insurance coverage and health savings or spending accounts. As individual health needs can change from year to year, Open Enrollment is a good time to consider current health benefits, assess your needs, compare different plan options, and make an informed decision on which plan benefits your lifestyle most. With the exception of Medicare’s Open Enrollment period beginning in October, Open Enrollment occurs between November and January. There are, however, some health insurance plans that allow you to enroll any time in the year, and there are qualifying life events that allow you to change your benefits outside of the Open Enrollment period.
Marketplace insurance (where you can shop for insurance coverage, created by the Affordable Care Act) and employer insurance follow the Open Enrollment schedule; Medicaid and the Children’s Health Insurance Program (CHIP), however, are examples of insurance plans that allow enrollment year-round. A QLE (or Qualifying Life Event) can make you eligible for a Special Enrollment Period, allowing you to enroll in health insurance outside of the yearly Open Enrollment Period. A few examples of QLEs are loss of health coverage (from your employer, parent, or change in income), changes in household (marrying or divorcing, having a baby, or a death in the family), changes in residence, or any other life events that would cause you to lose insurance coverage.
Where can I go for more help?
Health insurance terminology can be difficult to understand, but the financial professionals at Pullman Regional Hospital are here to help. Please reach out to our Patient Financial Services team for help paying your bill and for information about financial assistance at (509) 332-1163.
You can find additional financial aid resources on our Financial Services page such as frequently asked questions, the Price Estimation Tool, and billing transparency. Don’t wait until Open Enrollment to ask your insurance-related questions, help is available year-round!
