15 Common Health Plan Terms You Should Know
Have you ever checked out of your doctor’s office or scrolled through the details of your health plan only to realize you don’t know the meaning of many of the terms being used? One of the main challenges people face when using or enrolling in a health plans is understanding the sea of acronyms and terminology.
Always ask if you don’t understand something your health care provider of health plan representative says but just in case, here are a few of the most important health insurance terms to know so that you can be a better informed and more empowered health care consumer. Then you can confidently enroll in, and use, the coverage that’s right for you.
This is the amount you pay for a health care service, like a doctor visit or a trip to urgent care. The amount depends on your plan and the type of service you receive. Keep in mind that if your plan has a deductible, you may be responsible for meeting your deductible first. Then, your copay will kick in. In addition, prescription medications also require copays, and they will vary depending on the medication.
EXAMPLE: You have a $20 copay for visits with your primary care provider (PCP) and a $40 copay for urgent care visits. This means you will pay $20 every time you go to your PCP and $40 every time you go to urgent care.
The amount of money you pay for covered health care services before your health insurance starts to pick up the tab. If your cost exceeds the deductible, your plan will cover the remainder, or a percentage of the remainder. If you’re in the process of choosing a health insurance plan, it is useful to know that plans with higher deductibles tend to have lower premiums.
EXAMPLE: If your deductible is $2,000, your insurance won’t pay for anything until you have paid $2,000 for covered health care services. If you require a medical service that costs $3,000, you will pay the $2,000 deductible, and the plan will cover the remainder or a portion of the remaining $1,000.
Explanation of Benefits (EOB)
At first glance, it may appear to look like a bill – it’s not. An EOB is a statement that your health plan sends in the mail after you receive a health service. It tells you how much the doctor charged, how much your insurance company will allow, how much your insurance paid, and the amount you may owe.
Flexible Spending Account (FSA)
A flexible spending account (FSA) allows employees to set aside pre-tax dollars for specific, qualified health and/or dependent care expenses. The money is deducted directly from the employee’s paycheck and is not subject to payroll taxes.
Health Maintenance Organization (HMO)
Health maintenance organizations, or HMOs, offer comprehensive coverage among a more limited selection of providers than PPOs. Visits to specialists often require referrals, and diagnostic tests, procedures, and specific medications may require approval in advance. Out-of-pocket costs are generally lower than other forms of insurance.
Health Insurance Portability and Accountability Act (HIPAA)
A federal privacy law that sets national standards to protect your medical records and other personal health information. The law gives you more control over your health information, sets boundaries on the use and release of health records, and establishes safeguards that health care providers and others must meet to protect the privacy of health information.
EXAMPLE: If you call your health plan with questions about a claim for a dependent who’s 18 or older, the health plan may not be able to provide you with these details, as the information is protected by federal privacy laws.
Labs or lab work
Common medical tests are often referred to as “labs” or “lab work” and may only be covered in network — or not at all — by some health insurance plans. Make sure to double check with your specific plan before the time comes to get tests performed.
Once a year, employees have the opportunity to enroll in a health insurance plan or change his or her coverage. If an employee wishes to change coverage outside of the open enrollment period, he or she must experience a qualifying life event.
These are healthcare services that are not billed to insurance and require payment at the time of service. These often include services like acupuncture or nutrition counseling.
Many people don’t realize that every health insurance plan sets a maximum for the amount you will have to pay, referred to as the out-of-pocket maximum (OOP max). Once you have reached your OOP max, your health insurance company will begin to pay 100 percent of your costs for covered care. Different plans have different OOP maximums.
EXAMPLE: Let’s say your out-of-pocket maximum is $5,000. Once you pay $5,000 for covered health care services (this can include deductibles, copays, and coinsurance), your health insurance will pay 100 percent of the costs for covered care.
Preferred Provider Organization (PPO)
With a PPO plan, you are encouraged to use a network of preferred doctors and hospitals. These providers are contracted to provide service to plan members at a negotiated or discounted rate. You generally are not required to designate a primary care physician (PCP) but will have the choice to see any doctors or specialists within the plan’s network.
Primary Care Physician (PCP)
Your PCP is your first point of contact for an array of medical concerns, helping to identify new concerns and monitoring your overall health. Your PCP can refer you to specialists if needed. Most insurance plans require that you designate a specific PCP.
Sometimes your health insurance plan requires that certain medical services be approved prior to you receiving them. This is called pre- or prior authorization, prior approval, or precertification. It allows your health insurance company to ensure that the care you are receiving is medically appropriate and delivered at the appropriate location.
Qualifying life event
This is when a change in your life makes you eligible for updates to your health care coverage. Qualifying life events can include getting married or divorced, having a baby, moving to a new city, or a change in income.
Well visit/Physical exam
Most insurance plans fully cover one preventive visit (aka “physical” or “well visit”) every 365 days.
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