One of the biggest problems for most people is simply understanding their health insurance benefits. For the most part, health insurance policies try to be user-friendly in their wording, but many people are unfamiliar with medical and insurance terminology.
Most health insurance policies also provide something similar to a cheat sheet, which gives the basic outline of policy coverage and covers the most common medical services. However, it would be best if you were sure that you understand the different things that are excluded under your plan. Many health insurance plans provide limited benefits for mental health, chiropractic services, and occupational health. Even physical therapy and home health care are often limited to a certain number of yearly visits.
Co-payment or Co-pay
A co-payment is a predetermined amount you must pay a medical provider for a particular service type. For example, you may be required to pay a $15 co-payment when you visit your doctor. In this instance, you must pay $15 to the doctor’s office at the time of the visit. Normally, you are not required to pay any additional fees — your health insurance company will pay the rest. However, in some cases, if your health insurance policy specifies it, you may be responsible for a co-payment and then a percentage of the remaining balance.
A deductible is the number of medical expenses you must pay before the health insurance company begins to pay benefits. Most health insurance plans have a calendar-year deductible, meaning the deductible requirement starts over again in January of every new year. So, if your calendar year deductible is $1500, as long as your medical expenses for the current year do not exceed $1500, the insurance company pays nothing for that year. Once January of the new year starts, you must begin again to pay $1500 of your medical expenses.
Coinsurance (or out-of-pocket expense) is the amount or percentage of each medical charge you must pay. For example, you may have a $100 medical control. Your health insurance company will pay 80% of the cost, and you are responsible for 20%. The 20% is your coinsurance amount.
Coinsurance accrues throughout the year. If you have any medical charges in one year, you may meet the coinsurance maximum requirement for your policy. At that point, any covered charges will be paid at 100% for the remainder of the calendar year.
Stop-loss or out-of-pocket expense limit.
Sometimes you will hear the out-of-pocket expense limit referred to as your stop loss or coinsurance amount. TThis is the amount you must pay out of your pocket per calendar year before the health insurance company pays everything at 100%.
You will need to check your policy because many policies that require co-payments do not allow these co-payments to go toward the out-of-pocket amount. For example, you may have reached your out-of-pocket maximum for the year, so you may pay nothing if you are admitted to the hospital. However, since you have to pay a $15 co-payment every time you visit the doctor, you will still have to make this co-payment.
Lifetime maximum benefit
This is the maximum amount that the health insurance company will pay toward your medical expenses for the lifetime of your policy. Generally, this amount is in the millions of dollars. You will not likely exhaust this amount unless you have a severe condition.
Preferred Provider Organization
A Preferred Provider Organization (or PPO) is a group of participating medical providers who have agreed to work with the health insurance company at a discounted rate. It’s a win-win situation for each side. The insurance company has to pay less, and the providers receive automatic referrals.
In most health insurance policies, you will see different benefit levels depending on whether you visit a participating or nonparticipating provider. A PPO plan provides more flexibility for the insured person because they can call a participating or nonparticipating provider. They receive a better price if they use a participating one.
Health Maintenance Organization
A Health Maintenance Organization (an HMO) is a health insurance plan restricting you to only using specified medical providers. Generally, unless you are out of their network area, no benefits are payable if you go to a nonparticipating physician. Typically, you are required to select one main doctor who will be your Primary Care Physician (PCP). Whenever you have a health problem, you must visit this doctor first. They will refer you to another network provider if they feel you need it. However, you cannot just decide to see a specialist; you must go through your PCP.
You will see this term in all health insurance policies, and it is a frequent cause of denied claims. Most insurance companies will not cover any expenses that they do not consider medically necessary. Just because you and your doctor consider something medically necessary, your health insurance company may not. For this reason, you always need to verify that any costly procedures you are considering will be covered.
Routine treatment is generally defined as preventive services. For example, a yearly physical examination you have regularly is usually considered regular. Many of the immunizations that children and adults receive fall under this classification. Some insurance companies provide limited coverage for common treatment; others provide no benefits.
You acquired and received treatment for a pre-existing condition before your current health insurance policy’s effective date. Health insurance companies vary in how they treat pre-existing conditions. Some companies will not give you coverage if you have certain chronic pre-existing conditions. Others will give you coverage but will not provide any benefits for some time — usually from 12-24 months. Still, other health insurance companies will exclude a pre-existing condition from a policy and will never provide any benefits for that condition.
Be sure you are very clear on your policy’s pre-existing limitations so that you are not unpleasantly surprised when you visit your doctor.
Explanation of Benefits
This is the form the health insurance company sends you after they complete handling your claim. It details the bill they received and how they processed it. It is commonly called an EOB.
Coordination of Benefits
If you are eligible for benefits under more than one health insurance plan, your various health insurance companies will need to coordinate benefits. This ensures that no more than 100% of the total charge is paid. There are many variations in how this situation can occur. In general, the primary company makes its payment first. You then file a copy of the charges with the secondary company and a copy of the Explanation of Benefits (EOB) from the primary company. The secondary company usually picks up the remainder of the bill.
A participating medical provider has signed a contract with a health insurance company or health insurance network to charge predetermined rates to patients in the network.
A nonparticipating provider is a medical provider who does not have a contract with a particular health insurance company or network. If you use a nonparticipating provider, you will generally pay a larger portion of the bill. In some cases, you may be responsible for the entire account.
Limited benefit plans
These are not considered to be comprehensive medical insurance plans. Instead, they provide very specifically limited benefits for different types of services. For example, they may offer a flat rate for each day you stay in the hospital or pay a fixed amount for each surgical procedure you have.
Typically, they are marketed toward people who cannot afford or cannot obtain more comprehensive coverage due to pre-existing health conditions. Or, they may be geared toward people who have high-deductible plans. The good thing about these plans is that they generally pay in addition to any other coverage you may have. Therefore, no coordination of benefits is required.
If this is your only coverage, be aware that you will usually have to pay a large portion of any bill, as these limited plans do not usually pay large amounts daily. For example, it may cost you $1000 a day to stay in the hospital. If your limited benefit plan pays you $200 a day for each day you spend in the hospital, you will be personally responsible for the remaining $800.
Medicare supplement plans
People with Medicare often choose to purchase a Medicare supplement plan as Medicare does not usually cover medical charges in full. Medicare continues to change and add new options, but, in general, a supplemental plan pays the balance of the medical bills after Medicare pays its portion. For example, most Medicare supplements will pick up the Medicare deductible.
Some policies also pay for some of the charges that Medicare may not cover. There are many different policy variations. If you are unsure what you are purchasing, consider contacting a broker assisting senior citizens.