Health Insurance Terminology

If you're presenting an overview of your company's insurance policy, selecting a policy for your company or a newly licensed agent marketing group insurance, you need to know health insurance terminology. The best practice for health insurance terminology is to review the definitions and link the name to it's meaning. Many of the insurance terms sound a lot alike so it's somewhat difficult.

Knowing the terms doesn't guarantee you'll understand everything. I was in the industry for close to thirty years and don't pretend I understand every policy, at least not immediately. The funniest experience I ever had with health insurance occurred the day our company's new insurance plan outline was issued. There sat a group of agents whose combined experience numbered over 100 years and the only words you could hear was, "What the heck does that mean?" Sometimes even knowing the terms is not enough.

Deductible:

The deductible is the amount the insurance company doesn't pay up front. Once the insured pays that out of pocket, then the insurance company splits the cost of care in the co-insurance section. Remember, the insurance company deducts this amount from their payment to the insured. Co-insurance is the division of the bill in percentage between the insurance company and the insured. The company contract states the percentage of the bill the company pays, the rest is on the shoulders of the insured. These show as ratios, such as 90/10, 80/20, 70/30, 60/40 or 50/50. The first number is the coverage percentage the insurance company pays.

Out of Pocket Maximum:

When dealing with deductibles and co-insurance the insurance company normal limits the amount the insured has to pay until the company pays 100 percent of the allowable claim. This is the out of pocket maximum.

Co-Payment:

Don't confuse a co-payment with co-insurance. A co-payment is a small amount the insured pays each time he uses a specific service or part of the plan. For example, the co-payment for generic drugs is $10. Every time the insured gets a prescription, he pays $10 of the cost. If the drug only costs $9, then that's all he pays. If the prescription calls for a drug that's not generic, the plan might require a co-payment of $15 dollars. Normally a co-pay covers prescription drugs, doctor's office visits and frequently emergency room visits.

Managed Care:

Managed care policies have a network of hospitals, doctors and other professionals called preferred providers. HMOs, health maintenance organizations, don't cover you if you don't use the network. PPO, preferred provider organizations, and POS, point of service, plans encourage you to use them by including higher co pays, co insurance and deductibles if you don't. Traditional plans are fee for service plans where you choose any doctor or service facility.

Pre-existing Conditions:

A pre-existing condition is a medical condition the insured had before he purchased a plan or signed up for group insurance. Insurance companies don't pay claims for these conditions if they exclude them or find them undisclosed excludable information later. Group insurance is more forgiving than individual policies and the pre-existing medical condition receives coverage after a year or 6 months if there's no treatment or recommended treatment.

Reasonable and Customary Fees:

Even though the insured may not have a co-pay or met all the deductibles and co-insurance requirements, they still have to pay any excess that the doctor or the hospital charges that is more than what the insurance company finds standard for their area and treatment. Any charge above the reasonable and customary amount isn't part of the out of pocket maximum or deductible. Frequently companies negotiate with the doctor to lower the fee to the amount they pay.