Wrapping your brain around health insurance terms can be one of the most hair-pulling experiences ever. Especially if you thought you knew what your coverage was, and then bam! A bill lands in your inbox and you’re paying for things you didn’t anticipate. But we’re here to help. Understanding health insurance is important, but it doesn’t have to be so confusing or stressful.
(And don’t worry. We’ve kept it straightforward... so you can keep your hair!)
Before you really get going on open enrollment in 2021, here’s a full breakdown of 8 health insurance terms you absolutely must know before you finalize your health insurance plan this year.
1. What is an insurance deductible?
Everyone hates this word because it can make your insurance plan seem so complicated. In fact, one of the most common questions we hear is, “What does deductible mean?” But when you break it down, it’s simple. An insurance deductible is just the amount you pay before your insurance kicks in. For example, if you have a $2,000 deductible, you will pay $2,000 out of pocket before your insurance begins covering visits and procedures.
2. What is coinsurance?
This is a deceptive term. Coinsurance does not mean secondary insurance. Rather, it’s the percentage of a procedure for which you’re responsible. In other words, you cover a percentage for a given procedure, and your insurance plan covers the rest. You’ll enter the coinsurance phase after you meet your deductible. Your individual plan details show a full breakdown of which procedures qualify for coinsurance.
3. What is a copay?
Often confused with coinsurance, a copay indicates the dollar amount you owe at the time of service. Or put another way, this is the amount you pay at the reception desk at the time of your appointment. Some insurance plans don’t require a copay, but instead require coinsurance.
4. What does out-of-pocket maximum mean?
If you’ve been wondering what an out-of-pocket maximum is, you’re not alone. Your out-of-pocket amount is the maximum amount you will pay from your own wallet each year. This amount is not reimbursed by insurance. Out-of-pocket expenses can include coinsurance, deductibles, and copays. Consult your insurance plan for a full explanation of which out-of-pocket expenses are your responsibility.
5. What is a formulary?
If you’ve never heard this term before, you have probably heard it referred to as prescription coverage instead. A formulary is a list of prescription drugs that are covered by your insurance plan. This can include both generic and name-brand prescriptions. Formularies are often divided into tiers, with certain tiers receiving more coverage than others.
6. What is an insurance network?
It can be a pain to figure out which doctors (also known as providers) are covered under your plan. To keep things easier, you can search for providers who are in-network, or in the group of doctors who are covered under your plan. However, even when a doctor is in-network, always consult your insurance company about procedures that may require pre-authorization.
What does out-of-network mean?
Out-of-network is the exact opposite of in-network. It means that the doctor is not part of the group of doctors covered under your plan. Visiting an out-of-network doctor can lead to a larger bill. There are some insurance plans that only cover procedures you get from a doctor in your plan’s network.
7. What is insurance pre-authorization?
When your plan says you need pre-authorization, this means you and your doctor must obtain your insurance company’s permission before you undergo a procedure. If you don’t, your health insurance plan may not cover it and you’ll have to pay the full amount yourself. If you need pre-authorization, call your insurance plan immediately to get approval.
8. What is an explanation of benefits?
You might receive an explanation of benefits, or EOB, after a visit with your doctor. This is a statement from your insurance company showing how your benefits were applied to a claim — but not a bill. It shows how much your provider charged for a service, your member discount for that service, how much your insurance company paid the provider on your behalf and the balance (if any) that you owe your provider. This is where you will see which procedures might have been out-of-pocket or qualified for coinsurance.
What are the best health insurance plans in Utah?
The best insurance plans offer the access to care you need, where you are. Additionally, the best plans offer more upfront benefits like preventive services, mental health counseling, and an affordable deductible. These factors give you the peace of mind you deserve. If you have prescription medications, you’ll want to find out if your recurring prescriptions are listed on your insurance provider’s formulary, what they will cost, and whether there are more affordable generic options. Now that you’ve decoded those hard-to-understand health insurance terms, learn more about what to look for in a health insurance plan.