Let's face it - insurance can be complicated.
When you're trying to choose health coverage, wading through insurance terminology and definitions can be like learning a foreign language.
The following are definitions of common health insurance terms – in plain English.
- Deductibles, copayments, and coinsurance: Even though you might be paying a hefty monthly premium for health insurance, plans rarely cover 100 percent of your health care costs. There are almost always three types of out-of-pocket expenses involved:
- Deductible: The amount you have to pay on your own before your insurance benefits kick in.
- Copay: The amount you pay directly to the health care provider (doctor, hospital, etc.) at every visit, usually a set dollar amount.
- Coinsurance: Copays generally won’t cover all of the health care provider’s fees. Your insurance company covers a large percentage of the remaining fee (usually 60-90 percent, depending on the plan), and the patient is responsible for the remaining percentage, called coinsurance.
- Flexible spending accounts (FSA): Accounts offered and administered by an employer that gives the employees a way to set aside pre-tax dollars out of a paycheck to help pay for the employee’s share of insurance premiums or medical expenses not covered by the employer’s health plan. The employer can also make contributions to a FSA.
- Insurance marketplace: Under the new health law, called the Affordable Care Act (ACA), you’ll be able to shop for health care insurance through an online marketplace, which allows you compare providers, plans, and prices to find coverage that fits your needs.
- Networks: A network is a group of doctors, hospitals, and other health care providers contracted to provide services to your insurance company’s customers for discounted fees. You’ll generally pay less for using an in-network provider. Depending on your health insurance plan, you may not be covered at all for services provided by physicians, hospitals, or other providers outside the network. When choosing a health plan, it is extremely important to understand whether the plan’s network will meet your needs.
Out-of-pocket maximum: A predetermined amount you’ll pay out of pocket before your insurance will cover 100 percent of your health care expenses.
- Subsidies and tax credits: There are two types of subsidies available to individuals, but only if the plan is purchased on theindividual marketplace:
- Advance premium tax credits, available to people whose household incomes fall between 100% and 400% of the Federal Poverty Level (FPL). These tax credits can be claimed monthly, in advance of the end of the tax year, and are paid to the insurer at the time when premiums are due.
Cost-sharing subsidies, available to people whose household incomes fall between 100%-250% of FPL. This subsidy helps households who earn less income afford the out of pocket costs of obtaining health care.
- The FPL calculation (and therefore subsidies) factor in household size. Here’s an easy-to-read FPL chart which outlines the income levels at which households of different sizes qualify for ACA-related health insurance subsidies.
Eligibility for both types of subsidies is also dependent on whether or not one qualifies for Medicaid or Medicare.
- Usual, customary, and reasonable fees: Similar types of health care providers within a geographical area generally charge the same average fees, often used by medical plans as a benchmark for the amount they’ll approve for a specific test or procedure. If you receive health care and incur fees that are higher than these approved “usual, customary, and reasonable” fees, you’ll be responsible for paying the difference. However, you can sometimes get the provider to lower the fees to an amount the insurance company deems reasonable and customary simply by questioning the physician about the fees.
Originally posted by MI Healthy Answers