Navigating health insurance can be confusing, but understanding key terms helps you make informed decisions about coverage and costs. Here’s a simple breakdown of essential health insurance terminology:
1. Basic Coverage Terms
Premium: The amount you pay monthly for your insurance plan (like a subscription fee).
Deductible: The amount you pay out-of-pocket before insurance starts covering costs (e.g., $1,000/year).
Copay (Copayment): A fixed fee for specific services (e.g., $20 for a doctor’s visit).
Coinsurance: Your share of costs after the deductible (e.g., 20% of a bill, while insurance pays 80%).
2. Plan Types
HMO (Health Maintenance Organization): Requires a primary care physician (PCP) and referrals for specialists. Lower costs but less flexibility.
PPO (Preferred Provider Organization): More flexibility to see specialists without referrals, but higher premiums.
HDHP (High-Deductible Health Plan): Lower premiums but high deductibles; often paired with an HSA (Health Savings Account) for tax-free savings.
3. Key Concepts
Out-of-Pocket Maximum: The most you’ll pay in a year (includes deductibles, copays, and coinsurance). After this, insurance covers 100%.
Network: Doctors/hospitals contracted with your insurer. In-network costs less than out-of-network.
Prior Authorization: Approval needed from insurance before certain treatments or medications are covered.
Formulary: A list of prescription drugs covered by your plan (check for tiers, as costs vary).
4. Enrollment Terms
Open Enrollment: The annual period to sign up for or change plans.
Special Enrollment Period (SEP): Time to enroll after qualifying life events (marriage, job loss, birth of a child).
COBRA: Temporary coverage to continue employer insurance after leaving a job (you pay the full premium).
5. Common Documents
Explanation of Benefits (EOB): A summary of what insurance covered (not a bill).
Summary of Benefits and Coverage (SBC): A standardized overview of plan costs and coverage.
6. Cost-Saving Tips
Preventive Care: Many plans cover check-ups, vaccines, and screenings at no cost.
Generic Drugs: Usually cheaper than brand-name medications.
Telehealth: Virtual visits often cost less than in-person appointments.
