7 Terms You Must Understand Before Purchasing Health Insurance
1. Premium: the amount you or your employer pays monthly, quarterly, or yearly to buy a health insurance plan.
2. Copayment (copay): a cost-sharing measure sometimes used in conjunction with a deductible that requires a patient to pay a given dollar amount at the point of service. For example, if a patient has a $15 copay for doctor visit, then he or she must pay $15 per visit. Not to be confused with coinsurance.
3. Deductible: the amount that an individual must pay, per year, before his or her health insurance will begin to pay for coverage. If you have a $2500 deductible, then you must spend this amount on out-of-pocket medical expenses before your insurance will contribute. It is sometimes used in combination with coinsurance or copayment.
4. Coinsurance: once you’ve met your deductible, coinsurance will kick in. Coinsurance requires a patient to pay a specific percentage of the total cost of a particular service. For example, if your coinsurance is 10%, you will be required to pay 10% of the total cost of a doctor visit, procedure, or any other healthcare service, and your insurance will cover the remaining 90%. Keep in mind that coinsurance does not apply until after you’ve met your deductible—so up until that point, you’ll be required to cover all of your healthcare costs. Not to be confused with copayment.
5-6. Out-of-network & In-network: these terms refer to whether or not a provider (which can be a general doctor, specialist, hospital, lab, pharmacy—anyone who provides you with healthcare services) has agreed to provide a discounted rate to your insurance company. Generally, you will pay lower copays and deductibles when you access care through an in-network provider. Providers who do not have an agreement with your insurance company are considered out-of-network, so their services may cost you more and may not be covered by your insurance plan.
7. Annual out-of-pocket maximum: the maximum total dollar amount that your health insurance company requires you to pay for healthcare services. This amount is calculated after monthly premiums—so the amount you pay in premiums does not count towards out-of-pocket maximums. What does count toward your out-of-pocket maximum varies by health plan. Your deductible and copay may or may not count, depending on the cost-sharing provided by your plan. For higher metal tier plans, more of your expenses count toward your out-of-pocket maximum.
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