This is a collaborative post by Alice Johnson to help you understand your health insurance.
Everyone needs health insurance in the modern-day, but you may not know what you are buying when you take out a new policy. There is a glossary of terms below that will help you understand your new insurance policy. Plus, you need to know what you have been offered when you get quotes from your employer or a private company. Each term comes with an explanation of its importance, and you can ask informed questions the next time you shop for insurance.
Health Insurance 101
PPO, HMO, Etc.
You could be searching for health insurance for green card holders, insurance for students, or supplemental insurance for seniors. These terms simply describe the sort of insurance network that you are buying into. An HMO is a health maintenance organization. You choose a family doctor that you go to for routine care. If you need to go to anyone else, that doctor will give you a referral. In exchange for following the rules of the HMO, you tend to pay less out of pocket.
A PPO is a preferred provider organization. You do not need to choose a family doctor, and you do not need a referral to see someone inside the network. You pay a bit more in premiums or out of pocket costs, but you have more freedom.
You may also choose a health savings plan that gives you a certain amount of money to use per year. You spend the money at your discretion without filing any claims.
You need a family doctor or family practitioner if you are in an HMO. The family doctor will give you referrals to specialists for more advanced care. You do not need to choose a family doctor if you are in a PPO.
The network is the group of clinics, offices, and hospitals that are covered by the insurance plan. These offices and clinics need to choose to accept your insurance, and they will charge lower fees if you are a part of the network.
Out Of Network
If you are out of your coverage network, you will pay more for care. Your explanation of benefits shows how much is covered when you are in the network and outside of the network. Plus, you need to know if the insurance will cover out of network services at all. Certain insurance plans or companies may not offer out of network coverage for certain procedures or visits, or you may get most of your visit covered instead of all of it.
Your deductible is a yearly payment threshold that you must reach before the insurance plan pays for everything. You need to satisfy your deductible in a calendar year before the insurance company covers everything. You may ask for a very low deductible, but you will pay a higher premium every year. If you have a high deductible, your premiums will drop because you must pay more out of pocket before filing a claim.
Your premium is the amount you pay every month for insurance. The premium changes based on your deductible and level of coverage that you want. Your employer may pay your premium for you, or your employer may pay a percentage of your premium because that is a part of your benefits package. Someone who gets insurance through their employer can typically get much better coverage because their employer is paying for a portion of their plan.
Annual Maximum Coverage
The annual maximum coverage allowed under your policy is the amount that the insurance company will pay in one year for your care. If you go over that limit, you must pay for everything out of pocket. If you need assistance, you may submit a request to your insurance company for an extension of your annual maximum.
Lifetime Maximum Coverage
Your lifetime maximum coverage number is the amount that the insurance company will pay over the life of the policy. If you have the same insurance for 20 years, you need to know if you have come close to the lifetime maximum for the policy. Some companies do not dictate a lifetime maximum, but other companies limit the amount of coverage you can get. This number is calculated using average claim figures over the life of a long term policy.
You must know everything there is to know about your insurance before you pay for the policy. You can look at the size of the network, the length of the policy, and the lifetime maximum. You can check the deductible for the policy, and you may ask your employer if they will pay a portion of your premium. You can see if your favorite doctor is in the insurance company’s network, and you can figure out how much the insurance company will pay if you need to receive care outside the network.