Everyone needs health insurance nowadays, but you may not know what you buy when you take out a new policy. Plus, you need to know what you have been offered when you get quotes from your employer or a private company.
A glossary of terms below will help you understand your new insurance policy. Each term explains its importance, and you can ask informed questions the next time you shop for insurance.
Health Insurance 101
These terms describe the sort of insurance network that you are buying.
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. With a PPO you pay more premiums or out-of-pocket costs, but you have more freedom. You do not need to choose a family doctor, and you do not need a referral to see someone inside the network.
You need a family doctor or Family Practitioner if you are in an HMO. You do not need to choose a family doctor if you are in a PPO. The family doctor will give you referrals to specialists for more advanced care.
The network is the group of clinics, offices, and hospitals 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
You will pay more for care if you are out of your coverage network. Your explanation of benefits shows how much is covered when you are in and outside the network. Plus, you need to know if the insurance will cover out-of-network services. Specific insurance plans or companies may not offer out-of-network coverage for particular 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. It would help if you satisfied 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 yearly. 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 are based on your deductible and the 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.
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Someone who gets insurance through their employer can typically get much better coverage because their employer pays for a portion of their plan.
Annual Maximum Coverage
The annual maximum coverage allowed under your policy is the amount the insurance company will pay in one year for your care. You must pay for everything out of pocket if you go over that limit. 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 the insurance company will pay over the policy’s life. This number is calculated using average claim figures over the life of a long-term 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 others limit the coverage you can get.
You can look at the network’s size, the policy’s length, and the lifetime maximum. See if your favorite doctor is in the insurance company’s network and figure out how much the insurance company will pay if you need to receive care outside the network.
Check the deductible for the policy, and you may ask your employer if they will pay a portion of your premium.