Learn the Terms: How to Decode Your Insurance Plan

Just skimming through your health insurance plan is often enough to give you a headache, let alone reading it in full. But gaining a grasp of some of the basic terminology health insurers use will help you zero in on the coverage that best suits your individual or family’s needs. Here’s a breakdown of the lingo you’ll see in most types of health insurance plans, what it means for your wallet, plus some of the fine print you should know to understand your coverage and financial exposure. 

Premium: The amount that you pay monthly for insurance.

Copay: The fixed amount you pay for a covered medical service or medication. 

Coinsurance: The percentage of the cost of a covered service that you pay, typically after you've met your deductible. The fine print: “The danger of coinsurance is that it's a percentage instead of a fixed cost, so your out-of-pocket expenses for treatment can be significant,” says Nicole T. Rochester, MD, founder and CEO of Your GPS Doc and author of Healthcare Navigation 101: A Guide for College-Bound Students (and Parents!). “I advise my clients to find plans that have more copays than coinsurance if possible.” 

Deductible: What you pay before your insurance starts covering bills or implementing coinsurance. The fine print: Some plans cover certain services prior to meeting the deductible. For example, your health plan may cover primary care visits and you will only be charged a copay. Also, you may have an individual and a family deductible. “In some plans, once the family deductible is met then the plan kicks in for all individuals covered under the plan, even if one or more of them did not meet their individual deductible. In other plans, each individual has to meet their own deductible, even if the family has met its total collectively,” explains Dr. Rochester.

Out-of-pocket maximum: The maximum amount of money you have to pay for covered services in a health plan year. Once you hit that number, all covered health costs after that are free until the following plan year, when everything resets (including any copays or coinsurance).

In-network and out-of-network: Most insurance plans have a network of healthcare providers and facilities, for which the plan will pay maximum benefits. If a provider or facility is out-of-network, you will receive lesser coverage or may not be covered at all. The fine print: Before signing on to an insurance plan, check if your preferred doctors and facilities are in-network.

Eligibility for Health Savings Accounts: Health Savings Accounts (HSA) allow you to contribute pre-tax dollars to use for your health expenses—that money can be used for copays, coinsurance, deductibles, medications, and other medical supplies (even things like Band-Aids and sunscreen count). The fine print: Not all insurance plans allow you to have an HSA. If yours does, here’s why you should take advantage of it. 

Coverage: Insurance plans administered through the Affordable Care Act must cover pre-existing conditions and 10 essential benefits:

• Ambulatory or outpatient services

• Emergency services

• Hospitalization and rehabilitative services like physical therapy and occupational therapy

• Laboratory services

• Maternity care

• Mental and behavioral health services

• Pediatric care

• Prescription drugs (including birth control)

• Preventive and wellness services

The fine print: Off-exchange plans, so called because they are not sold on government-run exchanges, must also cover the 10 essential benefits and meet certain federal standards in order to be considered qualifying health coverage. There are exceptions to this rule: 

• Short-term health insurance: Health insurance plans that are for a limited amount of time while waiting for longer term coverage to begin.

• Self-insured plans: When an individual or an employer provides benefits from their own funds, rather than contracting out to an insurance company.

• Cost-sharing ministry plans: Religious or ethical organizations in the U.S. that share health care costs among its members.

• Indemnity plans: Commonly referred to as fee-for-service plans, you’re not locked into a specific provider and don’t need a referral to see a specialist. These plans often require payment up front and then reimburse the individual based on the claim. These plans are often purchased as a supplement to another plan, not as a substitute.

• Catastrophic plans: Low-premium, high-deductible plans that protect an individual from medical debt in light of a serious medical event. These plans do cover preventative services but other medical needs are typically out-of-pocket expenses. 

“I see this misstep a lot with younger clients,” says Dr. Rochester. “They go with a really inexpensive plan but don't realize that it offers suboptimal coverage. You have to be really careful about reading the benefits and making sure that you understand what is covered as well as the exclusions.”

Smart steps so you avoid paying more than you have to:

• Stay within the network.

• Make sure your in-network physician doesn’t send your pathology or lab work to an out-of-network facility.

• If you need minor surgery (something that would be considered an outpatient procedure), ambulatory facilities generally charge less than hospitals.

• When prescribed medication, ask for a generic. Make sure to check Blink Health  to see if you can get your prescription for less.