Health Insurance Explained In Plain English - Part 1

anding health insurance and the health industry is muchEmergency Room
easier if you recognize some of the basic terminologyWhen you receive care from a hospital emergency
and how it applies to you and your health insuranceroom, these expenses are customarily paid at the
policy. If you have a health insurance plan andcoinsurance level (70% or 80%) after the deductible.
aren’t sure how it works or what theMost health insurance plans also require you to pay an
terminology means, take a few minutes to read theadditional co-pay (commonly $75-$100) for each
explanations below. Knowing these terms and whatemergency room visit. A number of plans waive this
they mean to you can greatly aid you in dealing withadditional co-pay if you are actually admitted to the
your health care providers, insurance company,hospital through the emergency room and the plan will
insurance agent, or during the health benefits shoppingpay as an inpatient service. A plan can sometimes be
process.structured to have separate coverage for accidents
Benefit Yearas an additional rider (see definition below) to your
This is the 12-month period in which your benefits arepolicy.
calculated. Most insurance companies use aPrescription Medications
CALENDAR year, which is January 1 to December 31,Prescription medications can be classified as generic,
but a few will use a 12 month period from when yourbrand name, or non-preferred brand name (see below
policy goes into effect. For example, if your insurancefor definitions). Please Note: Not all health insurance
goes into effect on June 1, the END of your benefitplans pay for prescription drugs, so if you already take
year is May 31. Make sure that you understand howprescription drugs or think you will need help in the
your benefit year will be calculated.future with prescription drugs, you will want to make
Deductiblesure that you are purchasing a plan that includes this
Deductible means the amount of money you must paycoverage. Prescription drugs may be covered at the
out of your pocket for medical expenses EACHcoinsurance rate (70-80%) after a deductible
YEAR before your health insurance begins paying out.specifically for prescription drugs is met, other plans
Deductibles are usually reset to 0 at the beginning ofmay include Prescription drugs in the total deductible
each calendar or benefit year. Many insurancefor the plan.
companies offer health plans that have benefits thatGeneric Medications
are not subject to having to meet your deductibleDrug manufacturers are permitted to sell a generic
each year such as doctors office visits, immunizations,version of a medication after the patent expires for
wellness or routine exams, etc. An easy way tothe brand name medication (generally 20 years after
remember what this term means and how it works isthe brand name medication was registered). Generic
this:medications are equivalent to the corresponding brand
When you have incurred medical expenses, all billsname medication, but are much less expensive than
must be sent to the insurance company. When thethe brand name medication. Health insurance plans
insurance company looks at your bills, they then look atfrequently provide better payment for generic
your policy and see how things are covered. They willmedications as an incentive for you to ask for the
then add up what the combined medical expensesgeneric version. About half of all prescription
have been for the year to date: determine what yourmedications filled in the United States are filled with
deductible is and how much you have already paidgeneric medications.
towards meeting your deductible for the year, and payBrand Name Medications
out according to how your insurance policy says it will.Brand name medications are more expensive than
So in a nutshell, the insurance company isgeneric medications. Most health insurance plans
“deducting” your financial responsibility for medicalcreate a limited list of brand name medications that
expenses each year from the total combined medicalthey will pay for and many health insurance plans also
expenses before they have any responsibility to payprovide less coverage for brand name medications
out…hence the term “deductible”.than for their generic counterparts.
Co-PayNon-Preferred Brand Name Medications
A co-pay is an amount that is paid by the patient to aMost health insurance plans create a limited list of
provider at the time of service. It will either be a flatbrand name medications they will pay for. If your brand
fee (like $15 or $20) or it can be a percentage of thename medication is not on this list, it might be paid at a
service provided. The percentages or fee may varylower level under "Non-Preferred Brand Name
depending on the type of service provided. A co-payMedications."
is different than “coinsurance” — see next.Maternity
CoinsuranceSome health insurance plans cover the cost of
Coinsurance is the percentage paid by the insurancematernity, which includes doctor and hospital charges
company after you pay the deductible. Example: Yourfor prenatal care as well as labor and delivery.
health insurance pays 70%, you pay 30%. TheMaternity is expensive to add into a health insurance
insurance company pays 70% coinsurance, you paypolicy because it is considered a “guaranteed
30% coinsurance. Most health insurance policies willexpense” for the insurance company. If a woman
have a limit on the amount of coinsurance you have tobecomes pregnant, it is a safe bet that there is going
pay out each year this is known as your “Annualto be medical expenses incurred! If there are no
Coinsurance Maximum” or “Stop-loss”.complications and the birth goes well, the insurance
Annual Coinsurance Maximumcompany will be out a large monetary portion of the
After paying your deductible and after paying yourcost of delivery and even more if there are problems
coinsurance (classically 20% or 30% of medicalwith the delivery or the newborn. Insurance companies
expenses) to a certain dollar amount, your healthprice maternity so that they can still maintain profits. In
insurance will pay 100% for the remaining costs in thesome cases it may be best to save your money and
calendar year. Example: After you pay your deductible,pay for the prenatal care and the delivery out of your
your health insurance pays 70% of medical expensesown pocket (or on a credit card) and let the insurance
and you pay 30%. Once you reach the coinsurancecover the catastrophic events. The difference you
maximum, you no longer pay 30% of the medicalsave in the monthly cost of having maternity coverage
expenses because the insurance pays 100%.may be well worth it to you. Remember, once you
Out of Pocket Maximum or Stop Losshave a policy that covers maternity, you can’t
Stop Loss is the maximum amount of money you willjust remove the maternity coverage after the
have to pay out of your pocket in the benefit year.pregnancy is done! You will continue to pay for that
Lifetime Maximummaternity coverage for as long as you have that
This is the limit of the money the health insurance willpolicy.
pay out over your lifetime. Most major medical healthMammography
insurance policies will be a $2 million lifetime maximum,Mammography is a specific type of imaging that uses
while others will go as high as a $12 million lifetimea low-dose x-ray system for the examination of
maximum. In general, it is not recommended to have abreasts to detect early breast cancer in women
policy with less than a $2 million lifetime maximum.experiencing no symptoms and to detect and
Office Visitsdiagnose breast disease in women experiencing
When you visit a doctor in their office they normally billsymptoms. Current guidelines from the American
the health insurance company for an "office visit." MostCancer Society (ACS), and the American Medical
health insurance plans pay office visit expenses at theAssociation (AMA) recommend a screening
coinsurance (generally 70% or 80%) after themammography every year for women, beginning at
deductible. Some health insurance plans pay office visitage 40. Various plans will have automatic coverage
expenses at the coinsurance rate but waive thefor mammograms but some will not. Several states
deductible, which means you don’t have to(like Washington State, for example) have specific
reach the deductible amount before they will coverguidelines that require companies to have coverage
their portion of the expense. Still other health insurancefor mammograms in their policies as an automatic
plans pay office visit expenses in full after a co-paybenefit.
(usually $25 or $30). It should also be noted that officeMental Health
visits can be classified in two different categories. OneOutpatient mental health services include visits to a
category is usually called “Routine Care,”licensed counselor, therapist, or psychiatrist. Inpatient
“Wellness visits” or “Preventative care” (seemental health services include admission to a
definition below). The other type of office visit ispsychiatric hospital. Many plans do not cover mental
deemed as “Medically Necessary” (see definitionhealth services.
below). Certain health insurance policies cover each ofRehabilitation Therapy
these types of visits differently and other plans do notRehabilitation therapy may include physical therapy,
cover them at all. If having these types of office visitsoccupational therapy, speech therapy, message
covered by your health insurance policy is important totherapy, cardiac rehabilitation, and chronic pain therapy.
you, make sure you let your agent know so that theyMost health insurance plans limit rehabilitation therapy to
can help find the right plan for you.a certain number of visits per calendar year or to a
Preventive Carecertain dollar amount that they will pay for rehabilitation
Preventive Care is classically defined as routinefor either the year or for a lifetime.
exams, immunizations, well child care, and cancerRider
screenings. These include your yearly exams andAnything that changes the way your policy acts by
checkups for things such as physicals, pap smears,default is called a “Rider”. A rider can be anything
mammograms, etc. Not all plans cover preventivefrom an exclusion of coverage for a medical condition,
care. It may not be a wise use of your money to haveor additional coverage for potential conditions. (As in an
preventative care included in your plan if you never go“accident rider” mentioned earlier in this report)
to the doctor. A good health insurance agent can helpOccupational Coverage/On the job coverage
you determine if this is necessary coverage for you.The largest portion of health insurance plans do not
Medically Necessarycover occupational related medical expenses. This can
These are the visits utilized for your smaller ailmentsbe a HUGE pitfall for self employed people. Always
such as colds, flu, ear infections or minor accidents. Notmake sure that if you need to be covered while you
all plans cover ‘medically necessary’ visits, soare working that your plan will give you “on the job
make sure you know if your policy includes thesecoverage”. If you get injured or sick while you are
exams if you need them covered. You may consideron the job and you do not have Workman’s
purchasing accident insurance or adding a riderCompensation or Labor and Industries accident
(explained below) to your policy to cover these typescoverage, you may have to pay for ALL medical
of issues.expenses out of your own pocket.
Diagnostic Lab and X-RayVision Coverage
These are tests involving laboratory or imagingVision coverage is usually broken into two parts: vision
services (such as x-ray, CAT scan, etc.) to diagnose aexam, and vision hardware. Vision exam benefits
health problem. These services are usually paid at theinclude the cost of a refractive exam used to test
coinsurance (typically 70% or 80%) after thevision acuity (20/20, 20/40, etc.). Vision hardware
deductible.represents the cost of eye glasses or contact lenses.
Chiropractic CareA number of health insurance plans do not cover
When you visit a chiropractor for spinal manipulation orvision exams or hardware. However, medical issues
other services, these expenses are customarily paid atrelating to the health of the eye (like Glaucoma) are
the coinsurance rate (70% or 80%) either after thealmost always covered under the regular medical
deductible is met, or by waiving the deductible. Mostportion of the health insurance plan.
health insurance plans limit the number of chiropracticDoctor Directory
visits/services to 10 or 12 per year — especiallyEach insurance company will have a list of doctors
if the deductible is waived. After this, additional visitsthat the company has negotiated terms for payment
are not paid by the health insurance plan, and you willof services with. You can go to the insurance
be responsible for the full amount of the bill.company's website to find a listing of contracted
Inpatient or Outpatient Care“preferred providers”.
When you receive care from a hospital (inpatient orThis information may help you understand a policy that
outpatient services), these expenses are customarilyyou already have, or aid you in understanding a policy
paid at the coinsurance rate (70% or 80%) after thethat you may be thinking about purchasing.
deductible has been met.