Health insurance is full of its own lingo — and that can make bills and descriptions of benefits hard to understand. Learning the common terms that your insurance company might use is an important part of taking charge of your coverage. These terms are some of the most common — and commonly misunderstood — that you might encounter.
This is one of the most important terms, says Robin Solomon, a partner at Ivins, Phillips & Barker. “This is the amount you will pay out of pocket before your insurance kicks in at all,” she says. For example, if you have a $2,000 deductible, then your insurance will not pay a dollar until you reach $2,001 in expenses. As more employers switch to high-deductible plans, it’s vital to understand this term.
The copay is the amount you have to pay for a particular service, says Jeffrey Koontz, of the
Koontz Insurance Consulting Group. For example, under a plan with a $10 office visit copay, you would pay $10 each time you went in for an office visit.
This term is often misunderstood, Solomon says. It refers to the percentage you will be expected to pay after the deductible is met. If your plan requires 20 percent coinsurance, also known as an 80/20 plan, you will be expected to pay 20 percent of every medical bill. “This is in addition to the copay required for each office visit,” she says.
“Out-of-pocket” refers to the maximum you have to pay in deductibles, copays and coinsurance before something is covered 100 percent by the insurance carrier, Koontz says. “Some older group plans may only count coinsurance toward the out-of-pocket, with no cap on copays, while newer ACA-compliant plans count all employee outlays towards the out-of-pocket.”
5. Allowable Charge
This term comes up when you’re looking at out-of-network services, Koontz says. It’s the amount the insurance company deems acceptable for a given charge. “An insurance company may define an allowable charge to be an amount less than the provider is charging, and then pay at 50 percent. For example, if the provider charges $15,000 for a surgery, and the carrier only considers $10,000 the allowable charge, it will pay only $5,000 if it covers at 50 percent, Koontz says, making you responsible for $10,000.
6. Metal Levels
Almost all plans offered to individuals now are labeled as platinum, gold, silver or bronze, Koontz says. These terms refer to the actuarial value of the plans. Generally speaking, bronze plans cover about 60 percent of the covered expenses an “average” consumer might have. Silver covers 70 percent; gold, 80 percent; and platinum, 90 percent.
“Within each metal group, you will find different plans that are either closer to the low end or high end of the actuarial value range,” Koontz says. You also will find plans with similar actuarial values but varying features, such as a plan where an insured may pay more in deductibles but have 100 percent coverage versus another that may offer no deductibles but require a lot of copays and coinsurance.
This process requires a decision by your health insurer or plan that a health care service, treatment plan, prescription drug or piece of durable medical equipment is medically necessary, says Adria Gross, founder of MedWise Insurance Advocacy. “Your health insurance or plan may require preauthorization for certain services before you receive them. If the services require a preauthorization and you do not have it, your claims might be denied.”