Understanding the insurance lingo

Even as millions of Americans have gained health insurance coverage in recent years, many do not know how to use the coverage nor understand the basic terms related to healthcare costs, several studies suggest.

According to the American Institutes of Research, about three out of four Americans ages 22-64 believe they know how to use health insurance. However, only about one in five can correctly calculate how much they owe for a routine doctor visit.

A Rice University analysis showed that one in four adults in Texas “lacked confidence in understanding” the most basic terms related to healthcare costs, such as premium, deductible, and co-payment.

To help better understand health insurance terminology, the following definitions are provided by the US Department of Labor and the US Department of Health and Human Services:

Premium—The cost of your insurance plan. Payments are made monthly, quarterly, or yearly by you or your employer, most commonly both.

Deductible—The out-of-pocket amount you pay for covered healthcare services before your insurance plan starts to pay. For example, if your deductible is $500, your insurance will not pay for anything until your costs are more than $500. This is in addition to your premium.

Co-insurance—The amount that you are obliged to pay for covered medical services after you have satisfied any co-payment or deductible required by your health insurance plan.

Co-payment—A fixed amount you pay every time you receive a particular health service. For instance, if your co-payment to see a healthcare provider is $25, you pay that amount each time you see him or her. Insurance takes care of the rest.

Out-of-Pocket Maximum—The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100 percent. This limit does not include your balance-billed charges, premium, or healthcare services your plan does not cover. Some plans do not count the out-of-network payments, co-insurance payments, co-payments, other expenses or deductibles toward this limit.

In- and out-of-network—An in-network provider is a healthcare office that has contracted with the health insurance company to provide services for people on that insurance plan. An out-of-network provider is someone who does not have such a relationship with the insurance company. In many cases, insurance will not pay for out-of-network services, or not pay as well.

Claim—The bill you or your healthcare provider submits to your health insurance company.

Pre-authorization—A decision by your health insurer or plan that a healthcare service, treatment plan, prescription drug, or durable medical equipment is medically necessary. This is often necessary before a service is performed.