Top 5 Health Care Terms You've Heard Of, But Don't Know What They Mean

by Camilla Cheung on 15 March 2016 (0 comments)

Navigating the world of health care plans can be difficult, especially because health insurance terms can be so confusing. If you're not sure what a co-pay or deductible is, you may end up with surprise medical bills.

Master these five health terms, and you'll be well on your way to understanding your health plan and saving money in the process.

1. Deductible

One of the most important things to understand about your health plan is whether your plan includes a deductible, and how much the deductible will be. A deductible is the amount of money that you have to pay out-of-pocket (per year) before the insurance plan will share in the cost of covered services. If you have a high deductible plan (these plans usually have lower monthly premiums), you'll have to pay more out-of-pocket before the insurance company starts to share in your costs. And of course, there are other kinds of plans where you have no deductible at all.

2. Out-of-Pocket Maximum

An out-of-pocket maximum is the most you’ll have to pay for covered medical expenses in a given year through deductibles, coinsurance and co-pays. Once you've reached your out-of-pocket maximum, your plan begins to pay 100 percent of the allowed amount for covered services. All the money you pay toward your plan's deductible, and for coinsurance and copays, go toward your out-of-pocket maximum. How you reach that out-of-pocket maximum depends on your plan. For example, if you have a higher deductible, you’ll likely have to pay more up front before your plan starts to cover some of the costs (but your monthly premium may be lower).

3. Coinsurance

Some health insurance plans include coinsurance, an arrangement where you share the cost of a given procedure or treatment with the health insurance provider. For instance, you might pay 20 percent of the cost of an MRI, while the insurance company pays 80 percent. Coinsurance payments occur after you have already paid the full cost of your deductible. Coinsurance factors into your out-of-pocket maximum, so if you end up needing a lot of treatments, you won't have to pay more than your annual maximum.

4. Co-Pay

A co-pay is a fixed amount that you have to pay for medical services, such as a doctor's visit or a prescription drug. This is your initial payment for service, no matter what your visit is for. For example, your plan may require co-pays of $20 for office visits and $100 for emergency room visits.

Co-pays for generic drugs are usually less than for brand name prescription drugs, so you may want to ask your doctor to prescribe a generic if one is available.

To save money, be sure to get treatment from an in-network doctor. If you visit a doctor that is out of network, you may have to pay a higher proportion of the costs via co-pays or coinsurance, and sometimes a higher deductible. Taking advantage of in-network discounts can also save you money.

5. Authorization

Prior authorization means that your health insurance company must approve a treatment or medication before they pay for it. Look into the details of your plan and see what requires an authorization. Often, you may not need an authorization for a generic drug, but you will for a brand name prescription. I've found that it's usually a good idea to call a few days before an appointment (or before driving to the pharmacy), and make sure all the necessary forms are in place.

Where to Learn About Even More Health Care Terms

Understanding your health plan's terminology can help you to avoid unnecessary expenses. For more health terms explained, check out Cigna's Insurance Speak Guide, which can shed some light on some of the more confusing health care lingo.

Being aware of the details of your health plan can help you to take better control of your health without breaking the bank.

This article is sponsored by Cigna. It is for educational purposes only and is intended to promote consumer health. It is not intended as financial or medical advice and you should always consult a professional for financial or medical advice. For more health care terms and tips on using your health benefits, visit www.Cigna.com/knowyourbenefits.