Understanding Health Insurance Terms

Coinsurance
The amount patient / insured is required to pay for medical care in a fee-for-service plan, after deductible have been met. The coinsurance rate is usually expressed as a percentage. For example, if the insurance company pays 80 percent of the claim, patient / insured pay 20 percent.

Coordination of Benefits
A system to eliminate duplication of benefits, when an individual is covered under more than one group plans. Benefits under the two plans usually are limited to no more than 100 percent of the claim.

Co-payment
Another way of sharing medical costs. Individual pay a flat fee every time he receives medical service. (for example, $5 for every visit to the doctor). The insurance company pays the rest.

Covered Expenses
Most insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the policy.

Customary Fee
Most insurance plans will pay only what they call a reasonable and customary fee for a particular service. If patient’s doctor charges $1,000 for a hernia repair while most doctors in that area charge only $600, patient will be billed for the $400 difference. This is in addition to the deductible and coinsurance which patient is expected to pay.

Deductible
The amount of money insured must pay each year to cover medical care expenses before insurance policy starts paying.

Exclusions
Specific conditions or circumstances for which the policy will not provide benefits.

HMO (Health Maintenance Organization)
Prepaid health plans. Insured pay a monthly premium and the HMO covers doctors' visits, hospital stays, emergency care, surgery, checkups, lab tests, x-rays, and therapy. Insured must use the doctors and hospitals designated by the HMO.

Managed Care
Ways to manage costs, use, and quality of the health care system. All HMOs and PPOs, and many fee-for-service plans, have managed care.

Maximum Out-of-Pocket Expenses
The most money insured will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums.

PPO (Preferred Provider Organization)
A combination of traditional fee-for-service and HMO. When patient use the doctors and hospitals that are part of the PPO, he can have a larger part of medical bills covered. Patient can use other doctors, but at a higher cost.

Pre-existing Condition
A health problem that existed before the date insurance became effective.

Premium
The amount which insured or his employer pays in exchange for insurance coverage.

Primary Care Doctor
Usually patient’s first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors health and diagnoses and treats minor health problems, and refers the patient to specialists if another level of care is needed. In many plans, care by specialists is only paid for if the patient is referred by primary care doctor. An HMO or a POS plan will provide a list of doctors from which patient will choose primary care doctor (usually a family physician, internists, obstetrician-gynecologist, or pediatrician). This could mean patient might have to choose a new primary care doctor if his current one does not belong to the plan. PPOs allow members to use primary care doctors outside the PPO network (at a higher cost). Indemnity plans allow any doctor to be used.

Provider
Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.

Third-Party Payer
Any payer for health care services other than the patient / insured. This can be an insurance company, an HMO, a PPO, or the Federal Government.