Every day we get tons of emails from the loyal readers of our blog enquiring about health insurance. Considering the bulk of emails, we are not always able to get through each and every one of them. But from the mails that we do read, we have noticed that a lot of people are confused about the terms used in context of health insurance. Hence, we decided to write an article explaining the common terms used in health insurance industry.
So let’s start by learning about some of the simplest terms used in the context of health insurance.
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Premiums:
You don’t need to be a health insurance sales man in order to understand what premium means. The term is self-explanatory. But still for those who don’t have any idea of financial terms, premium refers to the periodic payments that you are supposed to pay to your health insurance provider. You can either pay the premium periodically or all at once. Most of the people prefer the option of paying the premiums periodically.
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Deductible:
Now this term is a bit more complex than the previous one. In simple terms we can say that it refers to the amount of money that you are required to deposit in the accounts of the health insurance provider at the time of purchasing the health insurance plan. Note that deductible is different from premiums. While premiums are paid on a periodic basis, deductibles are paid only once in the beginning.
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Co-insurance:
Co-insurance refers to the amount of expenses that will not be covered by the insurance company. Such expenses are meant to be covered by you from your own pocket. Let us consider a very simple example in order to understand it in a better way. Suppose that you visit a doctor and your medical bill amounts up to $100. Now at the time of purchasing the health insurance plan, the insurer is supposed to clarify the position of co-insurance. If the co-insurance in your case if 20 percent then you will be required to pay $20 from your pocket and the insurance company will cover the rest of the $80. One important thing to note here is that – higher the co-insurance is, the more money you will be required to pay from your pocket. Hence before purchasing any health insurance plan you must explicitly ask about the co-insurance.
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Out of pocket maximum:
It refers to a maximum cap that is renewed on an annual basis. Not following yet? Ok, consider that the out of pocket maximum for your health insurance plan is $100. We have taken such a small amount just for the sake of simplicity; in actual it’s much higher than this. Now suppose that you visited a hospital and the total hospital bill amounted up to $110. In this case you will be required to pay the $10 from your pocket because the out of pocket maximum is capped at $100. Once this annual limit is reached, all other medical expenses will have to be paid from your pocket. Once the year is over and the limit is renewed, the insurance company will start to cover the expenses but again only up to the annual limit.
This article is written by James Harley. James is one of our regular guest bloggers. Considering the bulk of e-mails we receive from our readers regarding clarifications on health care insurance related terms, we asked him to write an article detailing all the important terms.
Marty Huggins
