With all the news lately about the Patient Protection and Affordable Care Act (PPACA), you may find yourself hearing and reading terms that you’ve never fully understood. What does Out-of-Pocket Maximum really mean? Below is a story that includes a list of ten health insurance terms that might help you wade through the latest news items more clearly.
Once upon a time, Jane was fighting a bad cold and decided to see a doctor. Luckily, she had recently been hired at a job that offered health insurance. Before making an appointment, she checked with her Human Resources department to learn if she had met her Waiting Period.
1. Waiting Period – for job-based insurance, the time that must pass before coverage becomes effective for an employee or dependent, who is otherwise eligible for coverage. Current PPACA guidelines will limit Waiting Periods to no more than 90 calendar days.
Jane was happy to learn she had met her Waiting Period and was currently covered by her employer’s health insurance plan. However, her Human Resources department reminded her that her healthcare costs would be significantly less if she selected a doctor within their insurance plan’s Network.
2. Network – A group of doctors, hospitals and other health care providers who have contracted with your insurance company to provide services for less than their usual fees.
Jane, being a savvy consumer, decided to go to her insurance company’s website to search for an in-network Provider.
3. Provider – A physician (M.D. – Medical Doctor or D.O. – Doctor of Osteopathic Medicine), health care professional or health care facility licensed, certified or accredited as required by state law.
After Jane selected a doctor, she called their office to confirm their participation in the Network because changes are made all the time. Good news! Her doctor was contracted with her insurance company. Now that Jane knew who she was going to see, she wanted to make sure why she was going would be accepted by her insurance plan. Would having a cold be covered?
4. Covered Benefits – The health care items or services covered under a health insurance plan. Covered benefits and excluded services are defined in the health insurance plan’s coverage documents. In Medicaid or CHIP, covered benefits and excluded services are defined in state program rules.
So, Jane found her Summary of Benefits to check what her plan covered for Professional Services and Office Visits. Having found the details, she made her appointment fully prepared for what she would need to pay. On the day of her office visit, the receptionist asked her to pay the office Co-payment.
5. Co-payment – Sometimes referred to as a Copay. A fixed amount (for example, $15) you pay for a covered health care service (such as an office visit or having a prescription filled), usually when you receive the service. The amount can vary by the type of covered health care service.
Unfortunately, it turned out that Jane had more than a common cold, so she had to have a lot of tests run. She ended up going back to see the doctor frequently over the next few weeks. She started to receive bills from the doctor and her insurance company sent her an Explanation of Benefits (EOBs) with a lot of confusing terms. For each visit and test, the insurance company showed an Allowed Amount.
6. Allowed Amount – Maximum amount on which payment is based for covered health care services. This may be called “eligible expense,” “payment allowance,” or “negotiated rate.” If your provider charges more than the allowed amount, you may have to pay the difference. (See Balance Billing.)
Since all benefits are calculated on this Allowed Amount, Jane knew this is where all further calculations would begin. She hadn’t received any healthcare services before this visit, so the first thing she saw was that the Allowed Amounts on her earliest bills were applied to her annual Deductible.
7. Deductible – The amount you owe for Covered Benefits before your health insurance or plan begins to pay. For example, if your deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible for covered health care services. The deductible may not apply to all services.
As the statements continued to arrive, Jane noticed that after she had paid out her Deductible amount, the Allowed Amount was then split into two parts. One part was the portion the insurance company paid to her healthcare providers. The portion that she had to pay was called Coinsurance.
8. Coinsurance – Your share of the costs of a covered health care service, calculated as a percent (for example, 20%) of the allowed amount for the service. You pay co-insurance plus any deductibles you owe. The health insurance or plan pays the rest of the allowed amount.
Unfortunately, Jane went to a testing facility that was not part of her plan’s Network. Therefore, her costs were higher because the testing facility Balance Billed her.
9. Balance Billing – When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.
The bad news was that Jane found out she would need surgery. She was worried about the additional expenses, but the good news is that she would soon meet her Out-of-Pocket Maximum/Limit.
10. Out-of-Pocket Maximum/Limit – The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100% of the allowed amount. This limit never includes your premium, balance-billed charges, or health care your health insurance or plan doesn’t cover. Some health insurance or plans don’t count your co-payments, deductibles, coinsurance payments, out-of-network payments, or other expenses toward this limit. In Medicaid and CHIP, the limit includes premiums.
Happy ending: Jane’s surgery was a success, she used Preferred Providers so her insurance covered all expenses, and she went on to live happily ever after.
Sources:
- HealthCare.gov – Glossary
- Cover Oregon – Glossary
- Glossary of Health Coverage and Medical Terms
Image courtesy of: Flickr.com/kochbr