Health insurance is one of the single most important consumer investments you can make – maintaining health coverage does far more than simply cover medical costs incurred from office visits and accidents; it provides peace of mind. Understanding the ins and outs of your plan will help you avoid any surprising bills and prepare for whatever base costs you must pay. Before we delve into the core of coverage, let’s examine some of the most common types of insurance plans in order to better understand your existing plan, or to help you determine which plan may be right for you.
A PPO plan (Preferred Provider Organization) is a plan under which you are required to receive care from a specific list of preferred providers, as defined by your insurance company. It is very important to keep in mind that under a PPO plan, YOU are responsible for confirming that the physicians and specialists you choose to visit participate with your insurance company’s preset network. Care received from out of network providers may still be covered, albeit at a much lower rate, or not covered at all.
An HMO plan (Health Maintenance Organization) refers to an insurance plan that covers services rendered exclusively by physicians within a specific network of providers. This plan requires you to select a primary care physician (the physician whom you and your family see for all basic medical visits, i.e., yearly physicals) who will serve as the coordinator for the majority of your health needs and refer you to specialists as needed.
An EPO plan (Exclusive Provider Organization) is very similar to an HMO plan, but you do not need to select a primary care physician. As is the case with a PPO plan, you are required to obtain care from a set list of in network providers. The major difference between PPO and EPO plans concerns out of network services – as stated above, PPO plans will usually provide coverage at a much lower rate, while EPO plans do not provide any out of network coverage.
Medicaid is a joint state and federally funded healthcare program intended to provide medical coverage to those with limited income and disabilities. Medicare is federally funded health insurance for elderly individuals over the age 65, as well as those who receive disability payments.
Now that you have a better grasp on the differences between plans, read on to familiarize yourself with some of the most key and common insurance terms:
- Premium. An insurance premium is the amount of money that your or your employer pays for an insurance policy. Typically, this is a monthly charge.
- Deductible. An insurance deductible is a set amount of money that you are responsible for paying before your insurance company begins to cover services. Once you have met your deductible, you may still be responsible for your copay or coinsurance. Lower deductibles are typically accompanied by higher premiums, and vice versa.
- Allowed amount. An allowed amount, as the name suggests, is the maximum amount your insurance company may pay for a covered service. In the event that your provider charges more than your plan’s allowed amount, you will be responsible for paying the difference.
- Coinsurance. Coinsurance is the amount owed to your insurance company after you have already met your deductible. For example, if you have paid $2,500.00 in medical expenses and met your deductible, you and insurance company will now split the cost of services rendered. Because coinsurance is typically expressed as a percentage of the allowed amount, your insurance may now pay 80% of your service, leaving the remaining 20% as your coinsurance.
- Copay. A copay is a flat fee that your insurance company requires you to pay for specific medical charges before they accept responsibility for the remainder. Example: Your insurance company may set your copay at $20.00 for an office visit or monthly prescription refill. An easy way to differentiate your copay from your coinsurance: coinsurance is due after you have met your deductible, while copays are due at the time of service.
While we’ve only scratched the surface of the health insurance world today, gaining a concrete understanding of the basics will help you navigate your yearly medical expenses and better manage the unforeseen. And don’t forget, when in doubt, you are always able to call your insurance company directly to obtain more information. Make sure to check back with KLS for future tips and tricks!