These Basic Health Insurance Terms Can Save Your Life

When shopping for a new individual health insurance, many people lack knowledge of basic health insurance terms. It can be challenging if you are not familiar with the terminology. If you want to shop smart, you will do so with the help of a licensed insurance agent. But even in such cases, getting familiar with individual health insurance terms can be very useful.


The premium is what you pay to your health insurance provider to keep your coverage active. When in search of a plan, this is generally the first cost to think about. However, you may want to factor in the copayments as well as deductibles, coinsurance, and out-of-pocket maximums.


This is the flat dollar amount you pay to your healthcare provider for a service included in your plan. For instance, you may pay a $30 copayment and $10 when a generic prescription is filled. Copayments are different for each plan based on coverage type. If you need to go to the doctor regularly, you should find a cost-effective copayment.


Deductibles are the amount you pay for covered services before your health insurance starts paying. They are designed differently.  In some plans, a comprehensive deductible applies to all services while in others they have separate deductibles for covered services such as prescription drug coverage. Deductibles can change the cost of your premium.  Usually, lower deductibles mean a broader coverage, but it will affect the insurance premium costs.  Some like to keep their deductible 5% or less of their annual income.


This is the percentage of acceptable charges for services covered that have been paid.  For instance, your health insurance may cover 80% and you are responsible for 20%, known as the co-insurance. When the plan has a deductible, you generally pay your coinsurance for services covered after the deductible is met. Your coinsurance can affect the price of your premium as well. Usually, plans with lower co-insurance have higher premium costs.

Maximum Out-of-Pocket Costs

The out-of-pocket maximum is the max you can pay for covered services during a certain amount of time. The out-of-pocket doesn’t comprise copayments, co-insurance, and deductibles. Once the out-of-pocket maximum is paid, your insurance pays 100% of the amount allowed for healthcare expenses.


This is called the Health Maintenance Organization (HMO), which gives you less flexibility when it comes to choosing a provider. They limit coverage to medical care provided through a network of doctors and other healthcare providers under the HMO contract. Also, if you find a new job or move to another city, you are at risk of losing coverage.


With a Point of Service Plan (POS), you don’t need a referral from your doctor to receive care. Also, your medical expenses will be higher if you seek treatment out-of-network, but you will have more doctors to choose from than with an HMO plan.


With a PPO your insurance provider will pay a portion of your bill when you see an out-of-network specialist or physician. You don’t need a referral from your doctor, but you will pay more. Going to in-network healthcare professionals only will help keep the costs low.

Choosing Wisely

With an understanding of basic healthcare terminology, you should be able to find a budget-friendly plan that suits your needs. Lower deductibles mean you will have more flexibility, but higher premiums. Inexpensive plans are great if you are healthy, but they can be costly if you have a lot of medical expenses.

Need guidance? A licensed agent at Insurance Line One can help. Request a health insurance quote today!




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