For most people, it can be challenging to understand how health insurance works. Taking time to learn the basics will help you make the most of your benefits—and could even save you money. Here are seven key terms and concepts to get you started.
- Summary of Benefits: Reading your Summary of Benefits is a great way to understand your health coverage. This is usually a one-page document that quickly sums up how your health plan coverage works.
- Deductibles: Some healthcare services require you to meet your deductible before your insurance plan will begin to pay. This means you must pay a certain amount out of pocket, first. Once your deductible is met, your plan will kick in and cover the service according to your benefits. Some services, such as preventive care, are covered without you needing to first meet your deductible. Your Summary of Benefits will explain which services require deductibles and which don’t.
- Copays and coinsurance: A copay is the amount you pay, usually upfront, when you see a doctor or fill a prescription. Once you meet your deductible, your plan shares the cost of care with you. The amount you pay (a percentage) is called coinsurance.
- Out-of-pocket limit: This limit is the most you’ll pay for healthcare services within your plan year. (Oftentimes, your plan year is the same as a calendar year, but not always.) Note that your in-network and out-of-network limits may be different. Your benefit summary will include more information.
- Drug list (formulary): Health insurers are able to offer better prices on some drugs than others. They maintain a list of “preferred” drugs, called a drug list or formulary. This list usually includes both generic and brand-name medications, and you can save money by using drugs on the list.
- In-network vs. out-of-network: Health insurers contract with healthcare providers to make sure you get quality care at a discounted price. Note: the term “providers” includes doctors, nurses, dentists, chiropractors, and more. Providers who are contracted with your insurer are considered “in-network.” When you receive care from an in-network provider, you’re getting the best value from your health plan.
- Preventive care appointments: These are routine doctor visits that include screenings, check-ups, and patient counseling to prevent illnesses, disease, or other health problems. Be aware that healthcare providers are often scheduled well in advance, and it can take some time and planning to get care. Talk with scheduling staff at your provider’s office to find out average wait times for scheduling appointments.
Wondering about other health insurance terms?
The federal government maintains a comprehensive glossary of health insurance terminology. Your insurer’s customer service department is happy to help if you are still confused about something related to your plan.