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By Barbara Kunz, Ph.D., HealthAtoZ Writer
Understanding the language of health insurance is a challenge. According to a survey of over 2,000 workers covered by their employer's health insurance, less than half feel comfortable explaining common health insurance terms, such as co-pay, HMO or deductible.
Less than one in four can explain what a health savings account or coinsurance is. Yet, those workers are asked every year to make choices that influence their family's health coverage for the coming year.
Here are explanations for some important health insurance terms:
Closed Access: A plan that requires you to select a primary care physician. He or she is the only one allowed to send you to other health care providers within the plan. Also called Closed Panel or Gatekeeper model.
Coinsurance: The amount you pay for medical care after you've met your deductible. The coinsurance rate is usually shown as a percentage. If you have an 80/20 plan, the health insurance company pays 80 percent of the claim, and you pay 20 percent.
Coordination of Benefits: A system that makes sure your providers are not paid more than the total bill when you are covered under more than one plan.
Co-pay: A flat fee you pay every time you receive a medical service (e.g., $25 for each doctor visit).
Covered Expenses: Covered services are those medical procedures the insurer agrees to pay for. They are listed in the health insurance policy. Most health insurance plans don't pay for all services. Treating wrinkles to make you look younger is one example of a service that is usually not covered.
Customary Fee: Most health insurance plans will pay only what they call a reasonable (or usual) and customary fee for any service. This fee is defined as the charge for health care that is consistent with the average rate or charge for identical or similar services in a certain geographical area. If your doctor charges more, you may have to pay the difference.
Deductible: The amount of money you have to pay each year before your health insurance policy starts paying.
Employee Contribution: The employee's share of the premium costs.
Employer Contribution: The employer's share of the health insurance costs.
Exclusive Provider Organization (EPO): A type of preferred provider organization (see definition below) for which you use designated providers rather than having a choice. In an EPO, a primary physician monitors care and makes referrals within a network of providers.
Fee-for-Service: A health care system through which physicians and other providers are paid a fee for the services they provide.
Flexible Spending Account: A flexible spending account (FSA) is a financial account with tax advantages. An FSA allows an employee to set aside a portion of his or her earnings to pay for qualified expenses, most commonly for medical expenses, but often also for dependent care or other expenses. Money that is deducted from an employee's pay and placed in an FSA is not subject to payroll taxes.
HMO (Health Maintenance Organization): An HMO is a prepaid health plan. You pay a monthly premium and the HMO covers your doctors' visits, hospital stays, emergency care, surgery, checkups, lab tests, X-rays and therapy. You must use the doctors and hospitals chosen by the HMO.
Health Reimbursement Account (HRA): HRAs are accounts that employers set up to pay employees back for qualified medical expenses. An HRA pays until the funds are gone. They balance part of the costs employees have to pay with a high-deductible plan. All unused funds are rolled over at the end of the year. HRAs remain with the original employer and do not follow an employee to new job.
Health Savings Account (HSA): An HSA is a medical savings account with tax advantages. You do not have to pay income taxes on the funds you contribute to the account. You may use the funds only to pay for qualified medical expenses.
Network Provider: A doctor, hospital or lab that has a contract with the insurance company. The provider agrees to accept the amount your health insurance pays for a service as payment in full.
Lifetime Maximum: The maximum amount of money a plan will pay toward health care services during your lifetime.
Member: Anyone covered under a health plan, the enrollee or eligible dependents.
Nonparticipating Provider: A provider who has not signed a contract with a health plan and may charge more than your insurance pays.
Open Enrollment Period: A period during which members can make changes in their health care coverage.
Out-of-Pocket Limit/Maximum: The maximum coinsurance you will have to pay. After you've done so, your insurer will pay 100 percent of covered expenses up to the policy limit.
Preferred Provider Organization (PPO): A group of hospitals and physicians who provide, for a set fee, services to insurance members. These providers are listed as preferred. You may select from several hospitals and physicians without the limitations of an HMO.
Premium: The amount you or your employer pays in exchange for health insurance coverage.
Primary Care Physician/Doctor: A primary physician (usually a family physician or internist) provides initial treatment. If necessary, he or she then refers the member to an appropriate specialist within the approved health care network.
Provider: Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.
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