Everything You Need to Know About Health Insurance but Are Too Embarrassed to Ask

Whether your employer offers you health insurance or you get it through the Affordable Care Act marketplace, most plans use the same words to describe exactly what you are entitled to. Like filing taxes or fixing a flat tire, health insurance terminology is one of those essential knowledge that adults should have, but if you don’t know what all the jargon means, you’re not alone.

Knowing these words can help you take full advantage of everything your plan gives you, which is important to say the least. Let’s look at some terms and why they matter.

Financial health insurance terms you need to know

• Franchise. Your deductible is the amount you pay for your medical services before your health insurance starts paying its share. For example, if your deductible is $1,500, you must pay that amount yourself before your insurance kicks in and pays the rest. However, some services, such as preventive doctor visits, may be covered before you pay the deductible, so be sure to read all of the instructions in your plan.
• Premium. The premium is what you pay the insurance company to have your plan. You can pay it monthly, as most people do, or quarterly or yearly. If your bonus comes directly from your paycheck, it is deducted from your pre-tax paycheck, and your employer is also likely to pay a share. If you purchased your plan through the ACA marketplace, tax credits are available to help you offset the cost of your premium.
• Allowed amount. The allowance (or eligible cost or surcharge) is the discounted price that your plan has agreed in advance for the service you are receiving. This means that this is the maximum amount your plan will pay for a covered service.
• Surcharge. Your copay is what you must pay each time you have a particular service or appointment. These fixed amounts may vary depending on which service you are receiving. For example, you can pay $50 every time you get emergency care or $20 every time you get a prescription.
• coinsurance. This is triggered after you have completed your franchise. Co-insurance is the percentage you pay for your medical expenses after you have covered them. If your co-insurance rate is 25%, you will still pay 25% of your bills after you have met your deductible and your insurance company will pay the other 75%.
• Cash limit. This refers to the maximum amount you will pay during the policy period, which is usually a year before your plan pays 100% of the allowed amount. This includes the cost of your franchise, copay, and co-insurance, but not your premium.
• On-network/off-network providers. When you book appointments with various doctors and providers, you may notice that some are listed as in-network and others are listed as out-of-network. Any network provider or facility has a contract with your health insurance company to provide services. Depending on your plan, if you see an out-of-network provider, it may not be covered or it may only be partially covered. With out-of-network providers, you can expect higher deductible and equity limits. Your co-insurance and copay may also be higher for out-of-network providers.
• Pre-authorization/pre-authorization. Prior Authorization is a decision your insurance company makes about the medical necessity of a service, treatment, drug, or equipment. This is also called prior authorization. This does not guarantee that your insurance will cover the costs, but getting it gives you a better chance. Talk to your doctor when you get your prescription and check your insurance company’s website to see if it’s covered.

The Different Types of Insurance Plans You Need to Know

• OPP. It stands for “health management” and refers to health plans that are usually cheaper but offer more limited choices. With an HMO plan, you usually have to choose a network provider (unless you want to pay the entire bill). An HMO usually offers limited or no offline coverage.
• POS. The service point will not allow you to get specialty care without a referral from your PCP.
• PPO. A Preferred Provider Organization plan is a plan whereby your insurance company will pay part of your bill even if you go to a provider that is not in your network. It doesn’t even require a direction. However, try to stay online whenever possible, just to save money.
• EPO. In the Exclusive Provider Plan, you can only use providers, professionals, and facilities that are part of the plan’s network (except in an emergency).
• Prescription drug coverage. This refers to health insurance or a plan that helps you pay for prescription drugs. All plans in the ACA cover prescription drugs, but if you get insurance through your employer, make sure your insurance covers it.
• Catastrophic. A catastrophic plan is one that only pays after you’ve reached a very high deductible, but it does so without copays and co-insurance. In general, the cheaper your insurance premium, the higher your deductible, and insurance plans are the best example of this rule. If you pay for one, you won’t have much money unless something, well, catastrophic happens. Notably, insurance plans must cover your first three primary care visits and some wellness visits free of charge, even if you didn’t meet the deductible, which was $7,900 in 2019 and $8,150 in 2020. must be under the age of 30 or have a hardship exemption—say, because no other insurance options are available.

Why does all this matter?

Simply put, there are a lot of barriers in the American healthcare system. There isn’t much you can do about systems, but what you can do is arm yourself with information about what you are entitled to.

Dr. Gerald Kominsky, senior fellow at UCLA’s Center for Health Policy Research, focuses on health literacy, and he told Lifehacker why consumers need to know about it. Kominsky not only studies the barriers to accessing health care in the country, but also experienced them first hand. He explained that, like many people, he discovered that one of his existing prescriptions was not covered without prior authorization when he switched to a new insurance company. His new insurance required him to try other medications and demonstrate they didn’t work before they would consider covering the one he’d been taking for years, but he “didn’t want to experiment.” Instead, he received a GoodRx card , which provides drug coupons to users. Coupons cannot be used with insurance, but it’s a great option and the service is free.

“We often ask the question, ‘How many PhDs does it take to calculate your health insurance benefits?'” he said. “Health insurance is so complex and there are so many things that can vary from policy to policy that it causes confusion among the general public, and even more so among people working in the field. I can’t tell you how many medical professionals I’ve dealt with over the years don’t fully understand their insurance while they’re working as clinicians.”

Simply put, you’re not alone if you don’t know what your policy covers and what doesn’t, but it’s vital that you try to figure things out before an emergency happens.

“It’s really important for consumers to know the specifics of their policy,” Kominsky said. “Otherwise, you may find yourself in a situation where you suddenly receive a large bill that you did not count on. It may or may not be something you end up having to pay, but it’s your best defense to avoid getting a big, unexpected bill, also known as a “surprise bill.”

If you receive an unexpected bill, submit a request for review to your insurance company and document the circumstances. Document everything, basically. Kominsky also recommended keeping track of your personal expenses and, when you complete your deductible, let your insurance company know ahead of time. Some insurers are good at tracking this and notifying plan holders, he said, while others are not. Don’t let your insurance company’s disorganization cost you money.

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