Insurance Terms

DEDUCTIBLE

The amount of money you pay out of pocket each year before your insurance will begin covering expenses. Deductibles usually start over at the beginning of each calendar year. The deductible may not apply to all services.

Example: If you have a $2,000 deductible, you pay the first $2,000 of your own medical expenses. This is called “meeting your deductible.” After that, your insurance will pay for some of your medical expenses. You may still have to pay a portion of your expenses through copays and coinsurance.

CO-PAY

A copay is a fixed amount you need to pay for certain medical services, usually at the time of service. Office visits and prescription medicines often require copays.

Example: A visit to the family doctor may require a $25 copay, while an emergency room visit may involve a larger copay. Some services require both a copay and coinsurance.

CO-INSURANCE

Co-insurance begins after you’ve met your deductible and your plan starts paying some of the cost; it is the amount you pay after your insurance has paid its portion of the bill. Co-insurance is calculated as a percentage of total cost rather than a fixed dollar amount.

Example: You’ve reached your deductible for the year and the cost of your next doctor’s visit is $100. If your co-insurance is 20%, that means you will be responsible for $20 and your insurance plan will pay the remaining $80.

OUT-OF-POCKET MAXIMUM

Your out-of-pocket maximum (OOPM) is the maximum amount of money you will pay for medical services over a certain period of time, usually per year. Once you meet your out-of-pocket maximum, your insurance plan will pay 100% of all allowed charges.

Example: Your insurance plan includes an out-of-pocket maximum of $3,000. You have met your $2,000 deductible and paid an additional $1,000 in copays and coinsurance. Your insurance will now pay 100% of any future necessary and allowed medical charges until your policy renews the following year.

ALLOWABLE VS. BILLED CHARGES

The allowable charge is the contracted rate that is agreed upon between your insurance and medical provider for services rendered. This allowable amount is then used to determine how much you pay in coinsurance. You pay a portion of the total allowed amount in the form of a copayment, coinsurance, or deductible. Your health insurer pays what’s left.

The billed charge is usually higher than the allowable charge, due to different contracted rates with different insurances. In addition, whether the provider is in-network or out-of-network can affect the allowable amount. Most insurance will have a higher rate for out-of-network providers, resulting in higher out of pocket costs.

IN-NETWORK VS. OUT-OF-NETWORK (OON) PROVIDERS 

In-network providers are clinics and physicians that have agreed to charge your insurance company discounted rates for medical services. They can also be called “preferred providers.” Because of these negotiated rates, typically you will pay less by going to an in-network provider.

Please be aware that some insurance plans do not offer out-of-network benefits. This means that if you are seen by an OON provider, your insurance will not cover any portion of the charges for medical services. In addition, prior authorizations (see definitions) will not be granted for OON services. You may be required to pay these costs up front.

PRIOR AUTHORIZATION (PRE-APPROVAL or PRECERTIFICATION)

Some medical procedures and medications require your insurance company’s approval beforehand, called prior authorization. If a prior authorization is required, but not obtained, your insurance plan may determine it will not cover the cost. Even receiving prior authorization is not always a guarantee that the cost will be covered. To be sure you’re covered, always contact your insurance before moving forward with a treatment or procedure.