Health insurance can be very confusing. Understanding the terminology of your plan can be difficult. Here are 10 of the key terms that you will encounter and what they mean.
There are a few participants involved. The “provider” is a clinic, doctor, pharmacy or hospital. The “insurer” or “carrier” is the insurance company providing coverage. The “policyholder” is the individual that has the contract with the insurance company. “Insured” is the person with health insurance coverage. You may be both the policyholder and the insured.
A premium is the amount of money charged by an insurance company for coverage. The cost may be determined by several factors, including age, location, number of dependents and tobacco consumption. Policyholders pay these rates annually or in smaller payments over the course of the year. The policy is considered void is premiums are not paid.
This is a fixed amount you pay for a covered health care service.
A deductible is the amount you owe for health care services each year before the insurance company begins to pay. For example, if your annual deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible.
Coinsurance is your share of the costs of a covered health care service calculated as a percent (for example, 20 percent) of the allowed amount for the service.
Out of Pocket Maximum
An out-of-pocket maximum is the most you have to pay for your health care during a year. After you reach the annual out-of-pocket maximum, your health insurance or plan begins to pay 100 percent of the allowed amount for covered health care services or items for the rest of the year.
The lifetime limit is a cap on the total lifetime benefits you may get from your insurance company.
The annual limit is a cap on the benefits your insurance company will pay in a given year.