Health Insurance Primer - Terms You Should Know

Whether you are seeking health insurance for the first time, or are switching health insurance providers or plans, it's good to familiarize yourself with the unintuitive terms that are used throughout your plan's documentation so you know exactly what you're getting. Health insurance is complex, but this article should help clarify some of the questions you might have as you begin your investigations.

Health Insurance Terms - PPO

In terms of health insurance, PPO means Preferred Provider Organization, which means that there is a network of health care providers that that have been approved by your health insurance company. When you require medical assistance, your health insurance company will in general cover more of the costs if you visit a member of their provider network. PPOs are generally a less expensive option than HMOs.

How Does a Health Insurance PPO Work?

Basically, a health care provider will contract with a health insurance company for the mutual benefit of each. The health care provider will charge the insurance company a discounted fee, and in turn the insurance company will pay bills quickly and will refer a certain quota of patients to the provider.

Will the health insurance company cover costs for non-network health care providers?

The question as to whether your health insurance company will cover non-network health care providers depends on the company. On the whole there are still benefits, and your expenses still count towards your out-of-pocket maximum, but the benefits are significantly lower. To compare, a health insurance company might offer a $30 co-pay for a preventative doctor's visit if the doctor is within their network of health care providers, but might only cover 30% of a visit to a provider outside of their network.

Health Insurance Terms - HMO

The acronym HMO stands for Health Maintenance Organization. HMO health insurance plans work a lot like PPO plans in that you are limited to the health care providers who belong to the health insurance company's network, with a few significant differences.

1) Each enrollee has a primary health care physician that coordinates the care for the enrollee
2) The health insurance enrollee must typically be within a certain distance from the health care providers they will be accessing.

Which is Better Health Insurance, HMOs or PPOs?

HMO insurance plans typically have greater coverage than PPOs. That means that you will pay less for doctor visits, have a lower deductible, and pay less for medication. However, HMOs are usually significantly more expensive than PPOs.

Health Insurance Terms - Deductible

Each health insurance plan has a deductible, which is the amount of money you must pay for health care providers before the insurance benefits kick in. If your plan has a deductible of $2000, for instance, you will have to rack up at least $2000 in health-related costs before the insurance company will start to pay any of it.

Exceptions to the Health Insurance Deductible

There are typically certain exceptions to a health insurance deductible, both in and out of your favor. For instance, health insurance companies will usually apply their benefits to preventative care procedures and doctor visits before the deductible is met. It is usually the same for medication coverage. However, there may be exceptions for pregnancy care where the amount you pay towards health care costs related to a pregnancy doesn't actually count towards your deductible at all.

Health Insurance Terms - Out of Pocket Maximum

The term "Out of Pocket Maximum" or "Out of Pocket Limit" refers to the amount you have to pay each year in health-related costs before the health insurance company will start to cover all of the costs.

Health Insurance Terms - Co-pay

The term "Co-pay" refers to an option certain health insurance providers offer that allows you to pay a flat fee for a particular service. For instance, many insurance plans have co-pays for doctor visits. Plans have traditionally offered co-pays for medication as well, though there is a trend in modern plans to covert it to a percentage-paid service.

Health Insurance Terms - Pre-Existing Condition

A pre-existing condition is a health issue that you have before you apply for health insurance. If you have pre-existing conditions when you first apply for health insurance, or if you are switching providers, the health insurance company will either 1) Only cover costs related to the pre-existing condition after a certain term is up, typically around a year, or 2) Will never cover costs related to the condition.

It is very important to consider how your health insurance provider will deal with pre-existing conditions before signing up. If you expect to have to cover costs related to these conditions in the near future, then you may be able to find a plan with a higher costs that will cover pre-existing conditions earlier, or right away.