finance article No.8549
Insurance Terms You Should Understand
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If you are planning to insure your health and intending to shop for a policy, there are terms you should first understand so you will know what you are getting into. It is easy to be baffled by the insurance gobbledygook, especially by fast-talking salesmen who are simply interested in selling and not serving. The following terms and definitions may differ among insurers, but only a little. If you know the basic meaning of the terms you will understand what the salesman is saying. Or you can impress him by mentioning the terms, which means to say you cannot be gypped. Make sure you understand what he is saying by asking him to explain in detail each word or provision, so you can compare it with what you understand. Coinsurance-The amount payable once the insurance plan's deductibles have been paid, normally stated in percentage points. But coinsurance payments usually end when the out-of-pocket payments allowance is used up for a particular plan. Copayment- A payment you must make that is not included in your insurance plan. The amount may vary depending on whether it is a regular visit or an emergency. A few plans really require copayment, like HMOs and PPOs. Credit for prior coverage- When you switch employer or insurance plan, there might be payments on your previous plan's coverage applicable to the new. You may need to provide proof of this via information from the previous insurer before your new insurer can cover your health with the new plan without the requisite waiting period. Deductible- The amount you pay before the insurance applies or the part of the payable not covered by the insurance plan. Normally, a high deductible means lower policy premiums. Explanation of Benefits (EOB-. Similar to a bank's statement of your account. The EOB is from the company and lists the items and amounts paid and not paid in a claim. Maintaining your EOB records will help you keep track of your account, and aid you in challenging an insurance bill.
Exclusive provider organization (EPO) plan- This lets you use your plan with any doctor or hospital within the insurer's network, even with no referral. It gives you no coverage outside the network, though, even if your doctor was formerly accredited in it. Also, there might be copayment requirements. Indemnity plan- This is well-established and simplest plan. It lets you go to any hospital or doctor of your choice and charge your medical expenses, normally 80% and up to 100%, to the coverage, less the deductibles. The maximum coverage of 100% is possible once you have reached your out-ofpocket expense allowance in your insurance policy. Health maintenance organization (HMO)- Basically a prepaid plan which requires a monthly premium to provide a comprehensive health care schedule. Many HMOs require no deductibles, no forms, and no bills to keep a tab on, but limits the choices of hospitals and doctors you can go to. To consult a specialist, you'd need a referral from your doctor; otherwise, you cannot charge it. HMOs were formerly the cause of many complaints, either because of limited coverage or incorrect application of its provisions. But these complaints have dropped in the succeeding years. HMOs also compete with less-expensive health care insurance alternatives. Maximum out-of-pocket- The amount you pay before your insurance pays 100% of your insurance claim. Most times the insurance will pay only up top 80% of your claim. Maximum lifetime- The maximum amount your insurance will pay your covered expenses within your lifetime. Best to seek maximum limits of $3million. There are other terms you need to get acquainted with, and it is best to do so.
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