Important Insurance Terms Explained

No matter what type of insurance you might be dealing with, there is bound to be terminology and concepts that you might not understand. Health and life insurance is no different. Here are some common terms that you should know when thinking about health insurance.

Primary Care Physician (PCP): Typically applies to members of a Health Maintenance Organization (HMO). The member chooses a physician who becomes the gatekeeper who regulates all health care decisions.

Referral Physician: Also known as a specialty physician, your PCP will refer you to another physician to handle specific aspects of your health. The referral system keeps members away from higher priced specialists unless it is truly necessary.

Copayments: A specific flat dollar amount that is paid by the member for a certain aspect of your health care. For example, you might pay $5, $10, or $25 for each office visit to your PCP.

Coinsurance: An agreement between you and your insurance company where both are expected to pay a certain portion of your medical expenses. For example, a policy that pays 80% of your medical expenses will pay $160 of a $200 bill; you are required to pay the remaining 20% ($40).

Deductible: The portion of your medical expenses that you are required to pay before your insurance company will begin payment. Deductibles are set by your insurance company and determined by your health status and premium amount, among other factors.

Out-of-pocket costs: A term that refers to your coinsurance, copayments, and deductibles. Some plans may set a max out-of-pocket, which becomes your safety net. Your deductibles, coinsurance and copayments will not exceed the max out-of-pocket limit in any given year.