Health Insurance 101: Key Terms You Need To Know

​Navigating the world of health insurance can be challenging, especially with the abundance of unfamiliar terms and jargon. Understanding the key terms associated with health insurance is crucial for making informed decisions about your coverage. Whether you're choosing a new plan, reviewing your current policy, or simply trying to understand your healthcare benefits, this guide will help you familiarize yourself with essential health insurance terms.

1. Premium
The premium is the amount you pay to your health insurance company, typically on a monthly basis, to maintain your coverage. This payment is required whether or not you use any medical services. The premium does not cover other costs like copayments, deductibles, or coinsurance, which are additional expenses you may incur when receiving care.

2. Deductible
The deductible is the amount you must pay out of pocket for healthcare services before your insurance plan begins to pay. For example, if your plan has a $1,000 deductible, you will need to pay the first $1,000 of your medical expenses before your insurance starts to cover the costs. Some plans may offer certain services, like preventive care, without requiring you to meet the deductible first.

3. Copayment (Copay)
A copayment, or copay, is a fixed amount you pay for a specific healthcare service, such as a doctor's visit or prescription medication, at the time of service. For example, your plan might require a $20 copay for each visit to a primary care physician. Copays are usually lower for in-network providers and can vary depending on the type of service.

4. Coinsurance
Coinsurance is the percentage of the cost of a covered healthcare service that you pay after you've met your deductible. For example, if your coinsurance is 20% and the cost of a medical service is $100, you would pay $20, and your insurance would cover the remaining $80. Unlike a copay, which is a fixed amount, coinsurance is based on a percentage of the total cost.

5. Out-of-Pocket Maximum
The out-of-pocket maximum is the most you will have to pay for covered healthcare services in a plan year. Once you reach this limit, your insurance plan will cover 100% of the costs for covered services. This limit includes your deductible, copayments, and coinsurance, but it does not include your premium. The out-of-pocket maximum provides financial protection by capping your healthcare expenses for the year.

6. Network
A network is a group of healthcare providers, including doctors, hospitals, and specialists, that have contracted with your health insurance company to provide services at negotiated rates. There are two main types of networks:

• In-Network: Providers that are part of your insurance plan's network. You will typically pay lower out-of-pocket costs when you use in-network providers.
  
  
• Out-of-Network: Providers that are not part of your insurance plan's network. Using out-of-network providers often results in higher out-of-pocket costs, and some services may not be covered at all.

7. HMO vs. PPO
Health Maintenance Organization (HMO) and Preferred Provider Organization (PPO) are two common types of health insurance plans:

• HMO: Requires you to choose a primary care physician (PCP) and obtain referrals from your PCP to see specialists. HMO plans generally have lower premiums and out-of-pocket costs but offer less flexibility in choosing healthcare providers.
  
  
• PPO: Offers more flexibility in choosing healthcare providers and does not require referrals to see specialists. PPO plans typically have higher premiums and out-of-pocket costs but provide broader access to healthcare services.

8. Formulary
A formulary is a list of prescription drugs that your health insurance plan covers. It categorizes drugs into different tiers, with each tier representing a different cost level. Typically, generic drugs are in a lower tier and are more affordable, while brand-name and specialty drugs are in higher tiers and may cost more. It's important to check your plan's formulary to understand the cost of your medications and whether they are covered.

9. Prior Authorization
Prior authorization is a requirement that your healthcare provider must obtain approval from your health insurance company before a specific service, procedure, or medication is covered. This process ensures that the treatment is medically necessary and that it aligns with your insurance plan's coverage criteria. Without prior authorization, your insurance may not cover the service, and you could be responsible for the full cost.

10. Explanation of Benefits (EOB)
An Explanation of Benefits (EOB) is a statement from your health insurance company that explains what medical services were covered and how much you may owe after a claim is processed. It breaks down the total cost of services, the amount covered by insurance, and any remaining balance you are responsible for paying. The EOB is not a bill, but it helps you understand how your insurance benefits are applied to your healthcare costs.

Conclusion
Understanding these key health insurance terms is essential for making informed decisions about your healthcare coverage. By familiarizing yourself with terms like premiums, deductibles, copays, and more, you can better navigate your insurance plan and maximize your benefits. Whether you're choosing a new plan or reviewing your existing coverage, knowing these terms will empower you to make choices that align with your healthcare needs and financial situation.

​At Hyde Insurance Group, we do our best in making sure that our clients are well-protected with affordable and comprehensive policies. We make sure to go the extra mile to help you with your needs. To learn more about how we can help you, please contact our agency at (888) 345-1215 or  CLICK HERE to request a free quote. 

Disclaimer: The information presented in this blog is intended for informational purposes only and should not be considered as professional advice. It is crucial to consult with a qualified insurance agent or professional for personalized advice tailored to your specific circumstances. They can provide expert guidance and help you make informed decisions regarding your insurance needs.​