Health insurance can naturally be a little hard to navigate—throw in a bunch of confusing words and terms and it can become almost impossible to know what’s going on. But understanding everything in your plan can have you feeling more confident when visiting the doctor and help you save money in the long run. That’s where this list comes in—it is full of helpful definitions to help you understand your policy. (If you missed the first time we did this—head here to learn the definitions of premium, copayment, coinsurance, Explanation of Benefits and deductible.)
Coordination of Benefits
Sometimes people have more than one insurance plan. If that’s the case, the two plans need to work together to make sure you’re getting the most out of your coverage. That’s where coordination of benefits comes in: One plan becomes your primary plan that pays claims first and the second plan becomes secondary and goes towards the remaining cost. The benefits of filling out a coordination of benefits form is that claims get processed faster and you pay less out-of-pocket.
Step Therapy
Step therapy is when you try out certain lower-cost medications before “stepping up” to drugs that cost more. In the case of your doctor prescribing you a prescription drug that doesn’t relieve your symptoms, step therapy allows for you to try a more expensive medication, which would be covered if you’ve already tried the first-choice drugs.
Prior Authorization
This is when your insurer reviews a medication before covering it. The goal of prior authorization is to make sure that medication is the right choice for the situation. Drugs that need prior authorization may:
- have dangerous side effects
- be harmful when combined with other drugs
- be used only for certain health conditions
- often be misused or abused
HSA/HRA
These two terms refer to financial situations. Health Spending Accounts (HSAs) are similar to a 401(k) retirement account, but for your medical expenses. You put away a certain amount of money pre-taxes, and that fund can only go towards medical costs. Health Reimbursement Arrangements (HRAs) are funds set up by an employer. This fund is used to reimburse employees for medical expenses not covered by your health plan.
HMO/PPO
There are two major types of health insurance plans: HMOs and PPOs. If you have an HMO (Health Maintenance Organization), all of your health care services need to originate through your primary care physician. That means that you need a referral before seeing a specialist (except in an emergency). On the other hand, a PPO (Preferred Provider Organization) gives you more flexibility. You can go to any health care professional you want without a referral (although it might cost a lot more if you go to one out of your network). For more help navigating your health insurance plan, check out these blogs from this site as well as A Healthier Michigan:
- Medicare 101: Understanding Medicare Plans A-D
- The 5 Costs That Make Up Your Health Plan
- Common Health Insurance Questions: How Does a Medical Bill Get Paid?
Photo credit: Alan Cleaver
