Lost in Translation: Understanding Common Health Insurance Terms
Peter Graham, M.D.
| 4 min read
Peter T. Graham, M.D., is the clinical director for ...
Key Takeaways
- Understanding deductibles, copayments, coinsurance and out-of-pocket maximums can help patients better anticipate healthcare expenses and avoid surprises.
- Choosing in-network providers and reviewing coverage details before receiving care can help reduce costs and improve access.
- Explanation of Benefits statements break down what providers billed, what insurers paid and what members may owe.
- Taking advantage of preventive care and understanding plan benefits can support better health outcomes and long-term savings.
Healthcare is complicated, and sometimes, insurance terms and coverage details seem like a language of their own. Understanding these terms and benefits can help patients make more informed decisions, limit healthcare costs and get the most from their benefits.
Learn what key insurance terms mean, how they work together to determine what members pay and what steps patients can take to get the most from their plan.
Common insurance terms
- Cost-sharing: The cost of health insurance benefits is shared between the insurer and enrollee. Cost-sharing is the portion that enrollees pay directly to the healthcare service provider, including copayments, coinsurance and deductibles.
- Deductible: The amount a patient must pay on covered healthcare services before an insurer starts contributing. Once the deductible is met, patients share the cost with the health insurance company by paying coinsurance and copays until the total benefit maximum is reached.
- Copayment: A fixed-dollar amount that a patient is expected to pay for healthcare services, generally paid at the time of visit. The typical copayment for a scheduled doctor’s visit ranges between $25 and $50, depending on the plan.
- Coinsurance: The percentage of healthcare services covered by a patient is expected to pay after a deductible is met.
- Premiums: A recurring payment for the standing cost of coverage, typically charged monthly.
- Out-of-pocket maximums: The maximum dollar amount a patient pays for covered services in a year. After the maximum is reached, the insurer pays 100% of the costs.
- Network: All the doctors and hospitals under contract with a health insurer to provide healthcare services to their members. “In-network” healthcare services are typically cheaper than services from an “out-of-network” provider.
How insurance costs work together
While each term has its own meaning, they all work together to determine how much patients pay for healthcare services. Understanding these relationships can help members better anticipate their healthcare costs.
For example, imagine a member has a $2,000 deductible, 20% coinsurance and $5,000 out-of-pocket maximum. Once the deductible is paid, the patient will pay 20% of covered health insurance costs, with the insurer paying the remaining 80%. This will continue until the member has paid $5,000, the out-of-pocket maximum. Once the out-of-pocket maximum has been reached, the insurer pays 100% of covered services for the rest of the plan year.
How patients can better understand healthcare
Arguably, the most important document for understanding health insurance costs is called an Explanation of Benefits (EOB). An EOB, sent after a patient receives care is not a bill, but shows the patient their share of the payment, as well as the total amount billed by the provider and the amount paid by the insurer. Patients can often review their EOB through the insurer’s member account or mobile app.
Understanding healthcare is crucial. When patients take an active role in understanding their benefits and treatment options, they are able to get the most out of their care, leading to better health outcomes. The Centers for Medicare & Medicaid Services offers several recommendations for patients to make the most of their health plan:
- Confirm coverage and benefits: Patients should contact their health plan to ensure their enrollment is active and review what services are covered.
- Choose in-network providers whenever possible: Patients visiting an out-of-network provider will likely pay more for services.
- Take advantage of preventive services: Members should attend screenings, vaccinations, annual wellness visits and other preventive services that may be covered at no cost by their health insurer. Staying up to date on preventive care can help identify potential health concerns early and support better overall health.
- Prepare for appointments: Before a healthcare visit, patients should review their medications, make note of any new or ongoing symptoms and prepare questions about their health concerns. Providing this information can help healthcare providers better understand a patient’s needs and determine appropriate next steps.
Peter Graham is the clinical director for the Blue Care Network. For more health tips and information, visit bcbsm.mibluedaily.com.
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