Understanding the basics of how health insurance works will help you maximize your coverage and lower your out-of-pocket costs each year.
Let’s start by understanding what some common terms that are used mean.
Someone who has health insurance coverage provided by an insurance company.
The amount you pay for health care services before your health insurance begins to pay.
Your share of the costs of a health care service. It’s usually figured as a percentage of the amount allowed to be charged for services. You start paying coinsurance after you’ve paid your plan’s deductible.
The benefits you have for all healthcare professionals who elect to be contracted with your insurance company.
The amount of a medical bill that a patient may be responsible for depending on their health insurance benefits.
The monthly costs you pay to have a policy in place.
A fixed amount you pay for a health care service, usually when you receive the service.
The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, co-payments, and coinsurance, your health plan pays 100% of the costs of covered benefits.
The benefits you have for all healthcare professionals who elect not to be contracted with your insurance company.
Explanation of Benefits (EOB)
A statement sent by a health insurance company to covered individuals explaining what medical treatments and/or services were paid on their behalf. This is most commonly known as an EOB.
How Insurance Works
A High Level Explanation
- Patient pays their monthly premium to have a policy in place.
- Patient pays 100% of eligible health expenses until their policy deductible is met.
- There are certain covered health services that are exempt from this step – if exempt, patients only pay a co-pay – example would be annual wellness visit with primary care doctor.
- Once a deductible is met, patient decreases the paying a percentage of the eligible health expenses – also known as co-insurance.
- Patient pays co-insurance until their out-of-pocket maximum is met, then insurance covers 100% of eligible health expenses.