Frequently Asked Insurance Questions

  • The idea behind insurance is simple: Medical care can be so expensive that most people can’t pay for it entirely out of their own pockets. But if a group of people gets together, and they each agree to pay a fixed amount every month (whether they need medical care at that time or not), the risk is spread out over the whole group. In other words, each person is protected from high healthcare costs because the burden is shared by many.

  • It’s best to buy health insurance before you actually need it so you won’t be put on the spot for thousands of dollars in an emergency. You can only enroll in your company’s health insurance plan at specific times, such as during the yearly Open Enrollment period, or because of a life event (birth of a child, marriage, or loss of coverage). So you’ll want to join before you get sick, otherwise you might not be able to join until the next year.

  • An insurance premium is the amount you pay to the insurance company each month to buy health coverage. This cost can be paid by the employee, by the employer, or shared by both.

  • A deductible is the amount you must pay out of your own pocket before your insurance company will start paying for services. (For Example: If you have a $500 deductible per year, and each doctor’s visit costs you $100, your insurance may not kick in until you’ve been to the doctor five times.)

  • A co-pay is the portion of the bill you are responsible for each time you receive a service. (Example: When you go to the doctor after you’ve reached your deductible, you may no longer have to pay the full $100; instead you may pay a $25 co-pay, while your insurance picks up the other $75.)

  • Co-Insurance is similar to a co-payment, except that instead of paying a fixed amount, you pay a percentage of the total cost. (Example: You have surgery that costs $5,000. You might have to pay 20%, or $1,000, while your health plan pays the other 80%, or $4,000.)

  • An insurance claim is a detailed explanation of medical services that you or your doctor must submit to the insurance company in order to be reimbursed.

  • An in-network provider is any doctor, hospital, or other provider of medical services that has agreed to be in your insurance company’s network and to offer their services at discounted rates. Also called a participating provider. (Compare with out-of-network provider, below.)

  • An out-of-network provider is any doctor, hospital, or other provider of medical services that has not set up special rates with your insurance company. If you choose to use an out-of-network provider, your insurance may not pay as much toward that appointment — or your visit may not be covered at all. You have to pay the difference (or the entire fee) out of your own pocket.

  • Non-covered services are services that are not covered under your insurance policy, which means you will be responsible for all charges if you choose to get them. Examples of services that are frequently not covered include cosmetic surgery, chiropractic care, and alternative therapies like acupuncture.

  • An out-of-pocket maximum is the most you could pay during a coverage period for your share of the costs of covered services including co-payments and co-insurance.

  • An insurance policy is a contract between an insurance company and an individual that provides coverage for health costs in exchange for a set payment.

  • A pre-existing condition is any injury or illness that existed before the date when your current policy started. Pre-existing conditions may not be fully covered.

  • A formulary is a list of prescription drugs covered by the health plan. Formulary drug lists are often structured in tiers that cover low-cost generic medicines at a higher percentage than more expensive brand-name drugs.

  • An HDHP features higher annual deductibles than traditional health plans. With the exception of preventive care, employees must meet the annual deductible before the plan pays benefits. HDHP’s may have significantly lower monthly premiums than a traditional plan.

  • HSAs may be opened by employees who enroll in a high-deductible health plan. Employees can put money in an HSA up to an annual limit set by the government using pre-tax dollars. Employers may also contribute to these accounts within a prescribed limit. HSA funds can be used tax-free to pay for qualified medical expenses. The accounts are individually owned and remain with the employee even after employment ends.

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