INSURANCE TERMS DEFINED
May 4, 2009 -- "I will remember that I do not treat a fever chart, a cancerous growth, but a sick human being, whose illness may affect the person's family and economic stability. My responsibility includes these related problems, if I am to care adequately for the sick." — Modern Hippocratic Oath as written in 1964 by Dr. Louis Lasagna
In my last column, we reviewed the parties involved in the business of medicine. The common thread for uniting all of these entities is health insurance.
Hardly any preventative or restorative health services are paid for directly by the health consumer. Most cosmetic surgery, elective vision correction surgery, significant amounts of dental or orthodontic services, some chiropractic services and most veterinary services still follow a fee-for-service model.
Regardless of the evolution over the last 50 years, our health care system now looks to third-party payers to exchange consumer dollars for professional or facility services.
The most important thing a health consumer can do when reviewing an individual or work-related group health insurance policy is to read through that potential policy's definitions, schedule of benefits and subsequent covered and non-covered services. It is also important to assess the network facilities and provider panel. This is paramount if you hope to maintain certain provider or facility relationships.
If your goal for insurance coverage is to maintain the most choice to see any provider at any facility, ensure your non-network deductibles and coinsurances are not outrageously cost prohibitive.
Let us then review some basic but important health insurance definitions:
Premium: The charges that must be paid by an insured to maintain coverage
Schedule of benefits: A summary of deductibles, coinsurance, copayments, out-of pocket maximums and other limits. Details the payment difference between in-network and out-of-network services
Explanation of benefits (EOB): The statement sent to an insured listing services provided, amount billed, eligible expenses and payment made by their insurance
Deductible: The amount of eligible expenses insured must pay each year from his/her own pocket before the plan will make payment for eligible benefits
Copayment: A cost-sharing arrangement in which an insured pays a specified charge for a specified service, such as $10 for an office visit. The insured is usually responsible for payment at the time the service is rendered. (In addition to coinsurance and deductible payments)
Coinsurance: The portion of covered health care costs for which the insured has a financial responsibility, usually a fixed percentage. Coinsurance usually applies after the insured meets his/her deductible
Out-of–pocket maximum: The total payments that must be paid by an insured (i.e., deductibles and coinsurance) as defined by the contract. Once this limit is reached, covered health services are paid at 100 percent during the rest of that calendar year
Network provider: A medical provider who has contracted with an individual insurance carrier to render medical services to insureds at a pre-negotiated fee. Providers include hospitals, physicians, and other medical facilities
Non-network provider: A medical provider who has not contracted to render medical services or supplies to insureds at a pre-negotiated fee.
Maximum allowable amount: The maximum amount paid by an insurance carrier for a covered service. This is usually the contracted rate for full payment to a Network provider
Usual and customary (U&C): A term used to refer to the commonly charged or prevailing fees for health services within a geographic area. A fee is considered to be reasonable if it falls within the parameters of the average fee for the service within the community. Often, an insurance carrier will list any balance above their maximum allowable amount as the U&C. This balance will then be owed by the patient to a non-network provider.
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