Health Insurance 101: What You Need to Understand About Your Insurance Plan
Author: Dr. Megan Oliverio
Insurance plans can be overwhelming and confusing! Plans come in all different shapes and sizes, and it can be hard to make sense of your unique benefits. Even though we choose our plan, it can be difficult to understand how this translates to actual cost when visiting a healthcare provider.
Important Definitions
Co-payment – A co-payment is a fixed amount that you pay for each visit, while your insurance company covers the remaining amount. For example, if you have a $25 co-pay, that means you’ll pay $25 every time you come in for an appointment.
Deductible – A deductible is the amount you pay toward your health care costs each year before insurance starts to chip in—usually in the form of a co-insurance. For example, if you have a $1,000 deductible, you’ll pay the full cost of services until you’ve reach $1,000. At that point, insurance will start to cover some of the cost.
Co-insurance – A co-insurance generally follows your deductible and is similar to co-pays, except it’s a percentage of costs you pay, rather than a fixed amount. For example, if you have a 20% co-insurance, this means that you will pay 20% of the cost of each service, while your insurance company covers the remaining 80%. This cost sharing ends when you reach your out-of-pocket maximum.
Out-of-Pocket Maximum – An out-of-pocket maximum is the maximum amount of money you need to pay toward your health care costs before insurance will cover all services at 100%. For example, if you have a $3,000 out-of-pocket max, once you pay $3,000 in deductibles, co-insurance, and/or co-pays, your insurance company will pay 100% for any covered care above that amount. Just like your deducible, the out of pocket max is a yearly amount.
PPO vs. HMO: What’s the difference?
HMO stands for Health Maintenance Organization. HMOs have their own network of hospitals, doctors, and healthcare providers, who you can choose to see. With an HMO, you choose a Primary Care Physician (PCP) from a network of local healthcare providers when you join. This doctor will see you whenever you need medical care. If you are in need of a specialist, or are interested in seeing a psychologist, you will first need to visit your PCP to obtain a referral.
PPO stands for Preferred Provider Organization. PPOs also have their own network of hospitals, doctors, and healthcare providers, though this network is more vast. PPO plans do not require you to choose a PCP and no referrals are required.
What if I’m not in network?
Carve out – Sometimes, mental health benefits will be provided via a “carve out.” A carve out refers to a contract agreement entered between an insurance company and another company to provide special services.
Out of Network – If you’re insurance is “out of network,” this means that the doctor or healthcare provider you want to see does not have a contract with your insurance company. Sometimes, your plan will have out of network benefits, which means that your insurance company may help to cover some of the cost of service to the provider you’d like to see.
