PBS just published a good article on the confusion of all of these healthcare terms that continue to invade our daily life. Many people struggle with the alphabet soup of healthcare insurance. I will give you a perspective today on the most commonly used terms and what they mean. For reference, you can find the PBS article at http://www.pbs.org/newshour/rundown/many-new-patients-overwhelmed-health-care-jargon/
- HMO
- This stands for Health Maintenance Organization. HMOs are typically the cheapest products on the market. They provide a lower price based on the fact that there are typically incentives to certain physicians and facilities in the network to lower the use of healthcare by the patients who have chosen and HMO as their healthcare plan. These arrangements have a true “gatekeeper” model where nearly everything, from physical therapy to imaging to surgery, must be approved by the primary care physician.
- PPO
- This stands for Preferred Provider Organization. PPOs are more expensive and provide the patient with more choice. These are typically arranged without the need to consult with your primary care physician prior to seeing a specialist, getting an MRI, or seeing a therapist. In most cases, there is a preferred network of providers that are available to you “in-network” with a lower deductible and copay. Most still offer “out of network” benefits if you would like to see a doctor who does not participate in or contract with your PPO insurance plan.
- Copay
- This is the amount you pay for a given service or item. Typically, we talk about copays with regards to office visits to physicians and buying prescription medications. Copays are generally a set amount, although there is typically tiered pricing. In many plans, insurance companies are shifting to copays for prescription medications only after your deductible has been met.
- Deductible
- A deductible is the amount of money you must pay out of pocket before certain insurance benefits become available to you. Sometimes you must meet a deductible for your prescription medications before a copay price is available to you. In most cases, you must meet a deductible before coinsurance is applied. Many insurance plans have different deductibles for “in network” vs “out of network” and different deductibles for each individual vs the family. Meeting the individual deductible does not mean that everyone in your family now only has to pay coinsurance or copays, but if you meet the family deductible, each individual is now eligible for copays or coinsurance regardless of whether or not they met their individual deductible
- Coinsurance
- Coinsurance refers to the percentages that the insurance company and the covered patient are each responsible for when a bill arrives. Coinsurance typically starts after a deductible is met. A common coinsurance percentage is 80/20, where the insurance company pays 80% of remaining bill after a deductible is met. Typically, there are different coinsurance amounts for in network and out of network
Out-of-pocket maximum
- This is the maximum amount one can pay in a given year, including copays, deductibles, and the patient portion of coinsurance
Example:
Joe has insurance through ABC insurance company with a $3000 deductible and 80/20 coinsurance. He has surgery, with bills from the hospital, surgeon, and anesthesiologist that add up to $10,000. Joe will have to pay the first $3000 (assuming he had no other medical bills that year) and then 20% of the remaining amount ($10,000 – $3,000 = $7,000). He therefore owes $3,000 (deductible) plus $1400 ($7,000 * 20%) for a total of $4400. His insurance company will pay $5600 (80% of $7000). If Joe had surgery again later that year, he would immediately be responsible for only 20% of the cost, as he will have met his deductible for the year
