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Insurance


ALL THE HEALTH INSURANCE WORDS YOU NEED TO KNOW BUT WERE TOO EMBARRASSED TO ASK
ABOUT


PRAY TELL, WHAT IS A PRIOR AUTHORIZATION AND WHY WOULD YOU NEED ONE?

By
Lindsey Ellefson

Tuesday 5:30PM
Alerts



Photo: Kaspars Grinvalds (Shutterstock)


Whether your health insurance is offered to you by an employer or you get it
through the Affordable Care Act marketplace, most plans use the same words to
describe exactly what you’re entitled to. Like filing your taxes or fixing a
flat tire, health insurance terminology is one of those necessary pieces of
knowledge that adults are just expected to have, but if you don’t know what all
the lingo means, you’re not alone.


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Knowing these words can help you take full advantage of everything your plan
entitles you to, which is important, to put it mildly. Let’s look at some terms
and why they matter.


THE FINANCIAL HEALTH INSURANCE TERMS YOU NEED TO KNOW

 * Deductible. Your deductible is the amount you pay for your health services
   before your health insurance starts paying its share. If your deductible is
   $1,500, for instance, you have to pay that much on your own before your
   insurance will kick in and start paying the rest. Some services, like
   preventive physician visits, might be covered before you pay your deductible,
   however, so be sure to read all the guidance in your plan.
 * Premium. A premium is what you pay to the insurance company to have your
   plan. You could pay this monthly—as most people do—or quarterly or annually.
   If your premium comes straight out of your paycheck, it’s deducted from your
   pre-tax pay and your employer also likely pays part of the share. If you got
   your plan through the ACA marketplace, there are tax credits available to
   help you offset the costs of your premium.
 * Allowed amount. An allowed amount (or eligible expense or payment allowance)
   is the discounted price your plan has negotiated in advance for the service
   you’re getting. That means it’s the maximum amount your plan will pay for a
   covered service.
 * Copay. Your copayment is what you have to pay every time you have a certain
   service or appointment. These fixed amounts can vary depending on what
   service you receive. You may owe $50 every time you visit urgent care, for
   instance, or $20 every time you fill a prescription.
 * Coinsurance. This kicks in after you’ve met your deductible. Coinsurance is
   the percentage you pay of your medical expenses after you meet it. If your
   coinsurance rate is 25%, you’ll still pay 25% of your bills after you’ve met
   your deductible, while your insurance company will pay the other 75%.
 * Out-of-pocket limit. This refers to the maximum you will pay during your
   policy period, which is typically a year, before your plan starts to pay 100%
   of your allowed amount. The costs of your deductible, co-pay, and
   co-insurance are included here, but not your premium.
 * In-network/out-of-network providers. When making appointments with various
   doctors and service providers, you may notice some are listed as “in-network”
   while others are “out-of-network.” Any provider or facility that is
   in-network is one that has contracted with your health insurer to provide
   services. Depending on your plan, if you visit an out-of-network provider, it
   may not be covered or might be only partially covered. You can expect a
   higher deductible and out-of-pocket limit at out-of-network providers. Your
   coinsurance and copayment may also be higher for out-of-network providers.
 * Preauthorization/prior authorization. A preauthorization is a decision your
   insurer makes regarding the medical necessity of a service, treatment, drug,
   or piece of equipment. Also called prior authorization, this is not a
   guarantee your insurance will cover the cost, but getting one gives you a
   better shot. Talk to your doctor when you get a prescription and check your
   insurer’s website to see if it’s covered.








THE DIFFERENT KIND OF INSURANCE PLANS YOU NEED TO BE FAMILIAR WITH

 * HMO. This stands for “health maintenance organization” and refers to health
   plans that are typically lower in cost but offer more limited choice. Under
   an HMO plan, you usually have to choose an in-network provider (unless you
   want to pay the whole bill). An HMO typically offers limited or no
   out-of-network coverage.
 * POS. A point of service plan won’t allow you to get specialized care without
   a referral from your primary physician.
 * PPO. A preferred provider organization plan is one under which your insurer
   will pay a portion of your bill, even if you go to a provider outside your
   network. You don’t even need a referral to do it. Still, try to stay
   in-network just to save money, if you can.
 * EPO. In an exclusive provider organization plan, you can only use providers,
   specialists, and facilities that are in the plan’s network (except in cases
   of emergency).
 * Prescription drug coverage. This refers to health insurance or a plan that
   helps you pay for your prescription medications. All plans in the ACA cover
   prescription drugs, but if you get your insurance through your employer,
   check to be sure yours does.
 * Catastrophic. A catastrophic plan is one that only pays after you’ve reached
   a very high deductible, but it does so with no copay and no coinsurance. In
   general, the less expensive your premium is, the higher your deductible is,
   and catastrophic plans are the best example of that rule. If you pay for one,
   you won’t be out much money unless something, well, catastrophic happens.
   Notably, catastrophic plans have to cover your first three primary care
   visits and certain preventive care visits for free, even if you haven’t met
   the deductible, which was $7,900 in 2019 and $8,150 in 2020. Generally, to
   qualify for a catastrophic plan you must be under 30 or be granted a hardship
   exemption—say, due to the unaffordability of other insurance options.

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WHY DOES ANY OF THIS MATTER?

Simply put, there are a lot of barriers in the American healthcare system. There
aren’t many things you can do about the systemic ones, but what you can do is
arm yourself with information about what you’re entitled to.

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Dr. Gerald Kominski, senior fellow at the UCLA Center for Health Policy
Research, is all about healthcare literacy, and he told Lifehacker why consumers
need to know this stuff. Kominski not only studies the barriers to healthcare
access in the country, but has experienced them firsthand. He explained that,
like many people, he found one of his existing prescriptions wasn’t covered
without a prior authorization when he switched to a new insurance provider. His
new insurer required him to try other medications and demonstrate that they
weren’t working before they would consider covering the one he’d been on for
years, but he was “unwilling to experiment.” Instead, he got a GoodRx card,
which provides users with coupons for drugs. The coupons can’t be used in
conjunction with insurance, but they’re a great option and the service is free.

“The question we often ask is, ‘How many PhDs does it take to figure out your
health insurance benefits?’” he said. “Health insurance is so complicated and
there are so many things that can vary across policies that there’s a lot of
confusion among the general public, much less among people who work in the
field. I can’t tell you how many health professionals I’ve dealt with over the
years who don’t fully understand the insurance they have—and they work as
clinicians.”

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Simply put, you’re not alone if you’re confused about what your policy does and
does not cover, but it’s imperative you try to figure it all out before an
emergency happens.

“It’s really important for consumers to know the specifics of their policies,”
Kominski said. “Otherwise, you can find yourself in a situation where suddenly
you get a large bill that you weren’t expecting. It may or may not be something
that you ultimately have to pay, but this is your best protection to avoid
getting a large, unexpected bill, which are also known as ‘surprise bills.’”

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If you do get a surprise bill, file a request for review with your insurance
company and document the circumstances. Document everything, in fact. Kominski
also recommended keeping track of your out-of-pocket expenses and, when you meet
your deductible, proactively letting your insurance company know. Some insurers
are good about tracking that and notifying plan holders, he said, but others
aren’t. Don’t let your insurer’s lack of organization cost you money.

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