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  • Writer's pictureBenjamin Klein

Defining Health Insurance Lingo

Unless you’ve had to deal with health issues or you took insurance 101 as an elective, the terminology used in the health insurance world can be confusing. We hope you find the following definitions helpful:

HMO: A type of health insurance plan that allows you to see any doctor or other health care provider who participates in the plan’s network. Some HMOs require referrals from primary care physicians to see a specialist.

POS/PPO: A type of health insurance plan that covers services from almost any doctor or hospital. You’ll almost always pay less for the same level of care when you go to one in your health plan network. You don’t usually need a referral from your primary care physician to see a specialist.

Provider Network: Doctors and other healthcare providers who’ve agreed to accept your insurance. Each plan has its own network and getting care from your network is often a good way to get quality care at a more reasonable cost.

In-Network: Doctors and other health care providers who participate in a health insurance plan’s provider network and agree to accept the plan’s negotiated payment for services. You typically pay less out of your pocket, if anything, when you use in-network providers. You should always confirm that your providers are in-network in case they’ve opted to stop participating.

Out-of-Network: Doctors and other health care providers who do not participate in a health insurance plan’s provider network. You may be required to pay more out of your pocket when you use out-of-network providers. If your plan covers out-of-network services, benefits are typically subject to separate deductibles and out-of-pocket maximums.

Copay: A fixed amount that you pay for a certain health care service.

Coinsurance: A sharing of health care costs in which you and your insurance company each pay a percentage. As an example, 70% coinsurance means the insurance company pays 70% and you pay 30% of the covered expenses.

Deductible: A specific dollar amount that you have to pay each year for your health care expenses before your insurance company starts to pay. Deductibles are usually per person with a maximum number of deductibles payable per family.

Out-of-Pocket Maximum: Limits the total amount you have to pay each year for health care expenses, including deductibles, copayments, and coinsurance.

PCP: A physician, physician’s assistant, or APRN who is your main contact for care. Your PCP can do everything from writing prescriptions to referring you to a specialist when necessary. This is the person who knows the most about your health history and helps you navigate the healthcare system.

Specialist: A doctor or health care professional who has advanced education and training in a certain area of medicine. Examples include allergists, cardiologists, dermatologists, etc. Specialist copays are typically higher than PCP copays.

Telemedicine: An outlet through which you can consult a provider virtually, typically through an app downloaded on your phone. Your carrier may have an agreement with a vendor that contracts with providers throughout the country.

Freestanding: A healthcare facility that is not owned or affiliated with a hospital system. You should always check because sometimes it is not obvious that a facility is owned by a hospital system.

Prescription Formulary: A list of prescription drugs that have been selected and approved by the insurance carrier for their safety, quality, and sometimes cost. Your health plan’s formulary includes drugs from every therapeutic drug class, as well as health care supplies and devices. These formularies are available online along with any requirements you need to meet for your drugs to be covered.

Prior Authorization: A decision by your health insurer or plan that a health care service, treatment plan, prescription drug, or durable medical equipment is medically necessary. This is also sometimes called preauthorization, prior approval, or precertification. Your health insurance or plan may require prior authorization for certain services before you receive them, except in an emergency. Prior authorization isn’t a promise your health insurance or plan will cover the cost.

Step Therapy: Some plans require your doctor to start with one drug that’s on the formulary. If that drug isn’t right, your doctor can take the next step, and move you to a higher-level drug.

Mandatory Generic Substitution: When you choose to fill a prescription with a brand-name medication and a lower-cost generic equivalent is available, your cost may be higher. You could pay the brand name copay plus the cost difference between the brand name and generic drug.

Mail-Order Drug: A prescription that gets sent to you through the mail instead of going to a physical pharmacy. In many cases, you will reduce your out-of-pocket cost through mail-order.

Off-Label: Use of a drug for purposes other than those originally approved by the FDA. For example, if a drug was originally approved for use as an anti-inflammatory, using it to treat cancer would be considered an “off-label” use.

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