So, you are off to get yourself an individual family plan health insurance. Great. You start reading online; perhaps talk to some brokers, or your best friend. As an insurance broker, one of the things I notice when I speak to people is that they have the information about half right. The following are the six insurance terms to understand so you can be a fully fledged insurance wizard!
1. RIDER – This is a word that can mean more than one thing. Basically it means something that rides along with a policy. It’s what that something is, that can vary. You may add dental to your policy and that’s a dental rider. Or suppose you have a pre existing condition. The insurance policy may say that there is a rider on that condition for two years. That means they won’t pay for doctor visits or prescriptions or an operation or anything that has to do with that condition during the two year period.
2. MAXIMUM OUT OF POCKET – This is a very important number. Your maximum out of pocket refers to the most money you could pay for your health care in a single calendar year not counting the premium. Be very aware that if your policy does not say you have a maximum yearly out of pocket that means if you have an 80/20 plan you would be responsible for 20% of a hospital bill. Even if its $500,000!
3. CO INSURANCE -This is a close cousin to maximum out of pocket. In order to keep your health insurance premiums as low as possible you can add co insurance to your policy. If your plan is an 80/20 plan, the 20% is your responsibility. Your insurance policy has a maximum out of pocket (hopefully… see above) an amount that equals your 20%. Your carrier says that your 20% equals $2000.00. The $2000.00 is your “stop loss”.
4. DEDUCTIBLE – Ok, now everything comes together. Your policy has a $1500 deductible. That’s the amount you must pay for anything in your policy that has the term CYD + Co insurance. For example your son twisted his ankle and you took him to the ER. Actually, he broke his ankle and he needed surgery. The bill from the hospital is $15,000. Your $1,500 deductible from the $15,000 bill leaves a balance of $13,500. Of that $13.500.00 you will owe an additional $2000.00 which is your “stop loss” (see #3). Your insurance company pays the balance of the bill plus all your sonsʼ medical expenses for the rest of the calendar year because you have, ta da!, met the deductible and co insurance.
5. CO PAYMENT – This is a fixed amount for a doctors visit or a prescription. If you have a high deductible health plan and you have co payments, you may go to the doctor or get a generic prescription filled without having the deductible apply. The amount of money you pay as a co payment does NOT go towards the deductible.
6. PREMIUM – This is the amount of money you pay to the insurance company every month to keep your coverage in force. The higher the deductible; the lower the premium. If you want to save money now choose a lower premium/higher deductible. Fixed expenses more important to you? Pick a higher premium and a lower deductible. Always remember to add the deductible to the co insurance so you know what your maximum out of pocket will be should you be hospitalized, or have surgery.