What is the money called that you have to pay before insurance pays their part?

Trying to determine your annual health care costs? There are several pieces of the cost puzzle you should take into account, including your premiums, deductible, coinsurance and copay. Below is an explanation of each and examples that show how people use them to pay for health care. For details on your plan’s out-of-pocket costs and the services covered, check the Summary of Benefits and Coverage, which is included in your enrollment materials.

What is a premium? Premiums are regular payments to keep your health care plan active. Higher premiums usually mean lower deductibles.

An example of how it works: Trisha, 57, plans on devoting herself to her three grandchildren after she retires. Knowing she’ll need to keep up her energy, she just signed up for a different health care plan at work. The plan premium, or cost of coverage, will be taken out of her paychecks. Even though her new plan has higher premiums, the deductible and copays will be lower. That’s important since Trisha promised her grown children she’d be more diligent about her own health.

Read more about how health plans with higher premiums often have lower deductibles.

Her new plan will keep out-of-pocket costs predictable and manageable because as a former smoker with breathing problems, she needs to see doctors and specialists regularly. It’ll be a while before Trisha retires and becomes a full-time Grammy. In the meantime, she’s saving money, listening to her doctors and enjoying time with her family on weekends.

Deductible 

What is a deductible? A deductible is the amount you pay out-of-pocket for covered services before your health plan kicks in.

An example of how it works: Courtney, 43, is a single lawyer who just bought her first home, a condo in Midtown Atlanta. She loves that her building has a gym and pool because she likes to stay in shape. When she felt a lump in her breast during a self-exam, she immediately had it checked out. Thankfully, doctors told her it was benign, but she’ll need to undergo a lumpectomy to have it removed.

Courtney will pay out of pocket for the procedure until she meets her $1,500 deductible, the amount she pays for covered services before her health plan contributes. After that, she’ll pay 20 percent of any costs for the rest of the year because her hospital and doctor are in network. In the event she has more medical expenses this year, it’s good to know she’ll max out the deductible right away so she won’t have to pay full price.

Learn how you can save money with a health savings account.

Coinsurance

What is coinsurance? Coinsurance is the percentage of the bill you pay after you meet your deductible.

An example of how it works: Ben, 28, is a security expert living in suburban Philadelphia with his wife and two small boys. Their 3-year-old recently fell at the playground and broke his arm. The family maxed out their deductible already, so Ben will be responsible for only a portion of the costs ― or the coinsurance ― billed for the procedure to reset and cast the break. With his 20 percent coinsurance, he’ll end up paying a few hundred dollars for the hospital visit. His health plan will pay the remaining portion: In Ben’s case, 80 percent.

Find out how hospital plans can help you cover costs before you meet your medical deductible.

Copay

What is copay? Copays are flat fees for certain visits.

An example of how it works: Leon, 34, is a married forklift operator from Jacksonville, FL. He’s an avid runner, but lately has had nagging knee pain and swelling. His Primary Care Physician referred him to an orthopedic surgeon. Luckily, his health plan has some fixed costs and only requires $30 copays for visits to his regular doctor and $50 copays to see specialists like an orthopedist. (He also once paid a $150 copay the night he landed in the emergency room when his knee was so swollen he couldn’t bend it.) Having these set fees gives Leon peace of mind since he and Leah are saving to buy a kayak.

As it turns out, Leon has arthritis in his knee and needs physical therapy to help him stay active. His copays extend to physical therapy visits, where he’ll pay $20 for each session. Leon’s determined to get everything back on track so he and Leah can return to doing the things they love: spending time together outdoors.

By learning how premiums, deductibles, coinsurance and copays work, you can better understand your health care costs. Want to read more about the ins and outs of health care plans? Learn all you need to know here. 

Common Billing Terminology

Advanced Beneficiary Notice (ABN)

An Advanced Beneficiary Notice is a form advising you that tests performed by your doctor may not be covered by Medicare. The purpose of the ABN is to let you know in advance that these services may not be covered and to advise you that you will be responsible for payment of these charges.

Assignment of Benefits

Assignment of Benefits means the physician agrees to accept payment from an insurance company first and then bill the patient for any after-insurance balances. In this arrangement, the patient has assigned rights for payment, via signature, to the physician for services rendered.

Billing Statement

A summary of current activity on an account.

Birthday Rule

The Birthday Rule is endorsed by the National Association of Insurance Commissioners (NAIC). The Birthday Rule states that the plan of the parent whose date of birth (month and day) falls earlier in the calendar year is the primary plan for dependent children. For example, if the father’s birth date is March 4 and the mother’s birth date is January 22, the mother’s plan would be primary. If both parents have the same birth date, the health plan in effect for the longer period of time will be primary.

Claim

The information billed to the insurance company for services provided.

Co-Insurance

Co-insurance is an arrangement by which the patient and the insurance company share in the payment of a service. Co-insurance takes effect after the approved deductible amount has been met.
For example, assigned Medicare benefits have a 20 percent co-insurance. This means that after the approved deductible amount has been met, Medicare pays 80 percent of the approved amount and the patient, or the patient’s supplemental insurance pays the remaining 20 percent. The deductible in most cases becomes the responsibility of the patient.

Coordination of Benefits

Coordination of Benefits is the determination of benefits payable under more than one group health insurance so the insured’s total benefits do not exceed 100 percent of the medical expenses.

Deductible

The portion of eligible (covered) expenses that you must pay each year before coverage begins.

Eligible Charges (Allowed Amount)

The maximum dollar amount allowed for covered services rendered by participating providers and facilities or by nonparticipating providers and facilities. Deductibles and coinsurance amounts are calculated from eligible charges. Participating providers and facilities accept this allowed amount as payment in full for covered services. Nonparticipating providers and facilities may not accept this amount as payment in full for covered services.

Evidence of Coverage (EOC)

A written guide from your health plan that explains what the plan does and does not cover and the rules you must follow for getting care.

Explanation of Benefits (EOB)

A statement provided to the insured by an insurance company explaining how the claim was processed.

Flexible Spending Account

A short-term savings account that lets you set aside pre-tax income and use it to pay for health care or child care during the year.

Guarantor

The person responsible for paying the bill.

Insurance Deductible

An insurance deductible is a minimum amount the patient must pay before the insurance company will pay anything toward charges. Usually the deductible needs to be met and paid by the patient each year.

Insurance Copay

An insurance copay is the amount of money or percent of charges for Basic or Supplemental Health Services that a member is required to pay, as set forth by their health plan. This is often associated with an office visit or emergency room visit. For example $5, $10 or $25.

Non-Participation

Non-participation means the physician does not participate in the patient’s health plan; therefore, the patient is billed directly for services and is responsible for payment in full.

Open Enrollment

The period each year during which you can join a plan or change plans if your employer offers more than one plan.

Out-of-Pocket Maximum

The total amount of eligible charges each year payable by insured directly to providers or facilities; 100 percent of eligible charges will be paid during the remainder of the year once the applicable out of pocket maximum is satisfied.

Payer

A third-party entity (commercial or government insurance carriers) that pays medical claims.

Physician Participation

Physician participation is a method by which a physician agrees to accept an insurance company’s payment level as payment in full. The bill is sent directly to the insurance company with payment made directly to the physician. This excludes amounts considered patient obligation under the patient’s coverage plan. For example, co-insurance, deductibles, and non-covered services would still have to be paid by the patient.

Pre-Approval

Permission from your medical group or health plan to get a service that requires a referral from your doctor. Also called authorization or prior-authorization.

Pre-existing condition

An illness or injury you have before you join a health plan.

Premium

What your health plan charges each month to maintain your health care coverage.

Primary Insurance

The insurance primarily responsible for the payment of the claim.

Prior Authorization/Precertification

A formal approval obtained from the insurance company prior to delivery of medical services.

Secondary Insurance

The insurance responsible for processing the claim after the primary insurance determination of benefits.

Subscriber

The person who holds and/or is responsible for the medical insurance policy.

Supplemental Insurance

An additional insurance policy that processes claims after Medicare reimbursement.

Yearly Deductible

The amount you must pay each year before your health plan starts to pay. Also called annual deductible.

Yearly Out-of-Pocket Maximum

The most you have to pay for most health care services in a year. In some cases, you may still have to pay copays for some services.

What is the amount you pay before the insurance company pays the rest called?

What is out

What is deductible and copay?

How much you have to spend before your insurance pays anything is called the?