January 3, 2009
Understanding your Health Insurance Policy
Joel Schmidt

Health insurance policies can be difficult to understand.  Because health insurance policies can be so complicated, even health care professionals have trouble with them every so often.  Not only is every private insurance company different, but each of the plans within the separate companies differ.  They each have their own set of technical terms and rules.  Whether you are looking for individual coverage or trying to decide which group coverage option to choose from your employer, it is important to do your research. Know what you are signing up for, know the rules, and know these technical terms.

Deductible

Most health insurance plans require that you pay a deductible.  A deductible is the amount of money that you will have pay before your insurance company starts to pick up a percentage of the bill.  You will usually pay more for a policy with a lower deductible.  This might be smart, though, if you expect to receive regular medical care.  Deductibles are amounts that must be met each year.

Co-insurance/Co-payment

Depending on your level of coverage, you may be required to pay a certain percentage of your health care bills even after you have met your deductible.  The percentage that you will be responsible for is the coinsurance.  Commonly, coinsurance ranges from 10 to 30 percent. 

A co-payment, on the other hand, is a set dollar amount that you are required to pay for certain services before your out of pocket maximum has been met.  The amounts are different for different services.  An urgent care visit co-payment might be 100 dollars, while an outpatient Dr.’s office visit co-payment might be 25 dollars.  Unlike co-insurance, co-payments are usually due before services are rendered.  In some cases providers will also require up-front coinsurance payments.

Out of Pocket Max

An out of pocket maximum is the maximum amount of money that your insurance company will require you to pay over a year-long period.  Let’s say your deductible is $1000, your co-insurance is 20 percent, and your out of pocket maximum is $2000. After you have paid $2000 in deductible and co-insurance/co-payments, your insurance company will pay 100% for the rest of the year.

Life Time Maximum

A Lifetime Maximum (LTM) is an amount set by your insurance company that determines the most that they will pay while you are insured with them.  LTM amounts are usually never met, as they are set very high.  It is common to see LTM amounts set at one million dollars or higher.

Network

Each health insurance company has their own “network”.  A network consists of doctors and hospitals that your insurance company has a contract with.  To ensure that you are getting the best prices and eventual payment from your insurance company, it is important that you know your network.  Only pick doctors and hospitals that take your insurance.  If you are shopping for individual health insurance, pick a plan that meets your needs.

Pre-existing Conditions