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Health insurance is designed to put a limit on the amount you are required to pay for medical expenses.
It becomes especially valuable when you have large medical bills that you would not be able to pay. Your employer may provide health insurance for you and your family. You can also join group health plans.
There are a variety of health insurance plans and providers, including commercial insurance companies, health maintenance organizations (HMOs), preferred provider organizations (PPOs), non-profit health cooperatives, and point-of-service plans. With so many options, it’s best to work with an insurance agent recommended by friends you trust.
Here is a summary of terms related to health insurance.
Premium:The monthly or quarterly payment that you make to an insurance company to receive health insurance coverage.
Deductible: The total amount that you must pay first before your health insurance begins to cover a share of your medical bills. If your deductible is $500, you would need to pay the first $500 in medical bills each year before your health insurance would begin making payments.
Co-payment: The share of a medical bill that you are required to pay. If it costs $80 to see your doctor and your co-payment is $30, then the insurance company would pay $50. The co-payment is due each time you receive a specific medical service.
In-Network Provider: You can generally pay less when you visit a medical provider that is on your insurance company’s list of in-network providers. Your insurer often has an agreement to pay discounted rates to an in-network provider.
Out-of-Pocket Maximum: This places a limit on the total amount you are required to pay for a specific service, or for all medical services that your receive during a one-year period. When your maximum is reached, the health insurer will pay all additional covered costs.
Co-insurance: With co-insurance you are required to pay a percentage of the total cost of a medical procedure. This is in addition to any co-payment that you make. If your co-insurance for surgery is 25 percent, then you would need to pay that share of whatever the surgery costs, while your insurance provider would pay the other 75 percent.
Exclusions: Any services that are not covered by your insurance policy. You are responsible to pay for the full cost of services that are not covered by your policy.
Coverage limits: The maximum amount that the insurance company will pay out on your behalf for a specific service. You will have to pay any charges that exceed the coverage limit for that service. There may be an annual or lifetime coverage maximum that the insurance company will pay.
Prior Authorization: In some cases, your insurance company may require that they authorize a specific medical service before you receive it. Once you receive authorization, your insurer is obligated to pay for the service as long at it matches what they authorized.
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