Glossary of Health Insurance Terms
Co-Pay: This is the small amount you pay when you visit the doctor (usually $20-$35). Normally, insurance plans will waive the annual deductible and pay 100% of the office visit after you’ve paid your co-pay. Some plans will waive the deductible and pay 75% of the doctor visit, so your cost would be 25% of the doctor visit charges instead of a co-pay.
Stop-Loss: This is the total potential annual cost you would have to pay, assuming you had a major catastrophe. The stop-loss is simply the deductible plus (+) the co-insurance maximum. Once these two costs are met, the insurance will pay 100% of covered services for the remainder of the calendar year. See Deductible and Co-Insurance examples below for more details.
Deductible: This is the amount you are responsible to pay before the insurance company will cover their percentage (usually 70-80%). Most medical costs are subject to the deductible (ER visits, procedures/surgeries, ambulance rides, etc.) However, many times the deductible is waived for preventative treatment (physicals, routine mammograms, etc.) and for doctor visits.
Example: If your trip to the Emergency Room cost $1500 and you had a $500 deductible and 80%/20% co-insurance, then you would be responsible for the first $500 and 20% of the $1000 remaining ($200). Your cost would be a total of $700. You’ve now met your annual deductible, so if you have another procedure that same year, you will only have to pay 20% up to the co-insurance maximum.
Co-Insurance: This is the percentage the insurance company pays after you’ve met your deductible. Usually health insurance companies pay between 70% - 80%. So, after you’ve met your deductible, if your insurance plan pays 70%, then you would be responsible for 30%. The most important thing about co-insurance is the maximum. Co-insurance maximums can range between $4000 - $10,000. Once you’ve met the maximum, the insurance company pays 100%. You’ve now met your annual stop-loss.
Example: If your insurance plan has a 80%/20% co-insurance with a $5000 co-insurance maximum and you had a $100,000 surgery, you would only have to pay 20% up to $5000 (instead of $20,000 which would have been 20% of $100,000). After the co-insurance max is met, the insurance company will pay 100% of covered services for the rest of the year. Your total cost in this example would be your deductible plus the co-insurance up to $5000 max. If you had a $1000 deductible, then that $100,000 surgery would have only cost you $6000. The rest ($94,000) would be covered by the insurance company. And, if you needed another surgery later that same year, it would be covered at 100% since you already met your annual deductible and annual co-insurance maximum.
Comprehensive Coverage: Health plans with the richest benefits. Includes Rx, Maternity, Vision, Preventative care, unlimited Doctor visits with just a co-pay, and the lowest deductible options. Deductibles range from $1000 to $3000.
Catastrophic Coverage: Probably the most misunderstood coverage. Many people think that catastrophic coverage is very limited and will only cover “catastrophic” things like cancer, stroke, heart attack. Actually catastrophic plans are very similar to comprehensive coverage, with just higher deductibles (deductibles range from $1750 to $10,000). Besides the 3 main things usually missing from catastrophic coverage (Rx, Maternity, & Vision), most procedures are covered the same as comprehensive plans after the deductible is met.
Health Savings Plan (HSA): This type of coverage is Catastrophic. With the exception of a physical once a year, the insurance company does not pay for anything until you’ve met the annual deductible. Even doctor visits are subject to the deductible. Once the deductible has been met, the insurance pays the co-insurance (usually 70-80%) just like any other plan. This type of coverage is best for those who are fine with paying out of pocket for the first $2000-$3000 of their medical expenses, and only want insurance to kick in after that. This type of coverage is approved by the IRS to allow individuals to open an HSA bank account at their local bank. Contributions to this bank account are tax-deductible and tax free withdrawals can be made at any time for qualified medical expenses. Contributions that are not used each year roll over to the next year and continue to grow tax-deffered until retirement.