Understanding Health Benefit Terms

This guide summarizes important health benefit terms for patients. Please reach out to us if you have any questions about your bill or health benefits.

What is a Co-Payment?

Co-payment is a fixed dollar amount (for example, $15) you pay for a covered health care service, usually when you receive the service. The amount can vary by the type of covered health care service.

• There may be separate co-payments for different services.
• Some plans require that a deductible first be met for some specific services before a copayment applies.

What is Co-Insurance?

Co-Insurance is your share of the costs of a covered health care service, calculated as a percent (for example, 20%) of the allowed amount for the service. You pay co-insurance plus any deductibles you owe.

• For example, if the health insurance or plan’s allowed amount for an office visit is $100 and you’ve met your deductible, your co-insurance payment of 20% would be $20. The health insurance or plan pays the rest of the allowed amount.

What is a Deductible?

 Deductible is the amount you owe before your health insurance/plan begins to pay for health services that your health insurance/plan covers. For example, if your deductible is $1000, your plan won’t pay anything until you’ve met your $1000 deductible for covered health care services subject to the deductible. This means that you must pay $1000 on covered services before your insurance/plan pays anything. The deductible may not apply to all services.

• Some plans may have separate deductibles for specific services. For example, a plan may have a hospitalization deductible per admission.

• Deductibles may differ if services are received from an approved provider or if received from providers not on the approved list.

What is a High Deductible Plan?

High Deductible Plan is a health insurance plan with a higher deductible than a traditional insurance plan. The monthly premium is usually a little lower, but you pay more of the health care cost before the insurance company starts to pay anything. The IRS defines high deductible plan as any plan with a deductible of at least $1,350 for an individual and $2,700 for a family. The total out of pocket limit for a high deductible plan cannot exceed $6,650 for individual and $13,300 for a family. These limits are for in-network services only.

What is the Allowed Amount?

Allowed Amount is the maximum dollar amount on which payment is based for covered health care services. This may also be called “eligible expense,” “payment allowance” or “negotiated rate.”  For example, the provider may charge $100 but the “allowable amount” for the service is $60, therefore the insurance company will either pay the $60 or require the $60 to be paid by the patient (as a part of the deductible, copay or coinsurance). A provider that does not contract with a particular insurance may “balance bill” the patient (see below).

What is Balance Billing?

 Balance Billing is when a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.

 What is the Out-of-Pocket Limit or Out-of-Pocket Max?

Out-of-Pocket Limit or Max is the most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100% of the allowed amount. This limit never includes your premium, balance-billed charges or health care your health insurance or plan doesn’t cover. Some health insurance or plans don’t count all of your co-payments, deductibles, co-insurance payments, out-of-network payments or other expenses toward this limit. For example, if you have a $2000 out-of-pocket max per year once you pay all of your copays, coinsurance and deductible up to $2000, you will no longer have to pay any of those for the remainder of the predetermined period.

What is the Explanation of Benefits (EOB)?

Explanation of Benefits (EOB) is a letter sent to the patient and the provider to show how the claim was processed. The insurance company is required to send a copy of all EOBs to the patient as well as the provider. It also lets the provider know whether any remaining balance is due by the patient. The below information is found on all EOBs.

• Amount of the procedure before any discounts are applied
• Amount that the patient is responsible for
• How much the contract allows for the procedure
• The type and amount of any discounts that apply
• The final amount of the reimbursement after all discounts, deductibles, and so on are applied

What is an In-Network Provider?

In-Network Provider is a provider or supplier your health insurance or plan has contracted with to provider health care services. In-Network providers have contracts with the insurance company that provide a rate of reimbursement. Not all providers are In-Network with all insurance companies, so the patient may call their insurance company for a list of In-Network providers. In most cases, the patient liability is higher for an Out-Of-Network provider (see below). Example below:

• Dr. A is In-Network and charges $100, the patient has a $20 in network copay, the insurance company allows $60 for this service. The insurance pays $40, the patient pays $20 and the remaining amount is adjusted per the in-network contract.
• Dr. B is NOT in network and charges $100, the patient is now liable for the entire $100.

What Is a Out-Of-Network Provider or Non-Preferred Provider?

Non-Preferred Provider (Out-of-Network Provider) is a provider who does not have a contract with your health insurer or plan to provide services to you. You’ll pay more to see a non-preferred provider. Check your policy to see if you can go to all providers who have contracted with your health insurance or plan, or if your health insurance or plan has a “tiered” network and you must pay extra to see some providers.

What is a Premium?

Premium is the amount that must be paid for your health insurance or plan. You and/or your employer usually pay it monthly, quarterly or yearly. Premiums can be paid by employers, unions, employees, or shared by both the insured individual and the plan sponsor. The Premium is paid to your health insurance company/plan, and does not involve the physicians.