Understanding Your Health Insurance

Written by: Amanda Levison, M.S., LMHC, LPC, CCBT

Insurance can be confusing, with different policies and different terms like deductibles, co-pays, and coinsurance. We often do not understand these terms until we seek medical attention and end up having to pay, even though we have insurance. This can lead to unexpected bills that add stress to an already difficult situation, leaving us wondering why we’re paying so much out-of-pocket. It can be frustrating to anticipate a certain fee when it turns out to be different in the end. It’s crucial when you pick out a plan that you think of your health and wellness and what you may need in the coming year. Consider whether you’ll need ongoing therapy, routine check-ups, or specialized care, and factor these into your decision. Many times, people don’t think of the future and pick the lowest plan because it’s the most affordable. Unfortunately, many times, those lower plans cover services at a much lower rate and ultimately, it’s the consumer who is left paying. Understanding these differences can help you make informed choices that align with your healthcare needs and financial situation. So, what do these different terms mean? Our Harrisburg PA therapist breaks down a few of these things to better understand your insurance policy and what it means for your treatment.

Premium

The premium is like a subscription fee that you pay to the health insurance company in exchange for coverage. It is a fixed amount that you need to pay every month, regardless of whether you use any medical services or not. Think of it as the cost of staying insured and having peace of mind that your healthcare needs are covered when they arise. The premium helps to maintain your enrollment in the health insurance plan for a specific duration, usually one year. Even if you’re healthy and don’t need frequent medical care, paying your premium ensures that you’re prepared for unexpected events, like emergencies or sudden illnesses. It is an essential component of health insurance as it helps to fund the costs of healthcare services and administrative expenses incurred by the insurance company. In other words, your premium not only secures your access to care but also contributes to the overall system that keeps healthcare services running smoothly.

Out-of-pocket costs

Out-of-pocket costs for insurance refer to the expenses that are not covered by an insurance policy and must be paid by the insured individual. These costs typically include deductibles, co-payments, and coinsurance. While premiums ensure you maintain coverage, out-of-pocket expenses are what you pay when you actually use your insurance. 

These out-of-pocket costs are important to consider when selecting an insurance plan as they directly impact the total expenses an insured person will bear in addition to their regular premiums. For example, a lower premium plan might seem more affordable at first glance, but higher deductibles and co-pays can quickly add up if you need frequent medical care. Individuals should consider their healthcare needs, financial situation, and the potential costs associated with deductibles, co-payments, and coinsurance when choosing an insurance policy. By carefully evaluating these factors, you can choose a plan that provides the right balance of affordability and coverage for your unique situation.

Deductible

First and foremost, deductibles are a common aspect of insurance policies. A deductible refers to the amount of money an insured individual must pay out of their pocket before their insurance provider starts covering any medical expenses. Think of it as the threshold you need to meet before your insurance starts sharing the cost of your care. For example, if your insurance policy carries a $500 deductible and you encounter a medical bill of $1,000, you would be responsible for paying the initial $500 before your insurance kicks in to potentially cover the remaining $500. Understanding your deductible is crucial because it can significantly impact how much you pay upfront for services, especially at the start of a new policy year. Whether you're planning routine visits or preparing for unexpected expenses, knowing your deductible helps you budget better and avoid surprises.

Co-payment

In addition to deductibles, co-pays are another significant consideration. A co-pay represents the fixed amount an individual is required to pay for each medical service or prescription medication they receive. This amount is typically specified in the insurance policy and is paid directly to the healthcare provider at the time of service. For instance, if your policy states a $20 co-pay for every doctor's visit, you will need to pay $20 each time you see a healthcare professional, regardless of the total cost of the visit.

Coinsurance

Another term worth understanding is coinsurance. You might be thinking this sounds similar to a copay, but they are different. Coinsurance refers to sharing the cost of healthcare expenses between the individual and the insurance provider after the deductible has been met. It is usually represented as a percentage split, with the insurer covering a certain percentage while the insured individual pays the remainder. For instance, if your policy specifies a 70/30 coinsurance split, your insurance company will cover 70% of eligible medical expenses, and you would be responsible for the remaining 30%. This percentage split can vary depending on the type of service or care you receive. In some cases, certain medical services, or treatments, such as emergency care or specialist visits, may have a higher coinsurance percentage, meaning you will be responsible for paying a larger share. Remember that a copay is a fixed amount, while the coinsurance may change depending on the cost of the service.

Billed Amount/ Billed Charges

The billed amount is the charge the healthcare provider sets for a given service. This amount is often the initial price listed by the provider before any negotiations or adjustments are made.

The insurance provider will negotiate this charge with the provider, so you and the insurance provider will pay a discounted rate. It’s important to note that the billed amount is often higher than the amount the insurance company pays, which can sometimes lead to confusion about the final cost. After the negotiation, the insurance company usually covers a portion of this discounted rate, and you, as the patient, are responsible for paying your share, which could include your deductible, co-pay, or coinsurance. In some cases, if you’re seeing an out-of-network provider, the billed charges may be even higher, and your insurer may cover a smaller portion of the costs, leaving you with a larger balance to pay.

Allowed Amount/ Allowed Charges

Essentially, the authorized amount is the rate your insurance company has negotiated with your healthcare provider to be included in their network. This negotiated rate is an essential part of why having insurance can significantly lower the costs of healthcare.

They agree to a rate that is lower than what you would most likely pay without insurance coverage. This helps make medical care more affordable for you, as the difference between the billed amount and the negotiated rate is covered by the insurer. The allowed amount is the end negotiated rate of the billed amount. This is the final figure after the insurer and healthcare provider agree on the terms, and it serves as the maximum amount your insurer will pay for a specific service. For example, the healthcare provider may bill at $100 for an appointment, but the insurance may negotiate to $80, which would be the allowed amount. 

Claim

The claim will be the form that the healthcare provider submits to the insurance company for payment on your service. This claim includes all the relevant details about the services provided, including the diagnosis, procedures performed, and the costs associated with those services. Once that claim is submitted, the insurance company will then process it. During this process, the insurance company will review the claim to determine if the services are covered under your plan, and how much they are willing to reimburse the healthcare provider. If any discrepancies or issues arise during this review, such as missing information or a service being deemed not medically necessary, the claim may be delayed or denied.

In-network

The in-network providers are the providers that your insurance company has a contract with. In-network providers are the providers that insurance companies have negotiated prices with to provide discounted prices.

It's crucial to note that insurance policies can vary significantly in terms of deductibles, co-pays, and coinsurance. Familiarizing yourself with your specific policy's details will help you understand the financial responsibilities associated with your medical care. Consulting your insurance provider directly or seeking assistance from a qualified therapist can be helpful in unraveling the complexities of your policy and how it impacts your treatment.

Understanding your health insurance is essential to make informed decisions about your healthcare and avoid unexpected financial burdens. By familiarizing yourself with these terms and reaching out for further clarification if needed, you can navigate your insurance policy confidently and ensure that you receive the care you need while being aware of your financial responsibilities. If you still have questions regarding your particular insurance policy and how it will be used at our practice, please contact us.