March 2016, a study revealed about a quarter of adults in Texas lacked confidence in the meaning of several basic health insurance terms.
So what does this have to do with those of you who live outside the border of the Lone Star State? The study may indicate a potentially greater dilemma: The general lack of confidence in understanding health insurance terms among the nation’s insurance consumers.
Rice University’s Becker Institute Study
The study polled Texans aged 18-64 about their level of confidence in understanding seven health insurance terms. These terms were not legalese or arcane—they were standard terminology used to describe health plan features. The percentages below represent the percentage of respondents who replied they were “not too confident” or “not at all confident” about understanding the terms. (The other two categories respondents could have replied with were “very confident” or “somewhat confident.”)
Health Insurance Terms and Percentage Who Lacked Confidence
- Premium 2 percent
- Deductible 6 percent
- Co-payment 5 percent
- Co-insurance 3 percent
- Max Out of Pocket 2 percent
- Provider Network 2 percent
- Covered Service 8 percent
The overall lack of confidence for terms which are important to fully understanding the features of current or future health care insurance greatly influence purchasing decisions.
Health Insurance Terms 101
In the hopes of helping even just one person, we provide definitions for these seven terms.
Premium: The amount that is paid monthly/quarterly or yearly to possess health insurance. If you pay monthly, it is similar to your cable bill. It comes each month and payment keeps the service active. You may not see the premium if your employer helps pay it, as it comes directly out of your paycheck.
Co-payment: A fixed amount (for example, $25) you pay for an insurance-covered health care service. It is normally paid at the time you receive the medical service. The amount can vary depending on the medical procedure or test.
Deductible: The amount of money you pay for expenses before your insurance plan begins to pay. For example, if your deductible is $300, and your doctor’s visit costs $2,000, you would pay the $300 deductible and insurance would pay the remaining $1,700. However, if your entire medical bill for the doctor’s visit is $300, you would pay the entire amount.
Co-insurance: Co-insurance is the fee you pay for services, after the deductible.
For example, after an insured individual has paid the deductible, they are responsible for a percentage of the remaining costs, depending on the co-insurance split (80/20, 90/10, and 70/30 are common co-insurance splits). The insured pays the smaller percentage and the insurer pays the higher percentage.
Max Out of Pocket: The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the costs of covered benefits.
Covered Services: The services, drugs, supply, and equipment which your health care plan covers.
Become Informed and Ask Questions
A health insurance plan is a major investment. It is important to determine each plan’s differences. This way you can choose the best policy or provider for yourself and your family.