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Understanding your Health Plan

by | Sep 18, 2020 | Member Services

When it comes to understanding the lingo associated with your health plan, it can feel like you are trying to read about a foreign language. From coinsurance to copay, you know that you are going to have to pay a certain dollar amount towards your health plan but, what does that really mean? Let’s take a look at some of the key pieces of your health plan to learn more.

Allowed Amount

The allowed amount is the maximum amount the plan will pay for covered benefits minus any applicable member cost sharing. This is commonly part of what your health insurance administrator negotiates as reimbursement to providers for each service rendered.  The Allowed Amount is what the plan will pay for a service, and that amount is what your out of pocket expenses are subject to – not what the provider generally bills for that service. 

For example, if  you get an MRI, the provider may typically want $2,500 for that test.  If you did not have insurance, that would be the amount billed to you by the provider.  But the Allowed Amount as negotiated by your health insurance might be $1,500: this is the amount the assess to any out of pocket expenses that your plan is subject to – NOT the $2,500.

Deductible

A deductible is a specific dollar amount that is payable by the Member for Covered Benefits received each Plan Year or Calendar Year before any benefits subject to the deductible are payable by the Plan. The deductible may not apply to all services. Each will have an individual deductible and a family deductible, and you may have different deductibles that apply to different covered benefits under your plan. When a deductible applies to your plan, it will be stated in the schedule of benefits.

For example, if your plan has a $500 deductible and you have a claim for $1000, you will be responsible for the first $500 to satisfy your deductible requirement before the plan begins to pay benefits.

Copayment

A copayment or “copay” is a fixed dollar amount you must pay for certain covered benefits. The copay is generally due at the time of service, but might be billed by the provider after the visit.

There may be two types of office visit copayments that apply to your plan: a lower copayment known as Level 1 and a higher copayment known as Level 2. We call this a “split copay” because your copayment amount depends on the type of provider seen. Your specific copayment amounts and the services to which they apply, are listed in your schedule of benefits.

For example, if your plan has a $20 copayment for acupuncture visits, you’ll pay $20 at the time of the visit or when you are billed by the provider.

Coinsurance

Coinsurance is a percentage of the allowed amount for certain covered benefits that must be paid by the member. Coinsurance amounts related to your plan are stated in your schedule of benefits.

For example, if the coinsurance for a service is 20%, you pay 20% of the allowed amount while the plan pays the remaining 80%.

Formulary

A formulary is a list of generic and brand name prescription drugs covered by your health plan. Depending on the drug, some may require a copay or coinsurance while others are covered at 100%.

Network

Providers of healthcare services, including but not limited to, physicians, hospitals and other health care facilities, that are under contract with the health insurance provider to provide services to members.

For example, Members should confirm that their physician is an in-network provider before services are received. A Physician who is not an in-network provider is considered to be out-of-network and may not be covered by the plan.

Out-of-Pocket Maximum

An out-of-pocket maximum is a limit on the amount of copayments, coinsurance and deductibles that a member could pay for covered benefits in a year. The out-of-pocket maximum is specified in your schedule of benefits.  If a member or family reaches this out-of-pocket maximum in any year, the remainder of services covered by the plan are paid for in full by the plan and the member will not be responsible for any further out-of-pocket expenses until the new year.

For example, if your plan has an individual out-of-pocket maximum of $2000, this is the most Member cost sharing you will pay for out-of-pocket costs for the year. As an example, the out-of-pocket maximum can be reached by the following: $500 in deductible expenses, $400 in coinsurance expenses and $100 in Copayment expenses. 

Schedule of Benefits

The Schedule of Benefits is an official plan document that states any benefit limits and member cost sharing amounts that members must pay for covered benefits.

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