First, let's look at some of the main terms used in discussing health insurance.
Deductible: The portion of medical and/or prescription expenses you pay before the insurance company pays. This amount is usually an annual deductible, which you pay every calendar year.
Co Pay: A flat amount, usually $10, $15 or $25; that you pay for services or prescriptions and the remainder is paid by the insurance company.
Coinsurance: Coinsurance describes the cost-sharing arrangement between you and the insurance company and refers to the amount you pay after meeting your deductible. Common scenarios are 80/20 (the insurance company pays 80%, you pay 20%), 90/10 or 50/50.
"First Dollar Coverage": This term refers to health insurance plans that pay the "first dollar" of medical expenses. Many group health insurance plans offer first dollar coverage for certain services, such as preventive care.
High Deductible Health Plan (HDHP): A high deductible health plan is a health insurance plan with a deductible of $1,000 for single, $2,000 for family or higher. These plans may allow for an individual to establish a Health Savings Account (HSA), which has tax advantages.
Health Savings Account (HSA): Combined with a High Deductible Health Plan (HDHP), Health Savings Accounts allow an individual to establish a tax-advantaged savings account. Deposits to this savings account are tax-deductible, and interest is earned tax free. Withdrawals may be tax-free as long as the money is used for qualified medical expenses. These new plans are designed to engage consumers more actively in their health care spending and usage. (See HSA Summary document for additional information.)
Lifetime Maximum (or Limit): Most health insurance contracts state a maximum amount they will pay over the lifetime of the insured person. These amounts can range from $1,000,000 to unlimited.
Major Medical Insurance: Major Medical Insurance is a term used to refer to health insurance plans with a deductible. These plans are generally designed to cover "major" medical costs, not to provide "first dollar coverage."
Maximum Out of Pocket Cost: This is the "cap" or maximum amount you will pay for covered services; once you reach this amount; the insurance company pays 100% for the remainder of that calendar year. Usually based on an annual amount for expenses incurred between January 1st and December 31st.
Preexisting Condition: A health problem that existed before the date your insurance coverage became effective.
Short-Term Medical Insurance: Short-term medical insurance is a low-cost, limited health insurance plan that can provide coverage, sometimes immediately, for short periods of time. These plans are ideal during a waiting period before new coverage begins or if you're between jobs. These plans are also a great option for recently graduated college students while looking for employment. (Available on-line - click [where?] to view rates and additional information.)
