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F.A.Q. Glossary of Insurance Terms

What is a Deductible?

A deductible is generally the amount you must pay each year before the health insurance begins to pay for covered medical expenses. If you do not have a copay one must satisfy the deductible before the plan pays for covered medical expenses. If you have a copay plan certain services are covered under a copay (see below - What is a Copay?). Expenses which almost universally are subject to the deductible include hospitalization, surgery and expensive tests such as MRIs.

How is a Deductible Calculated?

Assume you do not have copays and a $1,000 deductible. As an example, assume a $50,000 surgery (including doctors, hospitals, tests, surgical fees, drugs, etc.). You would pay the first $1,000 of medical expenses and then the insurance coinsurance would pay a specified percentage of the amount above that (known as coinsurance frequently 80%) until a certain expense (assume $10,000) s reached. After which the company will pay 100% of covered medical expenses. In this scenario for the $50,000 surgery you would pay $1,000 deductible, $2,000 in coinsurance (20% of $10,000) for a total of $3,000 after which the company would pay the balance or $47,000. In addition, for the remainder of the calendar year the company would pay 100% of all covered medical expenses (doctor visits, tests, drugs and all other covered medical expenses..)

What is a Copay?

A copay is a set fee you pay for a specified medical service with the insurance company paying the remainder.. For example it may be $20 for a doctors office visit with the company paying any balance. It could also be $10 for filling a prescription for a generic drug with the insurance company paying the remainder. Copays usually (though there are some exceptions) usually do not count toward the deductible, coinsurance or out-of-pocket maximums.

What is Coinsurance and How Does it Work?

Coinsurance is amount you pay after a deductible is met. Usually it is 20% (the percentage can vary from 10% to 50% depending on the policy selected) of the next $5,000 to $10,000 of covered medical expense with the company paying 100% of the remainder. In this example, you would pay $1,000 (20% of $5,000) to $2,000 (20% of $10,000). After this amount the company pays 100% of covered medical expenses.

What is an Out-of-Pocket Maximum?

Out-of-pocket maximum is the maximum dollar amount you must pay before the company pays 100% of covered medical expenses. Once the out-of pocket maximum is reached, the insurance company pays 100% of covered medical expenses for the remainder of the calendar year.

The out-of-pocket maximum is usually calculated as the deductible plus any amount of coinsurance. In most scenarios the out-of-pocket maximum is $1,000 to $3,000 more than the deductible..Copays are generally excluded from the out-of-pocket maximum calculation.

What are accident policies?

Accident Policies are low cost policies that pay for the medical costs associated with an accident up to specified policy maximums per accident usually $5,000 to $10,000. The policies usually pay in addition to any other coverage and the funds may be used to pay medical expense or for any other purpose. These policies are especially valuable for families with children, people who play sports or engage in other activities where there is risk. Premiums are based on the of people covered but are generally under $50 per month for a family with $10,000 per accident of coverage.

These policies are excellent supplements to traditional medical plans, particularly those with higher deductible medical plans. They also are an economical option for individuals and families that do not have or cannot afford major medical coverage.

What is a Preexisting Condition?

Will a Preexisting Condition Impact My Ability to Get Health Insurance?

Is Maternity a Covered Service?

What is a HSA and How Does it Work?

What is Guaranteed Issue Health Insurance?

A Guarantee Issue product is a policy the company must issue regardless of medical conditions.

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