Editorial: Do you know insurance terms?
Health insurance issues are complicated enough for the average person to comprehend and it’s about to get more complex.
The Minnesota Department of Commerce urges consumers to take a look at the options to make the best decision for themselves and their households. The department says that understanding the difference between the terms will help consumers find health insurance that fits their financial and health needs.
It’s like the old saying: You can’t tell the players without a scorecard.
As a refresher, often the terms “rate” and “premium” are used interchangeably when discussing insurance, which makes comparing prices confusing to the average company. To simplify the process, the commerce department reminds consumers that:
• A rate is the average amount an insurance company charges for a defined package of health insurance plans. For example, the rate for your insurance might be $300 per person, per month.
The factors that go into setting individual and small group health insurance rates for a particular plan of benefits in a particular network of doctors and hospitals are: the combined medical costs of everyone in that company’s market for a particular age, tobacco use, and geographic area. This is called community rating; the rates are based on the costs of the entire community.
• A premium is the amount that you and/or your employer pay each month for your family’s plan. For example, if a plan covers a couple at a rate of $300 per person, per month, the premium is $600 per month.
The factors that affect the price of premiums depend on your age and the age of any family members in your plan; whether or not each person 18 or older uses tobacco; where you live; and the benefits in your health plan.
In addition to rates and premiums, the commerce department wants to help people understand the terms used in their health insurance coverage so they can pick the best plan option. Here are some important terms to know:
• Deductible: The amount you must pay each year for any health care you receive before the insurer will pay for your services. If you do not receive any care, you do not need to pay this amount. Often plans with no deductible or a low deductible are more expensive, but you will pay less when you actually get care.
• Copay: A flat-dollar amount that you pay when you receive care. For example, you may be required to pay $20 each time you see a doctor.
• Coinsurance: The percentage of the total charge that you pay when you receive care. For example, you may need to pay 20 percent of the cost each time you see a doctor.
• Formulary: A list of prescription drugs that your health plan will cover. You may pay more if the drug you take is not on this list.
• Network: All of the health care providers that are associated with your health plan. You generally need to use a provider that is in your network to get your best benefits.
• Out-of-pocket limit: The total amount that you would ever need to pay for care in a year. If you reach this limit, you do not need to pay for any health services you receive until your plan renews the next year. If you do not receive much health care, you may not meet this limit and you would pay less.
It is important to remember that the cost you pay may vary under different policies, the commerce department emphasizes. When shopping for a new plan, consumers will want to consider the deductible and the copay or coinsurance you would pay when you use your health care, as well as the premium you pay each month.
For more information or if you believe you’ve been a victim of a scam or fraud, call the Consumer Response Team toll-free at 1-800-657-3602 (in Greater Minnesota).