While health insurance is something many of us have and use, understanding the terminology used by your insurer is an entirely different thing.

It’s extremely common for the insured to not have a proper understanding of their health insurance due to misunderstanding the terminology used, which can cause incorrect plans or methods of care to be chosen, and unfortunately some financial surprises. Read on for tips in understanding common health insurance terms and gain better insight into your coverage.

Beneficiary

The recipient of health benefits, or you.

Coordination of Benefits

Sometimes a beneficiary will have more than one insurance involved to cover different aspects of their health needs or to pick up what one insurance doesn’t cover. When a situation happens that requires one insurance to work with another to handle payment and coverage, this is called coordination of benefits.

Explanation of Benefits

When the insurer refers to your explanation of benefits (EOB), they are talking about the medical coverage and services that are covered and paid under your plan. They will often ask that you refer to your EOB with questions pertaining to specific services being covered.

Deductibles

When you have a deductible with your insurance plan, this means that you will need to meet a certain amount of expenses paid out of your pocket before the insurance company will begin picking up the cost. Depending on the plan options and types, deductibles can range from a few hundred to ten thousand dollars or more per year.

With most deductible plans, not all services are limited in payment by the insurer until the deductible is met. Many standard doctor visits and services will be covered. Deductibles are usually tied into special services and emergency services.

Out of Pocket Expenses

This term refers to how much money the insured is personally responsible for, that the insurance company will not cover. Often, these expenses will have maximum limitations set, where the insured will not be required to pay more than a certain amount per year.

Yearly Maximum or Lifetime Maximum

This term refers to a set maximum amount that the insurance company has set for coverage of medical services. When they use this term, they are explaining that their coverage will not exceed a specific dollar amount, either throughout the lifetime of the policy or per year.

Exclusions

Exclusions are services and benefits that your insurer will not pay for or cover.

Co-Payments

Some services are covered at 100% by the insurer, however often there are medical services where you will need to pay a pre-set amount out of pocket. Copayments can be due for services like doctor’s appointments and emergency room visits.

Claim

When you are seeking payment of services by your insurance company, this is called a claim.

Dependent

If you have a child or spouse covered under your plan, of which you are the primary beneficiary, they are considered your dependents.

Formulary

This term is a reference of all prescription drugs, their coverage status, and their price with your insurance company.

Preauthorization

Sometimes certain services or procedures do not have pre-set guidelines under your policy. At the same time, they also may not be excluded from your benefits. When this is the case, and you need a service, a preauthorization can be submitted to your insurer requesting special approval.

Medically Necessary

This common term refers to the insurance determining coverage of a service or procedure based on the medical determination of your provider.

Primary Care Physician or PCP

When this term is used, it refers to the physician that handles the bulk of your medical care and coordinates and approves other services you may need from other providers.

Nonparticipating Provider

This term refers to a medical provider that is outside of your insurer’s network. Often, your insurance will not cover using these types of providers, or you may have to pay more out of pocket.