A few years ago, I sat down with a friend of mine who was faced with a perplexing problem. After years of battling Lupus and a host of other health complications, which prevented her from being able to find regular employment, she found a promising new job. But there was one problem: she was going to earn too much to qualify for Medicaid. So she asked me to take a look at the plan that was being offered by her new employer to help her determine if it was manageable, or to see if we could find a better option. As I met with her, I found myself using terminology that wasn’t familiar to her, and I was reminded that the vocabulary I learned after years of advocating for myself isn’t something that is part of our regular vernacular. After all, our insurance system isn’t exactly user-friendly. This is of paramount importance to consumers who may be searching for plans on the exchanges as a result of Affordable Care Act. Here are some general concepts that I think will be helpful to understand when trying to navigate through the rough terrains of managed care.
1) In-Network: Most insurance plans will have contracted rates for services with a preferred network of providers. Since these providers have negotiated rates in place as part of their contract with the respective insurance plans, they cannot charge more for a given service than their contract allows.
2) Out-of-Network: These are providers who have NOT contracted with the respective insurance plan. As a result, they are free to bill whatever they want for a given service. Most insurance plans will offer some reimbursement for out-of-network providers, but the reimbursement is typically less than for in-network providers.
3) Deductible: If you’ve ever been in an auto accident, or had to file a claim through your home insurance policy, this concept ought to be familiar to you. It simply means that a insured individual has to pay a certain amount out-of-pocket before the insurance will kick in. This amount is known as an annual deductible. Most insurance plans will have both an in-network deductible and a higher, out-of—network deductible, for services rendered by out-of-network providers (see above for a description of in-network vs. out-of-network). There’s quite a bit of variability here. Before buying an insurance policy, be sure to ask about the annual deductible. If it’s obscenely high, keep on looking.
4) Premium: This is the amount the insurance policy costs. Most insurance companies charge monthly fees, or premiums. Employers contribute to this premium, leaving a smaller cost-sharing obligation for the consumer.
5) Co-payment: This is a flat fee structure set up by your insurance plan for certain services, including office visits, to in-network providers. Usually, visits to a primary care physician cost less than visits to specialists.
6) Cost-sharing: This is a percentage structure set by your insurance company. It dictates the percentage you will be responsible to pay for a given service. Again, if you see an in-network provider, your insurance company will typically pick up a higher percentage of the cost. If you see an out-of-network provider, they often pick up a lower percentage of the cost.
7) Reasonable and Customary: Insurance companies typically determine what they consider to be a reasonable charge for a given service in a certain geographical area. In-network providers cannot charge more than this rate, whereas out-of-network providers can charge whatever they personally feel is reasonable. If you see an out-of-network provider, that provider may bill you for the balance not covered by your insurance company.
So… these are just a few basic catch phrases, and some things you need to think about when you’re comparing plans and trying to figure out what’s best for you. I usually go with a plan that offers a high percentage of reimbursement for out-of-network services. Although this costs more than less flexible plans, the freedom is far more important to me. Some people may choose to go with a plan that has a lower premium (i.e. costs less) but does not offer generous out-of-network coverage, usually found in a typical HMO model. Do what’s best for you. But make sure you know how to ask the right questions.