NDSU Extension Service - Ramsey County


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Know Your Health Insurance

Know Your Health Insurance


            Health insurance and health care can be complicated, confusing and leave us feeling lost in a foreign land.  Knowing the language is always a good first step when visiting an unknown area. Following are is the first in a series of columns highlighting common terms in the land of health insurance.

            Allowed amount -Maximum amount on which payment is based for covered health-care services. This may be called “eligible expense,” “payment allowance” or “negotiated rate.” If your provider charges more than the allowed amount, you may have to pay the difference. A preferred provider may not charge for the difference.

            Balance billing - When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider cannot charge you the balance of the bill for covered services.

            Coinsurance - Your share of the costs of a covered health-care service, which is calculated as a percent (for example, 20 percent) of the allowed amount for the service.

You pay coinsurance plus any deductibles you owe. For example, if the health insurance or plan’s allowed amount for an office visit is $100 and you’ve met your deductible, your coinsurance payment of 20 percent would be $20. The health insurance or plan pays the rest of the allowed amount.

            Copayment (copay) - A fixed amount (for example $15) you pay for a covered health-care service, usually when you receive the service. The amount can vary by the type of covered health-care service.

            Deductible - The amount you will pay for health-care services your health insurance covers before your health insurance begins to pay. For example, if your deductible is $1,000, your plan won’t pay anything until you’ve met your $1,000 deductible for covered healthcare services subject to the deductible. The deductible may not apply to all services.

            Excluded services -Health-care services that your health insurance or plan doesn’t pay for or cover.

            Formulary - A list of prescription drugs, generic and brand name, covered by a prescription drug plan or an insurance plan offering prescription drug benefits.

            Nonformulary -Any drug not listed on the formulary. These drugs will not be covered by the health plan’s prescription drug plan.

            Health insurance -A health insurance policy is a legally binding contract between the insurance company and the insured. The policy describes how much your health insurer will pay for your health-care costs in exchange for a monthly premium.

            In-network coinsurance -The percent (for example, 20 percent) you pay of the allowed amount for covered health-care services to providers who contract with your health insurance or plan. In-network coinsurance usually costs you less

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