PCPs, PPOs, and Premiums: De-coding Health Insurance Terminology

The purpose of today’s post will be to define all of the terminology commonly used regarding health insurance. This will help me set the stage for an upcoming entry, about my experience with helping my significant other sign up for a Marketplace insurance plan (i.e. an Affordable Care Act, or “Obamacare,” plan).

What is a deductible? This is the dollar amount of out-of-pocket expenses that your insurance requires that you pay before they will begin to pay for claims.

Sandra and Bill’s deductible is $500. That means that they will have to pay the first $500 of medical bills before their insurance will begin its regular coverage. So when Timmy falls and breaks his arm at the beginning of the year and goes to see an orthopedist in his private office for diagnosis (involving a consult, x-rays) and treatment (a cast), Sandra and Bill will have to pay the first $500 of bills before their insurance company starts to pay.

What is a copay? A copay is a fixed dollar amount that you pay every time you use a particular type of healthcare service.

Sandra has a $10 copay to see her primary care doctor (PCP) and a $25 copay to see a specialist. She has a $10 copay to fill a prescription for a generic drug and a $30 or $50 copay for a brand-name drug (depending on it’s “tier,” which is a category of price difference determined by the insurance company for drug coverage).

What is a coinsurance? This is the percentage of a medical bill that you will have to pay. Usually, an insurance company does not bill both a copay and a coinsurance for the same service, so it would apply to services outside of outpatient physician consults and drugs.

Sandra and Bill may have a 20% coinsurance for lab tests, diagnostic imaging (i.e. x-rays, MRIs, CTs), and inpatient services. If little Susie is hospitalized for an asthma exacerbation, Bill and Sandra will have to pay for 20% of the bills, up to a certain maximum level.