Learn the Lingo

14 Jun

When I began looking for health insurance, I jumped right into looking at the available health insurance plans. That was a huge mistake. I had no idea what I was looking at and I quickly became overwhelmed and disheartened. I began to think: How is it possible that I can’t understand a health insurance plan? How will I ever pass the bar exam if I can’t even figure out a health insurance plan? If I can’t pass the bar than none of this matters, I won’t be able to have a kid because I’ll have to work two jobs to pay off my law school debt and we’ll never be able to buy a bigger house and I’ll just work until I’m too old to have kids and then I will die alone and in poor health because I don’t have a health insurance plan because I could never figure it out . . .

You get the picture. And it wasn’t a pretty picture. But, once I stopped hyperventilating, I realized that understanding a health insurance plan is a lot like understanding the law: you have to learn the lingo. So, here are what I think are the most confusing insurance terms along with simple definitions.

Co-insurance – this is an amount (usually a percentage) that you will be responsible for paying. For example, if your coverage description says: “20% co-insurance” that means you will have to pay 20% of the cost of the service.

Co-payment – this is very similar to co-insurance, but is usually a flat amount that you are responsible for paying. For example, if your coverage description for a visit to the family doctor says “$35 co-payment” then you will have to pay $35 each time you go to your family doctor.

Deductible (or calendar year deductible, often abbreviated CYD) – This is an amount that you have to pay each year before insurance begins paying. The deductible may not apply to all services. If the description of coverage says something like “CYD + 20% co-insurance” then you have to pay whatever your deductible is before your insurance will start to cover the service. There are other types of deductibles as well, such as a pharmacy deductible. These specific deductibles are the amount you have to pay for a specific service (here, prescription medications) before coverage for that service will begin. While the normal deductible counts all of the expenses you paid, no matter what the expenses were for, specific deductibles include only expenses you have paid in a specific area (such as prescriptions). Otherwise, they work the same way a normal deductible works.

Out-of-pocket maximum – this is the maximum amount you will have to pay, for covered services, each year towards health care. Some companies do not count prescription drug expenses towards reaching your out-of-pocket maximum. Once you have paid your out-of-pocket maximum, your health insurance will pay 100% of your bills.

Pre-existing condition – this is a condition that you knew or should have known existed before your policy went into effect. How do you know if you should have known (but didn’t)? Well, the standard is whether a reasonably prudent person would have gotten it checked out. Who is the reasonably prudent person? (This, by the way, is a question that haunts first year law students as they progress through their Torts course.) The reasonably prudent person is a very boring guy. He doesn’t take risks and he always stops, looks both ways and listens for vehicle traffic before crossing the street. He doesn’t speed and always comes to a full and complete stop at stop signs. I could go on, but I think you get the picture. Basically, if there was any symptom at all (an odd mole, stomach pain, etc.) that you had before the policy that could have clued you in that there was something wrong, whatever is wrong is considered a pre-existing condition. Now, if you can show that you had insurance coverage during the time that the reasonably prudent person would have figured out there was something wrong, then there may be some coverage. Additionally, and here’s an important one for us pregnancy planners: Pregnancy is a pre-existing condition. If you conceived before your coverage began, you may not be covered. The tricky thing here is that pregnancies are dated by the first day of your last period – so your insurance company could claim that you were pregnant on that date, even though you actually weren’t, because that is how your pregnancy is dated. The lesson: buy insurance early. Like a few months early. Just to be safe.

Rider – this is essentially a policy that stacks on top of (or rides on top of, if you will) your basic policy. For example, Blue Cross and Blue Shield offers a maternity rider because their basic policies do not cover maternity care. This rider has completely different coverage than the basic policy and I would pay an additional premium every month for the rider.

Total Lifetime Maximum Benefit – this is the most the insurance company will pay out over your lifetime.

Vesting period – this is basically a delay in coverage. The vesting period is a time period during which your insurance company does not cover you. Now, usually vesting periods relate to a specific type of coverage. For example, coverage for maternity may not vest right away. You may have to have the coverage for a few months before it kicks in. And, here’s the kicker, you may not be covered if you conceive (or develop whatever condition the vesting period concerns) before the vesting period is over.

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3 Responses to “Learn the Lingo”

Trackbacks/Pingbacks

  1. Find Available Plans « The Preggers Plan - July 2, 2011

    […] have to purchase an additional maternity rider. (For more information about what a rider is, see Learn the Lingo.) For an extra premium each month (about $190, but this varies a bit depending on the underlying […]

  2. Figuring out what your health insurance plan covers « The Preggers Plan - July 6, 2011

    […] Figuring out what is covered and what is not can be really tough, especially if you don’t understand insurance terminology. So, here is how to figure out what your health insurance […]

  3. Health Insurance and Pregnancy « The Preggers Plan - October 23, 2011

    […] and co-insurance? What’s the difference between those things and a deductible? So, I had to learn the lingo.  And once I did that, I mostly understood what each plan covered. […]

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