Health Insurance Terminology: Copays, Coinsurance, & More

When an emergency occurs an insurance policy prevents you from using your savings to pay all the expenses related to the emergency. However, purchasing the right insurance policy is not an easy task, especially when you come across incomprehensible words like copays and coinsurance. In order to make the right decisions regarding your health insurance; it is very important to be familiar with these common terms. Whether you are a first-time insurance buyer or simply seeking an explanation, decoding these terms is the key to making the most out of the health insurance plan you have chosen.

What is Co-pay?

Co-pay, also called copayment for insurance, is an integral part of many health insurance plans because it is a cost-sharing mechanism between the insured and the insurance provider. This provision obliges the policyholder to pay a specified part of medical bills and the insurer covers the rest, based on policy terms and conditions. The co-pay is usually stated as either a fixed sum or as a percentage of the bill. The amount varies according to the insurance policy and the kind of healthcare services rendered. Co-payments are used to encourage the rational use of healthcare services by ensuring that individuals have a financial stake in their healthcare decisions while also making it affordable to receive medical care.

What is Coinsurance?

The concept of coinsurance implies sharing the risk between two or more insurance companies. Basically, it implies that your claim amount is split among the policies covering the same incident following the conditions provided in the policy document. This structure is the norm in general commercial liability policies, where risks and claim amounts are usually of a higher degree. Generally, there is a primary insurer who holds a larger proportion of the premium and then shares both the premium and the claims with other co-insurers. Even in the case of individual insurance, you may find coinsurance clauses that indicate how much the insurance company is going to pay if other insurers are involved. It leaves no room for ambiguity or bias when a claim is made. Moreover, coinsurance could imply that the insurance company and the insured are involved in some cost-sharing arrangement. This implies that the policyholder is required to pay for a certain percentage of covered expenses, while the rest is taken care of by the insurance provider.

What are Deductibles?

Deductibles refer to the amount you must pay before your insurance coverage begins. This lump sum is the financial responsibility benchmark. Usually, it is determined on an annualised basis. For instance, if your policy features a deductible of Rs. 6000/- and your medical bill totals Rs. 35,000, you are required to pay your complete deductible amount, i.e., Rs. 6000 before your insurance company will start covering the remaining amount. Deductibles are a way for a policyholder and an insurer to work together and handle healthcare costs properly. Deductible clauses of your policy are of extreme relevance as far as budgeting and planning your healthcare expenses are concerned.

Additional Health Insurance Terms You Must Know

These are a few health insurance terms you must be aware of:

Premiums

Premiums are payments that you pay each month to the health insurance company. It is similar to a membership fee. They ensure that you are registered with the health insurance plan. The premiums are not directly linked to the medical services you receive.

Out-of-Pocket Maximum

The out-of-pocket maximum refers to the maximum total amount that you are required to pay for healthcare services during a calendar year. After you have paid for a threshold limit of the covered healthcare costs, your insurer will likely pay for the rest of the covered health bills, except for premiums and non-covered services.

Health Maintenance Organisation (HMO)

HMOs require you to choose a primary care physician (PCP) from the health care provider’s network. Your primary care physician handles the coordination of care and also makes referrals to specialists. This type of healthcare conveys lower premiums and costs, though coverage is only within the network except for emergency cases.

Preferred Provider Organisation (PPO)

PPOs are health insurance plans that give you the freedom to make a provider choice, irrespective of whether they are in or out of the network. Plus, you can visit a specialist even without a referral. Although premiums and costs are high, your options in provider selection are also higher.

Point of Service (POS)

POS plans combine the functions of the HMOs and PPOs plan. Often you have a primary care doctor and you will need referrals to visit a specialist. However, you will be able to see out-of-network providers at a higher price. POS plans balance affordability and freedom of choice.

Conclusion

Understanding health insurance jargon is fundamental to managing complexity with confidence. It enables you to compare the different insurance policies side by side and select the one that suits you best. With this knowledge at your fingertips, you can now make wise choices regarding your healthcare so that you can buy the online health insurance you need without worrying about draining your finances.   *Standard T&C apply Insurance is the subject matter of solicitation. For more details on benefits, exclusions, limitations, terms, and conditions, please read the sales brochure/policy wording carefully before concluding a sale.