Health Insurance 101
Jenny had an appointment with her doctor a few weeks ago. Today she received a bill from her health insurance company. She looked at the bill but couldn’t make any sense out of it. Co-pay? Deductibles? “What do these words mean?” she thought. “Why do I owe money”? “Doesn’t my health insurance cover my medical expenses”? “What’s going on”?
Does Jenny’s story sound familiar? Has this ever happened to you? If not, some day you’ll be in charge of your own health insurance and you’ll likely have to deal with issues like this. Now is a good time to begin learning about how health insurance works so you’ll be well informed!
Let’s start with the basics:
How does a person get health insurance?
There are many ways to get health insurance. The most common are through your parents, your college or school, or your work. If you don’t have insurance through one of these sources, you can sign up for Medicaid (see below) or pay for your own plan. Paying for a plan yourself can be very expensive, so make sure you’ve tried the other ways first. Here’s an explanation of different types of health insurance.
Health Maintenance Organization (HMO): A type of insurance that has a network (see below) of doctors and other health care providers that you need to pick from. In an HMO, you have to pick a primary care provider (PCP), which is someone that will take care of your general medical needs. In an HMO, you’ll need a referral (paperwork) from your PCP, to see a doctor specialist (such as an allergist or orthopedist).
Preferred Provider Organization (PPO): A type of health insurance that gives you a list of doctors that your insurance would like you to go to. You can go to doctors that are not on the list, but your co-pays and other costs might be higher if you do.
Medicaid: A health insurance plan run by the government to help people and families who make less than a certain amount of money. Each state has different rules regarding who can apply for Medicaid and some states have another name for the coverage. In Massachusetts, Medicaid is called “Mass Health”. Some people have both “private” insurance such as Blue Cross Blue Shield and Medicaid if for example they have a chronic or lifelong disease.
Below you’ll find definitions for common “insurance” words that will help you understand your plan.
Network: A group of doctors, hospitals, and other providers that a health plan says are the only ones that the insurance will cover. This is important to know if you need to go to a specialist, or a doctor who sees a specific kind of patient or illness. Going “out-of-network” means that you are seeing a doctor or other provider who is not covered by your insurance and it might mean that you’ll have to pay for the visit yourself. Always check with your health insurance company before seeing a new doctor or health care provider.
Co-pay: A set amount of money you have to pay each time you have doctor’s appointment, get a prescription (medicine at the pharmacy), or use the emergency room. Each health plan has different dollar amounts for different kinds of visits.
Usually the co-pay for doctor and health care provider visits is much lower than co-pays for emergency room visits. Check the front of your insurance card for the co-pay amounts you are responsible for. If your card has “OV” with a “dollar amount” next to it, this means you’ll be responsible for that amount for every “office visit” or out-patient appointment. If this information is not on your card, you’ll need to call the phone number (your insurance company) on the back of your card and find out what your co-pay is for office visits.
Also, you might have higher co-pays for certain types of medicines your doctor prescribes for you and lower co-pays for other medicines. This is called a “tiered prescription” system, when the insurance company puts some medicines in higher or lower “tiers”. Lower “tiers” usually mean lower co-pays for those medicines. Medicines in Tier 1 have the lowest co-pay. More expensive medicines might be in Tier 2 or Tier 3 and have a higher co-pay.
“Covered”: Things that your insurance plan will pay for. For example, if you’re on a medicine that is ”covered” by your health insurance, it means you only have to pay the co-pay (see above) when you pick up the medicine from the pharmacy. If it’s “not covered” it means that you’ll have to pay the full cost of the medicine yourself or get special paperwork from your doctor.
Premium: The fee or amount you pay each month for your health insurance. The amount depends on the insurance company, if your parents work or if they help pay for some of the costs, and the type of plan you pick.
Deductible: The amount of money you have to pay towards a medical bill before your insurance covers the cost; the higher the deductible, the lower your monthly premium. However, with a higher deductible, you have to pay more money before your insurance starts to help pay if something happens and you get sick or hurt. Lower deductibles usually mean higher monthly premiums.
Example of Co-pays, Deductibles and Premiums:
Health Plan A:
- Deductible = $500
- Premium = $30
- Co-pay for Emergency Room visit = $100
Health Plan B:
- Deductible = $200
- Premium = $60
- Co-pay for Emergency Room visit = $50
Let’s pretend you break your leg playing basketball. You go to the emergency room and it costs $1000 for the x-ray and the visit with the doctor.
If you picked plan A, you would have to pay your usual premium for that month, the co-pay for an emergency room visit, and the deductible. That’s $30 (premium) + $500 (deductible) + $100 (copay) = $630 for that month. Your insurance would pay the rest of the bill. If you stayed healthy and had no emergencies, you would just pay the $30 every month.
If you picked Health Plan B, you would pay $60 + $200 deductible + $50 = $310 for that month. Your insurance would pay the rest of the bill. If you stayed healthy, you would pay $60 every month.
Keep in mind, this was just an example with fake dollar amounts to show you how some health insurance plans work. When it comes time to choose a health plan for yourself, be sure you learn all about the different options so you can get the right plan for you!
Health insurance can be hard to understand. Learn what you can and ask a trusted adult to help explain things you don’t understand. You can always call the number on your insurance card if you have questions.