Health Insurance Terms
What is "COBRA"?
COBRA stands for "Consolidated Omnibus Budget Reconciliation Act." It's a federal law that basically says that when you leave your company's group policy for whatever reason (let's say you decide to quit, or you get fired, or the company you work for goes out of business), you're entitled to continue the group insurance typically for 18-36 months. This is a very important law.Many years ago when I started in the insurance business, if I had a client that was on a group policy, they could become "uninsurable". Let's say they developed heart disease while they were working for that company, they leave that company, now they can't get insurance. Under this new law, at least they can keep the insurance for 36 months after they leave the company and then they can hopefully get a job with another group policy and go on that plan.
What is a "co-payment"?
A co-payment is usually a $35, $25, $10 payment that you'd use when you go to a doctor's office. The doctor says, "It'll cost you $25 for this co-payment." The insurance company says they'll pay the doctor the balance; all you have to do is pay $25, or $35, whatever the co-payment. Usually, it's a very small, incidental fee to walk into the doctor's office. It's strictly for the consult. It doesn't cover a lot of expenses other than the consult. So when you see an internist for a bad cough, the doctor might have a fee of $180, but if you have a co-pay insurance program, you only pay $25 if it's a $25 copay program.
What is "co-insurance"?
After you've reached your 500 or 2000 or 1500 dollar deductable, whatever it is, the insurance company still requires you to pay a certain percentage of the benefit under a PPO program. So as an example, you might have a $500 PPO program that says that after the $500 deductable is met, the insurance company will pay 7% of your bills and that means you're going to pay 30% of your bills. Your going to pay 30% until you've reached a certain maximum out-of-pocket, which is another $4000 as an example. So the $4000 of co-insurance plus your $500 deductible is what you really would call your out-of-pocket. So co-insurance is a way that the insurance company helps you share part of the expenses before they start paying 100%.
What does "out-of-pocket" mean?
Out of pocket is what you really end up paying when you have a condition or illness or accident. When all things are done, after you've looked at your whole expense for a broken leg, and you look at the doctor's fees, the surgeon's fees, the medications you had to take for the pain, all the doctor visits for the Xrays - when you add it all up, let's say it's 10,000 15,000 20,000 dollars, your maximum out of pocket may only be 4,000 dollars. That's what you're going to write a check for, either to the doctor or the hospital. That's your out of pocket. The insurance company has paid the rest.
What does "lifetime maximum" mean?
Lifetime maximum is one of the most important features of a medical insurance policy. Most companies in California for example are 5 million or 6 million dollars, and some companies are even unlimited. In other states, the lifetime maximum may only be a million. Now what a lifetime maximum really means is how much the insurance company is on the hook for if you have a catastrophe. So as an example, one of my clients many years ago was in a car accident and she was severely burned. She had at least 2 plastic surgeries to repair herself so that she looked beautiful again. The insurance company paid probably 2 million dollars out of pocket for her. They paid all of that expense. Now she still has, under her health insurance policy, a 6 million dollar lifetime maximum so that she has used up 2 million, she still has 4 million left. Policies that are issued in some states are only a million. Some of the colleges that have college policies, for example, like my own son is going to a college where they wanted me to purchase the health insurance policy that is offered for the school kids, and it only had a 3, dollar lifetime maximum. The problem with that is that if his expenses were greater than 3, dollars, I would be on the hook for the balance.
What are "exclusions"?
What is a "waiting period"?
A waiting period on a health insurance policy: Let's say that you didn't have insurance when you came to see me, and you wanted to buy an insurance policy. The insurance policy might say that, any pre-existing conditions that you have, for example: high blood pressure, or allergies might not be covered under those programs for six months, but after that period of time you'd be covered for pre-existing conditions. On the other hand, let's say that you had a prior health insurance policy with some other carrier, but you just switched programs. Because there's continuity between your prior health plan, and this new one, there's no waiting period. So, any type of new claim would immediately be covered.
What does "coordination of benefits" mean?
Coordination of benefits refers to the fact that some people have insurance in two places. For example, you might have insurance through your employer and your spouse might have insurance through his or her employer. You then go to a doctor or a hospital and submit a claim. The two insurance companies are going to make sure that they work together. They are going to coordinate their benefits so that you don't get paid more than the cost of the insurance. Years ago, there were many of my clients who were on two policies and both policies had to pay. Many times people were paid much more than the claim ever cost. But that doesn't happen too much and more.
What is a "grace period"?
A grace period is the time that your insurance company gives you to pay your premium. Many times we may forget to pay the premium. We lose our bill or we're on vacation and the bill comes. The insurance company typical says, "You have 31 days after the due date to pay the premium." If you don't pay the premium after 31 days the insurance company can come back and say, “We're not going to insure you." If you want to get the insurance policy back you have to submit medical evidence of insurability. So people that have health problems should be very careful about ever going into that grace period. It's just basically an accomodation by the insurance company to give you a chance. And they notify you and they notify the agent. That's another reason why it's good to have an agent. Because if you have a good agent that sees that you have not paid the premium that agent will call you on the telephone and ask if you are sure you want to let this policy relapse. That's one of the biggest benefits of having an insurance broker that is on your side.
What is a "pre-existing condition"?
Pre-existing conditions refer to your health history before you applied for insurance. If you're taking medication for psychological reasons, going to a doctor for acne or if you have allergy problems and you're getting allergy shots on a weekly basis, are all conditions that you're being treated for. The insurance company expects you to be honest on the application and answer all the questions, and those constitute pre-existing conditions. The insurance company will look at that and decide whether or not they think you're insurable or not. It's very important to be honest on the application with regard to pre-existing conditions because you really don't want to pay for an insurance policy that could be declined or rescinded later because you weren't forthright on the application.
