1. What is co-insurance?

Co-insurance is that portion of your eligible medical claims expense that remains your responsibility. Deductibles, co-pays and percentage splits are all co-insurance. Rule of thumb: The higher your co-insurance, the lower your premium and vice-versa.

2. What is a deductible?

A deductible is the dollar amount the insured is responsible for paying before the insurance plan begins to pay. Deductibles may be waived for some procedures--office visit co-pays, for example. Deductibles are sometimes called retention.

3. What is a co-pay?

A co-pay is a fixed dollar amount that the insured pays when using certain services. Usually they are office visit co-pays.


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4. What is an out-of-pocket maximum?

Out-of-pocket maximum or annual out-of-pocket refers to the maximum co-insurance for eligible medical expenses for a year. Prescriptions are not usually subject to the out-of-pocket maximum.

5. What is major medical insurance?

Major medical insurance used to refer to inclusion of coverage outside of a hospital in your plan. Today it often refers to insurance with a high deductible and substantial maximum lifetime benefits.

6. What are maximum lifetime benefits?

Maximum lifetime benefits refer to the maximum dollar amount an insurance plan will pay on an individual during his or her lifetime. HMOs have no lifetime maximum.


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7. What is a preferred provider organization (PPO)?

A PPO is a panel or group of physicians, hospitals and ancillary providers who have signed a contract with an insurance company in which said contract dictates their relationship and fees. There is reduced coverage outside of the PPO network. You may move between PPO providers without referrals with some exceptions.

8. What is a health maintenance organization (HMO)?

An HMO is a higher degree of managed care in which an insured chooses a primary care physician (PCP) as a gatekeeper. The PCP sees the insured for all conditions (with some exceptions) and then makes the appropriate referrals to specialists. Kaiser is an example of a captive HMO wherein you visit its facility and are assigned a physician when you arrive. The hybrid HMOs have panels of physicians at their own offices who serve as PCPs. HMOs have no coverage outside of their networks with the exception of emergency care. You must live within a 50 mile radius of an HMO to be a member. HMOs also offer the value of negotiated fees.

9. What is an exclusive provider organization (EPO)?

An EPO is similar to a PPO. It has a panel of providers for the insured’s use and you are free to use any provider. However, there is no coverage outside of the network. EPOs also offer the value of negotiated fees.


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10. What are negotiated or discounted fees?

PPO and HMO and EPO contracts are based on negotiated fees. Insurance companies make contracts with medical providers that stipulate what the insurance company will pay for any given procedure. These negotiated fees are substantially less than what you would pay without insurance, thus resulting in significant savings to you. For example, if the provider’s retail bill is $1,000, the contract may require it to reduce that charge to $600. Your co-insurance then would be based on $600 and the balance of $400 would be written off by the provider. Thus, negotiated fees are an important part of what you purchase.

11. What is a primary care physician (PCP)?

When you enroll as a member in an HMO you must select a PCP. Your PCP will be your general practice, family practice or internal medicine physician who you see for your general medical care. Your PCP will manage all of your care and referrals to specialists when appropriate.

12. How do I find out if my current doctor is a PPO, EPO or HMO provider?

Insurance companies issue directories of providers. Most also post their directories online. Your agent will be able to tell you. Or you can always call your doctor’s insurance clerk to ask.


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13. Can an insurance company cancel my policy due to claims or health conditions?

No, not once a policy has been issued in the absence of fraud. You must disclose your medical conditions at the time of application. Once the policy has been issued it will remain in effect as long as you pay the premiums.

14. Can an insurance company raise my premiums if I get sick?

If you get sick or injured after your policy is issued the insurance company will only raise your premiums as part of a general rate increase. You will not be singled out for individual increases.

15. When will my premiums change?

Your premiums will be adjusted as the insurance company makes adjustments to the insurance pool you are in. These adjustments are in response to claims experience, age experience and medical inflation. Other than that, your premiums will be adjusted as you age. Most companies use age bands so your premiums will receive increases when you turn 30, 40, 50, 60, etc.


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16. What is a tier rating?

When you apply for insurance the insurance company will underwriter review your medical conditions. If you have medical conditions that represent an unacceptable risk to the company it may decline to offer you coverage. If your conditions represent a risk greater than standard but are still insurable they may offer you insurance at a higher premium rate. These are called “tiers” and usually represent a percentage increase of the published rates.

17. What are published rates?

Published rates are the standard rates published in insurance company brochures. Insurance companies are allowed to offer you insurance at a higher rate.

18. Can I ever get a tier rating removed?

Oftentimes a company will agree to review your condition and remove your tier rating if your history and records indicate that your condition is resolved and not likely to recur.


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19. Do I need to get a medical exam when I apply for health insurance?

Generally, no. However, if you are 50 years of age or older the insurance company will require you to have had a physical exam within the last year. If you have not, then they will defer action on your application pending a physical examination scheduled and paid for by you.

20. What is creditable coverage?

Creditable coverage is evidence that you have had continuous health insurance. Companies are required to issue creditable coverage statements when your insurance terminates. Your next insurance company will ask for evidence of creditable coverage to determine if you are subject to pre-existing condition limitations of coverage.

21. Are dental and vision covered under my health insurance policy?

Generally no. Routine dental is not covered. However, if your teeth get knocked out in an accident that is usually covered by your medical insurance.


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22. Is vision care covered under my health insurance?

Not usually, although some medical plans offer discounts for lenses and frames at participating vision centers. It pays to ask at the time of purchase. And HMOs often will cover annual eye exams through an ophthalmologist.

23. Are prescription drugs covered?

Prescription drugs (RX) are usually covered under your health plan and are often treated as separate coverage with separate deductibles and co-pays that are not counted toward your annual out-of-pocket expenses.

24. What is underwriting?

Underwriting is done by an underwriter who is an employee of the insurance company. The underwriter is responsible for reviewing your medical information and records in order to decide if and at what tiering to offer you insurance.

25. What is an attending physician’s statement (APS)?

An APS is a request by the insurance company for information from your medical provider. Usually it results in the forwarding of your records to the company.

26. What is Individual Health Insurance?

Individual Health Insurance refers to private health insurance or insurance applied for outside of a business. It is contrasted to group or employer-sponsored health insurance and is subject to different insurance laws and California statutes.


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