Understanding Health Insurance and You: Part One

Friday November 19th, 2021

Chances are, you have insurance for all types of things: house, car, even your life. Insurance is meant to protect you financially in the event of something bad happening. Health insurance is similar to, but also different from, other types of insurance that only cover emergencies. With health insurance, you’re covered for emergencies plus routine and preventive care. In this article, we’ll review how health insurance in America works and cover key terms you should know. We’ll help you understand how the different elements of health insurance work.

Insurance terms 101

Let’s define some common insurance terms.

  • Premium: the amount you pay to the insurance carrier every month.
  • Copay: a fixed amount you pay for a covered service such as visiting your primary care provider or getting an X-ray. (Copays vary from one plan to next. You may not have copays for preventive services on certain plans.)
  • Deductible: the amount you pay for covered services before your insurance begins to pay.
  • Coinsurance: the percentage of costs for a covered service you pay after you’ve met the deductible.
  • Maximum out-of-pocket costs: the most you pay for covered services in a given year.
  • Preferred cost-sharing: a term that refers to lower out-of-pocket costs (often reduced copays) for prescription drugs when you use certain in-network pharmacies.
  • In-network: The group of providers and pharmacies who accept your insurance (typically, the insurer has negotiated better rates with in-network providers). You might want to seek in-network providers who offer value-based care, which rewards providers for the quality of care they provide and focuses more on patient health outcomes.
  • Out-of-network: Providers and pharmacies who do not accept your insurance. If you seek care from an out-of-network provider, you may have to pay more or cover all the costs yourself.

How health insurance works

Because you use health insurance for routine and preventive care, you and your insurance company pay the costs together. The type of service and how much has been spent on your healthcare in a calendar year will determine how much you pay and how much the insurance company pays. Here’s how it works:

  • You pay the monthly premium, whether you use your insurance or not.
  • When you seek care and/or fill a prescription, you pay either a copay or the full cost of the service/prescription as outlined in your policy. For any services provided or prescriptions filled, you pay up to the amount of your deductible. You can help reduce your costs by using in-network providers and pharmacies, especially pharmacies with preferred cost sharing. You might find that a value-based care provider with multiple services in the same location—onsite lab work, behavioral healthcare and health coaching—could make it easier for you to navigate your healthcare.
  • Once you’ve met the deductible, your insurance starts to pay more of the cost for covered services. This is when coinsurance begins.
  • Once you’ve paid an amount equal to the out-of-pocket maximum between your copays, deductibles and coinsurance, your insurance company pays the remaining costs of in-network, covered medical bills until the end of the year or you switch insurance plans, whichever comes first.

Know what’s covered and what isn’t

Health plans typically cover routine and preventive services for things such as heart disease, diabetes, depression and cancer as well as shots for illnesses like the flu and pneumonia. Check your plan details to know which services are covered.

Plans differ regarding which services or prescriptions are not covered. You’ll want to review your specific plan details. In general, most insurance plans do not cover cosmetic procedures (nose job, tummy tuck, facelift, etc.). Many plans will not cover off-label uses for prescription drugs, meaning use for reasons other than what the drug was officially approved to treat by the U.S. Food and Drug Administration.1

Ways to save on medical expenses

Here are some tips to save more on your medical expenses:

Use in-network providers and pharmacies to avoid paying higher costs.

  • Fill your prescriptions at preferred cost-sharing pharmacies.
  • Confirm your medications are on your plan’s drug formulary. If not, ask your provider if there is an alternative covered drug you could switch to, if there is a generic you could use instead or if they can do a medication reconciliation to evaluate your prescriptions.
  • Compare prescription costs at your local pharmacies. Humana’s MyHumana app and website let you compare costs side by side at nearby pharmacies so you can fill your prescription at the best cost.
  • Know whether your plan requires referrals for specialists or not. Typically, Health Management Organization (HMO) plans require you to see your primary care provider before seeking care from a specialist. When you work with a value-based care provider, they serve as your medical home base and help coordinate your care.
  • Understand where to get care. Learn when to seek primary care, urgent care or emergency room here.
  • Use telehealth services to get care from home. Learn more about virtual visits here.
  • Take advantage of free and paid screenings and services to maintain your health and catch any concerns early on.

Looking for more ways to get more out of your health plan? Read part two in our series.

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1https://www.webmd.com/a-to-z-guides/features/off-label-drug-use-what-you-need-to-know

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*Humana VBC Report, 2020, digital.humana.com/VBCReport/