Understanding Health Insurance

You are responsible for your health care, so it helps to be informed. Below are commonly used health insurance terms; familiarize yourself with the definitions as they will help you better understand your coverage.

Allowed Amount - Blue Cross and Blue Shield calculates payment of your benefits based on the allowed charge (sometimes referred to as the allowed amount). This is the maximum amount on which payment is based for covered health care services. This may be called eligible expense, payment allowance, or negotiated rate. The allowed charge that Blue Cross Blue Shield uses depends on the type of health care provider that furnishes the covered service to you.

Balance Billing - There may be certain times when a health care provider will bill you for the difference between the provider’s charge and the allowed amount. This is called balance billing. A network provider cannot balance bill you for covered services. See allowed amount above for information about the allowed amount and the times when a health care provider may balance bill you.

Coinsurance - A form of cost-sharing requiring the member (i.e., the health plan participant) to pay a percentage of the cost for medical care, typically after a deductible has been reached. Coinsurance rates may differ between services received from an in-network physician/facility and those received from an out-of-network physician/facility.

Copayment - A cost-sharing arrangement in which the member pays the provider a specified flat dollar amount for a specific service and the benefit plan pays the balance.

Deductible - The fixed dollar amount a member must pay before the plan begins to pay benefits during the plan year. Plans may have both individual and family deductibles. Deductibles may differ between services received from an in-network physician/facility and those received from an out-of-network physician/facility.

Flexible Spending Account (FSA) - These tax-favored accounts allow an individual to set aside pre-tax dollars from their salary to reimburse themselves for certain qualified out-of-pocket expenses. Most aspects of the account are regulated by the Internal Revenue Service (IRS).

Health Savings Account (HSA) - A tax-favored, individually-owned account designed to help eligible individuals save for future qualified medical expenses on a tax-free basis. In order to contribute to an HSA, an individual must be covered by a qualified high-deductible health plan. An individual may not be enrolled in an FSA (see above), but is eligible to contribute to a Limited Purpose FSA. This account is similar to an FSA, but only reimburses for dental and vision expenses. Most aspects of the account are regulated by the Internal Revenue Service (IRS).

In-Network Providers - Physicians and facilities with whom the health plan has a contract or an agreement specifying discounted payment levels and other requirements, also called participating providers.

Out-of-Network Providers - Physicians and facilities who do not have a contract or an agreement with the health plan. When members obtain services from an out-of-network provider, they typically pay a higher percentage of the total costs. Some plan types—such as an HMO—do not provide any benefits for out-of-network providers. Also called non-participating providers.

Out-of-Pocket Maximum - The total amount a member is required to pay for services during the plan year. The out-of-pocket maximum generally includes the deductible, member-paid coinsurance, and copayments. It does not include monthly insurance premiums, which are deducted from pay. After a  member reaches the out-of-pocket maximum, the plan pays 100 percent of covered charges for the rest of that plan year. Plans may have both individual and family out-of-pocket maximums. The out-of-pocket maximum may differ between services received from an in-network physician/facility and those received from an out-of-network physician/facility.