Blog Editor’s Note: This is the first post in our new “Financial Navigation 101” series. Financial navigators are the core users of our solutions—and key partners in our quest to remove financial barriers to care. Our goal is to highlight topics and offer recommendations that will empower navigators in their vital work on behalf of patients and families.
It’s no secret that healthcare in the United States has become increasingly unaffordable, placing a tremendous financial strain on patients, families, and the entire health system. According to recent research, 100 million Americans are saddled with medical debt. And at least one in five adults skipped needed care in the past year due to costs. Even for those who have insurance, patients shoulder a huge financial responsibility. In 2017 alone, patients paid $47 billion out-of-pocket for prescription drugs.
What’s more, healthcare coverage is not only expensive, but confusing. In a recent survey, over 75% of respondents couldn’t define “coinsurance,” and half incorrectly defined “copayment” and “deductible.”
Financial navigators can play a crucial role in clearing up confusion and ensuring that patients understand key terminology when it comes to their medical bills and coverage. By improving health literacy, navigators can empower patients to take an active role in their own finances and maximize opportunities to save costs.
Below are 15 commonly misunderstood terms, along with glossary definitions adapted from Healthcare.gov:
- Affordable Care Act: The comprehensive healthcare reform law enacted in March 2010, also known as “ACA” or “Obamacare.” The law requires most American citizens and legal residents to have health insurance. The ACA created state-based American Health Benefit Exchanges through which individuals can purchase coverage, as well as separate Exchanges through which small businesses can purchase coverage. It also expanded Medicaid to nearly all adults with incomes up to 138% of the federal poverty level, among other provisions.
- Allowed Amount: The maximum amount a health insurance plan will pay for a covered healthcare service. If a provider charges more than the patient’s allowed amount, the patient may be responsible for paying the difference.
- Annual Limit: A cap on the benefits an insurance company will pay in a year while a patient is enrolled in a particular health plan. These caps are sometimes placed on specific services such as prescriptions or hospitalizations. Annual limits may be placed on the dollar amount of covered services or on the number of visits that will be covered for a particular service. After an annual limit is reached, the patient must pay all associated healthcare costs for the rest of the year.
- Balance Billing: When a provider bills a patient for the difference between the provider’s charge and the insurance plan’s allowed amount. For example, if the provider’s charge is $200 and the allowed amount is $150, the provider may charge the patient for the remaining $50.
- Coinsurance: The percentage of costs of a covered service a patient pays, after they have paid their deductible. For instance, if a patient’s coinsurance is 20% and their insurance plan’s allowed amount for a doctor’s office visit is $100, the patient would owe $20 for the visit—after meeting the deductible.
- Copayment: Also known as a “copay,” this is a fixed amount a patient pays for a covered service, after paying their deductible. For example, if a patient’s copay is $45 for a doctor’s office visit, and they’ve met their deductible, the patient will pay $45, usually at the time of the visit.
- Cost Sharing: The share of costs covered by insurance that a patient pays out-of-pocket. This generally includes deductibles, coinsurance, and copays, or similar charges. It does not include premiums or balance billing amounts for non-network providers.
- Claim: A request for payment that the patient or provider submits to the patient’s health insurer.
- Deductible: The amount a patient pays for covered services before their insurance plan starts to pay. With a $2,000 deductible, the patient pays the first $2,000 of covered services—and then they typically pay only a copay or coinsurance, while the insurance company covers the rest.
- Exchange: This is another term for the Health Insurance Marketplace, a service available in each state through which individuals, families, and small businesses can shop for and enroll in Affordable Care Act-sponsored health plans.
- Network: The facilities, providers, and suppliers a patient’s health insurer or plan has contracted with to provide healthcare services. When a doctor, hospital, or other provider accepts a patient’s insurance plan, they are considered “in-network.”
- Marketplace: Short for the Health Insurance Marketplace, this is a shopping and enrollment service for insurance plans created by the Affordable Care Act.
- Out-of-Pocket Costs: Expenses for medical care that are not reimbursed by a patient’s insurance. These costs include deductibles, coinsurance, and copays for covered services, plus all costs for services that are not covered.
- Out-of-Pocket Limit: Also known as an “out-of-pocket maximum,” this amount is the most a patient would have to pay for covered services in a plan year. After this limit has been reached, the health insurer pays 100% of the costs for covered benefits.
- Premium: The amount a patient pays for health insurance every month. In addition to their premiums, insured patients usually pay other healthcare costs, including deductibles, copays, and coinsurance.
Studies have shown that health literacy is associated with improved patient outcomes as well as reduced healthcare costs. By promoting education around these and other terms, navigators can help patients gain the knowledge to decipher their medical bills, optimize their healthcare coverage, and better afford the treatment they need.