California Medical Health Insurance

The vocabulary used to describe health care insurance plans can confuse even the savviest consumer. It practically takes an advanced degree in exotic languages to decipher today’s health insurance terminology. That’s why the health care insurance experts at San Jose Health Insurance put together this lexicon to help you better understand health care insurance terms and make better health insurance decisions.

Annual Deductible: The amount of money a consumer must pay out of his or her pocket per year before a California medical health insurance plan starts to pay medical expenses. The annual deductible can vary from one company to another, and from one plan to another.

Coinsurance: The amount of money—often expressed as a percentage of the total medical bill—that a health insurance policyholder must pay. The remainder of the bill is paid by the health care insurance plan.

Co-payment: A common component of HMO and PPO health care insurance plans, a co-payment, or “co-pay” for short, is the flat fee that the health care insurance plan member is required to pay for a medical treatment, test, or prescription medication. The health care insurance plan member normally makes the co-payment when he or she receives the medical service or buys the prescription drug. Co-payments usually are relatively small, but they do add up. For example, a health care insurance plan member might pay $15 for a doctor’s office visit or prescription drug.

Covered medical costs: The healthcare costs paid for by the health insurance plan.

Flexible spending account (FSA): Also known as a flexible spending arrangement, an FSA is a tax-advantaged savings account set up through an employer that that allows the employee to set aside funds to pay for qualified medical expenses. Funds deducted from an employee’s pay are not subject to payroll taxes such as federal and state income tax and Federal Insurance Contributions Act (FICA) tax. Sheltering contributions can nearly double the employee’s buying power, since combined federal and state payroll taxes approach 50% of each dollar earned. Funds in an FSA account must be used within the plan year, or else they will be lost.

Group health care insurance: Health insurance purchased by a group of individuals. Most group health care insurance plans are offered by businesses to attract and keep quality employees.

Health Maintenance Organization (HMO): An organization that provides medical care to consumers through a network of health care providers, such as doctors, surgeons, nurses, laboratories, and clinics. The health care professionals in the HMO network agree by contract to screen, diagnose, and treat patients according to guidelines set forth by the HMO. People who enroll in an HMO plan must obtain their care from medical providers within the HMO network, or else their medical bills will not be paid by the California medical health insurance plan.

Health savings account (HSA): A tax advantaged savings account that allows a consumer to set aside funds to be used for medical expenses. Similar to an FSA, an HSA can hold earnings before payroll taxes are deducted, nearly doubling the purchasing power of HSA funds. Unlike an FSA, an HSA does not carry the requirement that the funds be used within the plan year. Funds in an HSA roll over from one year to the next. Before age 65, the HSA account holder is required to use the funds to pay medical costs. At age of 65, the account holder can withdraw the funds for any purpose. To be eligible for an HSA, the consumer must be enrolled in a qualified high deductible health insurance plan (HDHP).

Indemnity health care insurance: Often known as a fee-for-service health insurance plan, an indemnity health care insurance plan pays a percentage of medical expenses—often 80 percent. The policy holder must pay the remaining percentage of the medical bills. In addition, the health care insurance company sets the rates for various procedures and treatments, based on a survey of comparable fees. The health insurance provider pays only a percentage of these “usual and customary” rates. If a healthcare provider charges more than the established rates, the policyholder is responsible for paying the difference.

Maximum out-of-pocket expense: The total sum a health insurance policyholder must to pay toward medical expenses before his or her health care insurance company assumes full responsibility for payment. Out of pocket expenses include a deductibles, co-payments, and coinsurance.

Medical savings account (MSA): Similar to an FSA or HSA, an MSA is designed to allow individuals to use pre-tax dollars to pay for medical expenses that not covered by a health care insurance plan. MSAs are specifically for self-employed individuals and the employees of small businesses.

Medicare: A United States government program that extends health insurance to qualified individuals, primarily those with disabilities and those who are aged 65 and older. Partially funded with payroll tax dollars, Medicare consists of two health care insurance plans: Part A and Part B. Fully funded with taxpayer dollars, Medicare Part A pays for the policyholder’s hospitalization, including stays in skilled nursing facilities, critical care hospitals, and hospices. It also pays for some kinds of home care. The Medicare recipient is not required to pay a premium for Medicare Part A, but he or she does pay a premium for Medicare Part B, which covers medical services such as doctor’s office visits, physical therapy, outpatient care, and home care.

Portability: The flexibility to change health care insurance plans without forfeiting coverage because of preexisting conditions.

Point of service health care insurance plan (POS): A managed care California medical health insurance plan that includes elements of both HMO and PPO plans. Like an HMO plan, a POS plan requires the policyholder to choose one physician to oversee care. This physician is the “point of service” care giver. As with a PPO, the POS plan member can seek medical attention outside the managed care network, but he or she will pay a greater portion of the bill. The policyholder is also responsible for managing the California medical health insurance paperwork, submitting bills, keeping records, and saving receipts.

Preferred Provider Organization (PPO): A managed care organization similar to an HMO or POS, a PPO provides health insurance coverage through a network of preferred health care providers who have agreed by contract to follow certain guidelines for diagnosing and treating medical conditions. Like a POS, a PPO will pay for care provided by medical professionals outside the network of preferred providers. As with a POS, the share paid by the PPO for care outside the network is smaller than the share paid for services provided inside the network.

Pre-existing condition: A medical condition that was diagnosed before enrolling in a new health care insurance plan. In California, health care insurance companies can delay or even deny medical coverage to a person who has been diagnosed or treated for preexisting conditions. Under California law, people enrolling in a group health care insurance plan cannot have coverage denied or delayed because they have a preexisting condition.

Supplemental health care insurance: A California medical health insurance policy that pays those medical expenses not covered by a primary health care insurance policy.