Written by: Jennifer Gorman (*Amsive Digital) | Reviewed by: Shelley Wyant | *MHP partners with Amsive Digital on news content
Understanding Your McLaren Health Plan: Key Terms and Definitions
If you find health insurance terminology confusing, you’re not alone: One in four insured adults say they have trouble understanding some common terms used by their health insurance plans. From coinsurance and out-of-pocket limits to prior authorization and HMOs, it can feel like health plans speak their own language.
Expanding your health insurance vocabulary can help you understand how your plan covers the services you need. This guide will explain the key health insurance terms that you might encounter when reviewing your current coverage or when shopping for new McLaren Health Plans.
What Does Coinsurance Mean in Health Insurance?
Coinsurance is a way that you and your plan share the cost of the health care services you receive. It’s the percentage of the cost of the service that you pay, like 20% or 40%, while your health plan is responsible for the remainder.
Coinsurance is due when you receive the medical service, and typically applies once you’ve met your plan’s deductible (the amount you have to pay out-of-pocket before the plan kicks in). You continue paying coinsurance until you reach your plan’s out-of-pocket maximum (the most you spend on care per plan year). Deductibles and out-of-pocket maximums are explained in detail further down the page.
Some plans don’t have coinsurance requirements. In plans that do, the coinsurance percentage may vary from one service to another. For example, a plan might charge a 20% coinsurance for an X-ray, and a 30% coinsurance for a specialist visit. Other plans charge the same coinsurance percentage for all services.
What Is a Summary of Benefits and Coverage?
A Summary of Benefits and Coverage (SBC) is a standardized document that insurers are required to provide with some types of private health insurance plans, including Marketplace plans. They’re designed to be an easy-to-understand summary that helps people compare health insurance options and choose a plan that best meets their needs.
The SBC summarizes the plan's key features, including what it covers and how much you’ll pay for covered services. It explains the potential costs of everyday medical events, like visiting a doctor’s office, having outpatient surgery, and getting prescription medications. It also answers important questions, like whether or not you need a referral to see a specialist.
On the SBC, you can also find important information about the plan’s limitations and exceptions. It will explain if you need approval from your health plan before certain services are covered (preauthorization). It will also list specific services that are generally not covered by the plan.
What Is a Certificate of Coverage?
Like a summary of benefits and coverage, a certificate of coverage aims to help you understand what your plan covers. It’s sometimes called a benefits booklet or evidence of coverage.
The certificate of coverage is much more detailed than the SBC. It explains how the plan works, what’s covered, and what’s not. It also explains the plan’s rules, like when a service is covered, when you can join the plan, and how to file an appeal.
What Is Out of Pocket Limit in Health Insurance?
An out-of-pocket limit, also known as an out-of-pocket maximum, is a cap on what you pay for covered health care services during the plan year. Once you reach your out-of-pocket limit, your plan will cover 100% of your qualified health expenses for the rest of the plan year.
Out-of-pocket limits are primarily designed to help protect against catastrophic medical expenses, such as unexpected illnesses or injuries. They also offer predictability to help you plan your finances.
Each plan sets its own out-of-pocket limit, so your limit will vary depending on your chosen plan. However, there are rules about how high the limit can be in different types of plans:
- Marketplace (Obamacare) plans: The out-of-pocket limit can’t be more than $9,450 for an individual in 2024. For a family plan, the maximum out-of-pocket limit is $18,900.
- Medicare Advantage plans: In 2024, the out-of-pocket limit for covered in-network services can’t be more than $8,850. Plans may set lower limits.
Typically, the amount you spend on deductibles, copayments, and coinsurance counts toward your out-of-pocket limit. Your premiums (the amount you pay each month for the policy itself) don’t count toward the out-of-pocket limit.
What Is a Copayment in Health Insurance?
A copayment is similar to coinsurance in that it’s an amount you’re responsible for paying when you get care. Unlike coinsurance, which is a percentage of the cost of the service, a copayment is a flat fee.
McLaren Health Plan copays can vary depending on the plan you choose and the service you receive. For example, if you enroll in a plan that charges a $75 copayment for an urgent care visit or a $25 copayment for a prescription, then that amount is due at the time you receive the service.
When you pay copays vary from plan to plan. Some plans charge copayments immediately, even if you haven’t met your deductible yet. Other plans don’t charge copayments until you’ve met your deductible. Check your plan’s Summary of Benefits and Coverage for details about how copays work.
Generally, copays don’t count toward your deductible, though that varies depending on the plan. However, the amounts you spend on copays do count toward your annual out-of-pocket spending limit.
What Is Cost Sharing in Health Insurance?
Health insurance plans don’t cover 100% of your medical bills; instead, you and your health plan split the costs of your care. Cost sharing is the portion of your covered health care expenses you must pay out of your pocket.
Cost sharing varies from one plan to another, but will typically include the following costs.
- Deductibles: The amount you need to pay out-of-pocket for covered health services before your plan kicks in.
- Coinsurance: A percentage of the cost (like 20%) of a covered service you pay when you receive care.
- Copayments: A flat fee (like $20) you pay when you receive a covered service.
Your monthly premiums for your health plan aren’t considered cost-sharing. That’s because you pay the premiums to keep your coverage active, regardless of whether you need care that month.
What Is a Deductible in Health Insurance?
A deductible is a set amount you need to spend on covered health expenses before your insurance plan starts to pay. For example, in a plan with a $3,000 deductible, you pay for the first $3,000 of covered services yourself.
Deductible amounts vary from one plan to another. Once you reach your deductible, your plan’s full benefits begin. Some plans have a $0 deductible, which means they start covering health services right away.
Under the Affordable Care Act, most health plans are required to cover certain preventive services even before you’ve met your deductible. The services are covered at no cost to you, with no copayment or coinsurance. Some examples of free preventive services include routine immunizations and blood pressure screening.
Plans may cover other services even if you haven’t met your deductible yet. That could include primary care visits, virtual visits, and prescription drugs. Check your plan documents for details.
In-Network Coverage vs. Out-of-Network Coverage
Most health insurance plans have a network of doctors, clinics, hospitals, and other providers who have agreed to participate in the plan. Some plans only offer coverage for providers in the network, unless it's an emergency. Others offer coverage for both in- and out-of-network providers.
Choosing in-network providers helps you maximize your benefits. For example, imagine your plan covers in-network primary care at $30 per visit but offers no coverage for out-of-network care. If you choose an in-network family doctor, the visit only costs $30. If you choose a family doctor that’s outside the network, you pay the entire cost out-of-pocket.
Some plans cover both in-network and out-of-network care, though you’ll typically pay less if you stay within the network. For example, imagine your plan covers in-network specialist visits with a $30 copay or out-of-network specialist visits for a 20% coinsurance. You can go outside the network if you want to, but the tradeoff is a higher bill.
To find providers who participate in McLaren Health plans, visit our provider directory.
What is Preauthorization?
Preauthorization, also known as prior authorization or prior approval, is a requirement that health plans have for certain services. It means that you or your provider must get approval from the health plan before you receive a covered service.
Health plans use preauthorization to ensure members receive care that’s both medically necessary and effective. The preauthorization process helps protect you from medical procedures that you might not actually need or that don’t work well in your situation. It also helps you feel confident that your insurance covers the services you receive.
The services, tests, or procedures that require prior authorization will vary from plan to plan. Some examples of services that often need prior approval include genetic testing, specialty drugs, and elective surgeries. If you don’t get prior approval before receiving the services, your plan may not cover your care.
What is an HMO (Health Maintenance Organization)?
A Health Maintenance Organization (HMO) is a type of health insurance organization that promotes wellness and preventive services through coordinated care. McLaren Health Plan is an HMO. HMOs are popular because they tend to be more affordable than other types of health plans.
With an HMO, you select a primary care provider who manages all your care and provides referrals to specialists, if necessary. For non-emergency care, the plan only covers in-network providers. If you need immediate medical attention, HMOs do cover out-of-network urgent care and emergency care.
Some HMO plans offer a point-of-service (POS) option that provides some coverage outside the network. For example, in an HMO-POS, you might pay a $30 copay for in-network specialist visits, or a 30% coinsurance if you see an out-of-network specialist.
Conclusion
Health insurance plans use specialized terms to describe the rules for getting care and how much you pay for your care. Learning common terms like coinsurance and preauthorization helps you be a more informed consumer and maximize the benefits of your plan. To learn even more health insurance terms, visit our McLaren Health Plan glossary.
What is McLaren Health Plan? We are a Michigan-based health maintenance organization providing health coverage to over 250,000 members. Our plan options include Medicare Advantage, Medicaid, individual plans, and more.
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