2 Commonly Misunderstood Health Insurance Terms

There are many health insurance terms that are used in association with benefits tied to a plan of health insurance. Coinsurance requirements, stop-loss limits, maximum lifetime benefits and others are found in policy documents and used to describe how benefits are used by insured individuals. 2 commonly misunderstood health insurance terms are deductible and pre-existing condition.

Deductible

A deductible is the “first dollar” paid before health insurance benefits are paid by an insurance company. Often times people with health insurance view the deductible as part of the benefit that they are receiving when they are sick or need medical treatment. A deductible is the amount of out-of-pocket expense that is first paid by the insured before benefits are payable by the insurance company. After the deductible has been paid, the insured and the insurance company often share in the cost of the expense, which is the coinsurance requirement.

Pre-Existing Condition

A pre-existing condition is typically defined as one that a person has or should of known that they had and sought medical advice or assistance for prior to joining a plan for health insurance.  The period of time in which the person should have been aware of their pre-existing condition is usually about 6 months.  A pre-existing condition can be the basis for denial of benefits in an individual health insurance plan. This is because individual heath is medically underwritten.  In an employer-sponsored group insurance plan, a pre-existing condition can only be subject to a probationary period of no longer than 12 months.

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