We define common health coverage terms on our websites and in our materials. Yet technical definitions may not always fully explain some concepts. 

This What Does It All Mean series will look more in depth at a few terms in each article. We will start not only with the beginning of the alphabet, but also terms that affect most members at one time or another.

Allowable Charge

The Official Definition

The maximum amount a health care plan will pay a doctor or hospital for a given service.

Let’s Break That Down

  • Different doctors charge different amounts for the same services.
  • Based on data about quality and cost, we allow a certain charge for that service.
  • Doctors in our networks sign a contract to only charge our members what we allow.
  • Doctors outside of our networks who charge more than we allow may bill the patient for the difference, if the member’s plan covers out-of-network visits. Note that not all plans cover out-of-network services.

Example

  • Doctor A charges $800 to treat a broken ankle.
  • We allow $650 for treatment of a broken ankle.
  • If Doctor A is out-of-network and you have a non-HMO plan that covers out-of-network care, Doctor A may bill you for $150 after we pay the allowable charge of $650. If Doctor A is in-network, you will not be billed for the amount over the allowable charge.

Annual Deductible

The Official Definition

The amount you are required to pay annually before reimbursement by your health care benefits plan begins. (The deductible requirement does not apply to preventive services.)

Let’s Break That Down

  • With any health coverage, you are responsible for some portion of expenses.
  • Most plans require you to pay a deductible amount out of your pocket before your plan starts paying claims.
  • Different plans have different deductibles.
    • Low deductible plans have higher monthly premiums. Members who go to the doctor a lot may prefer these plans.
    • High deductible plans have lower monthly premiums. Members who rarely see the doctor and need to watch their monthly budget may prefer these plans.

Example

  • You buy a plan with a $2,500 deductible.
  • You get some basic tests done for $500.
    • You pay that bill yourself.
    • Then you have $2,000 left to pay before we start paying claims.
  • Next you schedule your annual wellness exam, a preventive service.
    • You pay $0 for that visit because deductibles do not apply to preventive services.
  • Then you must go the hospital for a procedure.
    • The bill is $3,000.
    • You pay the first $2,000 of that bill, and then we pay the rest for any covered services, minus any coinsurance or copay you may owe.

 

Check back next month for a review of more key terms.