Insurance 101

Health Insurance Basics

Health insurance protects you from financial losses due to illness or injury. In exchange for your payments, known as premiums, your insurance company promises to pay for some or all of your health care services.

Health Insurance Terms

• Allowed amount – The maximum dollar amount an insurance company will pay for a given procedure or service. If a provider has a contract with an insurance company, the provider and the insurance company negotiate an allowed amount for each service or procedure. If a provider has a contract with a health insurance company, then the health insurance company considers the provider in-network and will not charge more than the allowed amount for a given procedure.
• Authorization – Your signature and pertinent information recorded on the form NC State requires you to sign in order to release your medical information either to yourself or to a third party. You may fax, mail or hand-deliver this form.
• Benefits – Medical expenses that your health insurance policy covers.
• Claim – Your formal request to your insurance company for their reimbursement of your medical benefits.
• Co-Insurance – The percentage of covered expenses you share with your insurance company.
• Co-pay or Co-payment – The dollar amount you must pay toward the cost of a benefit. Usually paid at your doctor’s office visit.
• Deductible – The dollar amount of eligible expenses you must pay during each policy year before benefits are payable by the insurance company.
• Exclusions – Medical and other expenses that your health insurance policy does not cover.
• Existing Creditable Coverage – Health insurance coverage other than University-sponsored health insurance plan that covered you before you came to NC State. Usually defined quite broadly, existing creditable coverage includes almost all group and individual health plans, Medicare, Medicaid, CHAMPUS, the Indian Health Service, a state health benefits risk pool, Federal Employees Health Benefits Plan (FEHBP), the Peace Corps Act, or a public health plan. Most faith-based plans do not meet the definition of creditable coverage. However, students may still request a waiver using these plans, but it may be denied.
• FERPA – FERPA stands for the Family Educational Rights and Privacy Act. This United States federal law applies to any student who either attends or has attended NC State. The United States Department of Education provides a summary of FERPA.
• Hard waiver requirement – The University of North Carolina Board of Governors’ requirement that students who have existing creditable health insurance coverage must BOTH provide evidence of their health insurance coverage to their respective universities AND waive coverage under the University-sponsored health insurance plan.
• Health care provider – Any person or entity that provides health care services. A provider could be a doctor, a physician’s assistant, a counselor, a licensed nurse practitioner, a hospital, or a physical therapist, just to name a few. Health care providers are usually licensed by the state in which they practice medicine.
• HIPAA – HIPAA stands for the Health Insurance Portability and Accountability Act of 1996, a U.S. federal law. HIPAA protects patients’ rights regarding #personal health information (PHI). The United States Department of Health and Human Services offers a summary of HIPAA.
• In-network – A provider or health care facility that is part of a health insurance plan’s network. In general, insured individuals pay less money out-of-pocket when they see in-network providers.
• Invoking criteria – The three conditions that, if you meet them all, mean that the State-level Health Insurance Requirement applies to you.
• Medical record – Legal documentation of your visit to a health care provider, the treatment you received and your payment for services.
• Network – A group of doctors, hospitals, and other providers with whom a health insurance company contracts to provide discounted services to insured individuals.
• Out-of-network – Describes a provider or health care facility which is not part of a health plan’s network. In general insured individuals usually pay more money out-of-pocket when they see out-of-network providers.
• PHI – PHI stands for protected health information, or any confidential information that identifies you. PHI may be oral or recorded in any form or medium a health care provider, health plan, public health authority, employer, life insurer, school, university, or health care clearinghouse creates that relates to past, present or future payment for the provision of health care to an individual.
• Premium – Money you pay your insurance company in exchange for insurance benefits
• Provider – Any person or entity that provides health care services. A provider could be a doctor, a counselor, a hospital, or a physical therapist, just to name a few. Providers are usually licensed by the state in which they practice medicine.
• Underwriter – A company that guarantees financial support for a health insurance policy.
• Usual, Customary & Reasonable (UCR) – The average charge for a given procedure or service. Typically based on the provider’s local area. If a provider is out-of-network, then there is no contractual agreement on how much he or she can charge for a given procedure. To help manage cost, insurance companies will often process out-of-network claims based on UCR. If the provider’s actual charge exceeds UCR, then the patient could be responsible for the difference between the UCR and actual charge amounts.

Difference Between Co-Insurance and Deductible

If your health insurance company says a covered benefit “applies to deductible and co-insurance,” you must pay the amount of your deductible. Your deductible is a declining balance. You must pay the amount of your deductible before your insurance company begins to reimburse you for medical expenses.

After you have paid your deductible, then you only need to pay co-insurance, or a portion of your medical expenses. Your health insurance company pays the rest. Under most health insurance plans, there is a limit to the amount of co-insurance you have to pay. This is known as an “out-of-pocket maximum.” In general, you pay your deductible and co-insurance directly to the doctor’s office, not to the insurance company.

Co-Pays or Co-Payments

You pay a co-pay (or co-payment) at the doctor’s office. A co-payment is a fixed amount of money that you pay when the doctor delivers (or renders) services to you. Co-pays DO NOT count toward your deductible or co-insurance. Depending on your insurance policy and on the kind of doctor you see, the amount of your co-pay may not always be the same. For example, you might pay a $20 co-pay to see a Family Practitioner, but you might pay a $50 co-pay to see a specialist, such as an Oncologist. In general, if the doctor’s title has “ist” at the end, the doctor is a specialist and not a primary care doctor.

Example In-Network Claim Under UNC System Health Insurance Plan (Deductible Not Yet Met)

If you have not yet met your deductible, the example below illustrates how your claim might break down. The dollar amounts in this example are for illustrative purposes only. Actual dollar amounts will vary depending on the service(s) you receive and the provider(s) you see:

Claim Breakdown	Patient Responsibility	Insurance Co. Responsibility
Total amount of claim = $250	$20 co-pay	$0
Deductible maximum = $200	$200 deductible	$0
Co-insurance maximum = $2,000	$6 co-insurance (20% of remaining $30)	$24 co-insurance (80% of remaining $30)
Total	$226	$24

Explanation of Above Claim

Because you pay a co-pay at your doctor’s office visit, your co-pay is deducted first: $250-$20 = $230. Next, your deductible applies: $230-$200 = $30. Your co-insurance applies next. You are responsible for 20% of $30, or $6. Your insurance company is responsible for 80% of $30, or $24. Therefore your total responsibility is $20 + $200 + $6 or $226.

Example In-Network Claim Under UNC System Health Insurance Plan (Deductible Met)

If you have met your deductible, the example below illustrates how your claim might break down. The dollar amounts in this example are for illustrative purposes only. Actual dollar amounts will vary depending on the service(s) you receive and the provider(s) you see:

Claim Breakdown	Patient Responsibility	Insurance Co. Responsibility
Total amount of claim = $250	$20 co-pay	$0
Deductible maximum = $200	$0	$0
Co-insurance maximum = $2,000	$46 co-insurance (20% of remaining $230)	$184 co-insurance (80% of remaining $230)
Total	$66	$184

Explanation of Above Claim

Because you pay a co-pay at your doctor’s office visit, your co-pay is deducted first: $250-$20 = $230. Because you have met your deductible, your remaining balance is $230. Your co-insurance applies next. You are responsible for 20% of $230, or $46. Your insurance company is responsible for 80% of $230, or $184. Therefore your total responsibility is $20 + $46 or $66.

Example Out-of-Network Claim Under UNC System Health Insurance Plan (Deductible Not Yet Met)

If you have not yet met your deductible, the example below illustrates how your claim might break down. The dollar amounts in this example are for illustrative purposes only. Actual dollar amounts will vary depending on the service(s) you receive and the provider(s) you see:

Claim Breakdown	Patient Responsibility	Insurance Co. Responsibility
Total amount of claim = $250	$20 co-pay	$0
Deductible maximum = $200	$200	$0
Co-insurance maximum = $4,000	$9 co-insurance (30% of remaining $30)	$21 co-insurance (70% of remaining $30)
Total	$299 (may be greater if provider’s charges are more than the health insurance company allows)	$21

Explanation of Above Claim

Because you pay a co-pay at your doctor’s office visit, your co-pay is deducted first: $250-$20 = $230. Next, your deductible applies: $230-$200 = $30. Your co-insurance applies next. You are responsible for 30% of $30, or $9. Your insurance company is responsible for 70% of $30, or $21. Therefore your total responsibility is $20 + $200 + $9 or $229, but you may owe more money if the doctor charges more for a service than the insurance company allows.

Example Out-of-Network Claim Under University-sponsored Health Insurance Plan (Deductible Met)

If you have met your deductible, the example below illustrates how your claim might break down. The dollar amounts in this example are for illustrative purposes only. Actual dollar amounts will vary depending on the service(s) you receive and the provider(s) you see:

Claim Breakdown	Patient Responsibility	Insurance Co. Responsibility
Total amount of claim = $250	$20 co-pay	$0
Deductible maximum = $200	$0	$0
Co-insurance maximum = $4,000	$69 co-insurance (30% of remaining $230)	$161 co-insurance (70% of remaining $230)
Total	$89 (may be greater if provider’s charges are more than the health insurance company allows)	$161

Explanation of Above Claim

Because you pay a co-pay at your doctor’s office visit, your co-pay is deducted first: $250-$20 = $230. Because you have met your deductible, your remaining balance is $230. Your co-insurance applies next. You are responsible for 30% of $230, or $69. Your insurance company is responsible for 70% of $230, or $161. Therefore your total responsibility is $20 + $69 or $89. Please contact the Student Health Insurance Office if you have any questions at: student-health-insurance@ncsu.edu or 919-515-2563.