Do you know your health insurance terms?
Health insurance is an important part of our lives to keep up healthy and safe. But if you’re like a lot of people, all those terms might as well be in another language!
Don’t worry, we’re here to help. Read on for 10 important health insurance terms you should know about.
The deductible is what you must pay for medical services before your insurance kicks in. For example, you might have an annual deductible of $1,000. This means your plan won’t pay anything until you’ve spent over $1,000 on health services it covers.
Different plans include different services, medications, and devices in their deductibles. Some preventive services could have coverage before you spend the deductible amount. Make sure you check your plan to find out exactly what your policy says on this matter.
- High Deductible Health Plan (HDHP)
If you’re on an HDHP, you’re paying a higher deductible than most others. Your insurance also won’t cover much until you’ve paid the full deductible.
In exchange, the premium isn’t as high. You’ll likely qualify for a health savings account. This lets you put aside pre-tax funds to cover those medical bills.
They can save money for younger people, and people who don’t have many medical needs. But if you pile up a bunch of medical bills, HDHPs can be expensive.
- Health Savings Account (HSA)
An HSA lets you put up to $3,350 ($4,350 if you’re 55+) in pre-tax dollars. This is for use on any medical expenses. These contributions reduce your tax bill. It will be tax-free when withdrawn for medical expenses.
HSAs differ from flexible spending accounts (FSAs). FSAs work in connection with your job to let you put pre-tax money away for out-of-pocket medical bills. HSA funds will stay in your account until you need them. You must use FSA funds before the plan year is over, as they won’t rollover.
Premiums are what you pay the insurance company for having active insurance coverage. Most people will pay monthly, though some plans offer quarterly or yearly payment.
For insurance through work, your employer likely covers some of the monthly premium, so if you’ve recently been laid off, you might find premiums are higher than you expect. For plans bought on the Affordable Care Act marketplace, there’s help. You can get tax credits to offset the cost of these premiums.
Co-pay is the set amount you pay for using routine services. For example, some plans will charge you a co-pay for visiting your primary care doctor. Or you might have co-pay chargers for visiting the ER.
In most cases, this is the same amount, regardless of any difference in drug costs. For example, you might need to pay $20 for a doctor visit or $100 for an ER trip. For generic drugs, you may have a co-pay of $15, or $30 for brand-names.
If your plan is charging co-pays, you’ll pay much less for the services straight away. Long before you hit your deductible.
Plans with a deductible will have coinsurance. It’s the percentage that you have to cover for medical treatment once you meet the deductible. To calculate this, you need to know the total you’ll have to pay for the medical service.
Once you know the total, you can take the percent amount you’re responsible for to work out how much you need to pay. For example, say your coinsurance is 20% and your treatment costs $1,000. That’s $200 you have to pay.
Medicare Part B only pays 80% of your bills, so if that is your only coverage, you may still face some large out of pocket expenses. To plug this gap you can purchase additional insurance. Check out this excellent resource for more detail when trying to understand Medigap insurance benefits.
- Out-of-Pocket Maximum
This is the highest dollar amount a person must pay out of pocket each year. Until you meet this figure, the person must share the cost of covered expenses.
Once the amount exceeds that top figure, the insurer will cover all covered expenses. Often this will be up to a lifetime maximum amount which is the total cap on the policy over its lifetime.
- Health Maintenance Organization (HMO)
HMO plans might give the least amount of term flexibility on who you can choose as a healthcare provider. You need to see a provider who works for the HMO, or contracts for them.
If you don’t, then you will likely have to foot the bill for the entire medical service costs. The only exception is in an emergency. If you move to a different city, you might also lose your cover.
- Point of Service (POS)
When on a POS plan, you can’t get care from a specialist unless your main doctor refers you. Your expenses will also be higher if you seek help from an “out-of-network” doctor.
There is a bright side, though. The list of doctors you can choose to see is likely a lot longer than the list on an HMO plan.
- Preferred Provider Organization (PPO)
With a PPO plan, your insurer might pay out a part of the bill if you see a healthcare provider outside your network. You won’t need to get a referral from your primary care doctor.
I could end up costing you more though. If you want to keep costs low, you want to stick to in-network doctors and professionals.
Health Insurance Terms Made Easy
So there you have it! With these 10 health insurance terms, you’ll get a better understanding of your plan.
Don’t let yourself get bogged down with all the technical jargon. Take some time out to read through your plan and make sure you know what you signed up for. Or, if you’re getting a new plan, make sure you know what it’s about before signing up.
Know what your plan covers, and what your responsibilities are. This will prevent any confusion or potential financial disaster down the line.
If you found this article useful, be sure to check out our other lifestyle posts.