Health insurance—it’s something we all benefit from, but rarely understand.
Unfortunately, taking control of your coverage isn’t as straightforward as just signing up and going on with your day. There are several things you need to know in order to make an informed decision about your healthcare plan.
If you’re confused by health insurance, you’re not alone. Both Individual and Medicare plans can be difficult to understand, not to mention the health insurance terms that go along with them.
Even if you’re well versed in the differences between the health insurance plans available to you, industry jargon can muddy the waters and keep you from feeling comfortable with your choices.
Read on as we explain some of the common health insurance terms you may encounter when signing up for your insurance plan.
Health Insurance Terms To Know
If you’ve ever purchased a home, you already know how helpful it is to understand the terms and jargon unique to real estate.
Knowing the definitions of things like homestead exemption, escrow, and interest rate> helps you fully comprehend what you’re signing up for and feel more comfortable with the entire process. Buying health insurance is no different.
Here are some of the most common health insurance terms you will encounter—whether you’re selecting a Group plan or signing up for Medicare.
Premium
A health insurance premium is what you pay monthly to a health insurance company. Occasionally your premium may be due once a year, or quarterly.
If you are offered health insurance through your employer, you usually opt to have your premium taken directly out of your paycheck. It makes it easier to keep track of your payments and you can be sure that your coverage won’t lapse since you won’t be late.
An added bonus of having health insurance through your employer is that they will typically pay for a portion of your coverage. Your premium stays the same according to what you signed up for, but your plan would be more expensive if your employer did not cover some of the cost. Unfortunately, the cost for others in your family is usually not subsidized by your company so their costs are higher and should be compared to what is available in the open market.
Deductible
Deductibles can be confusing, but they are crucial to understanding your healthcare coverage.
For example, if your plan has a $1,000 deductible, this means that your insurance will kick in after you have already paid $1,000 in medical bills for that policy period. You may also see a number that looks like a fraction, such as 80/20. This means that (after you meet your deductible), your insurance will cover 80% of your bills, while you are responsible for the remaining 20%.
Keep in mind, some preventative services are covered at 100% regardless of whether your deductible has been met. Other services may require a small fee. Things like well visits, routine pap smears, or other types of routine care generally will not cost you out-of-pocket.
Copayment (Copay)
A copayment is the amount that you will pay when you go into a doctor’s office. (In most cases, your copay doesn’t count towards your deductible.)
Your copay will vary for general care and specialists, with the latter being a little more expensive.
Health Savings Account (HSA) and Flexible Spending Account (FSA)
Health savings accounts and flexible spending accounts are pre-tax accounts that you can use to pay for common medical costs such as copays, prescriptions, and deductibles as well as medical equipment and over-the-counter drugs. (They cannot be used to pay for your monthly premium.)
An HSA allows you to contribute up to $3,350 (or more, if you’re over the age of 55) of pre-taxed money to be used on healthcare expenses. Ultimately, your contributions can lower your tax bill and will help you pay for fees that would otherwise come out of your pocket.
One huge perk of a HSA is that it’s not a “use it or lose it” type of account. In other words, any funds that are not used will rollover to the following year.
Similarly, an FSA is a pre-taxed account with a maximum of $2,850 a year. The difference between an HSA and FSA is the funds in your FSA must be used within the plan year or you will lose it. There are carry-over options, but an employer is not required to offer one.
Out-of-Pocket Maximum
Luckily for health insurance plans, there is an out-of-pocket maximum. This is a set amount. This is the maximum amount you would pay for in-network services in any given year. Think of it as your wall of protection if everything goes wrong with your health.
For example, if your out-of-pocket maximum is $7,000 and a hospital bill is $12,000, you will pay the $7,000 and insurance will take care of the rest.
Once that maximum is met, your insurance pays for your care through the end of the year. Remember that you still have to pay your premium (monthly) payment.
Claim
A claim is the service that your doctor submits on your behalf to your insurance company.
Let’s say that you needed an X-ray. Your doctor would perform your X-ray and then submit the cost to your insurance. Depending on how much you’ve put towards your deductible or out-of-pocket maximum, you may be responsible for some of the claim.
If applicable, you will receive a bill from the doctor for the remainder of the cost.
Open Enrollment
Open enrollment is the brief period of time each year when you can change your insurance plans. Typically, once open enrollment is closed, you can not change or alter your plan.
In most cases, if you’ve had a life-changing event (birth or adoption of a child, marriage, death of someone) then you are able to change your insurance outside of open enrollment.
Primary Care Physician (PCP)
This is the doctor that you choose to directly oversee your care.
S/he will be your primary touch point and who you receive your daily prescriptions from as well as your general care. This type of doctor is also the one who will refer you to specialists if need be.
High Deductible Health Plan
A high deductible health plan means that your deductible is higher than average. The exchange is that your premium will be a bit lower and you’ll qualify for an HSA account.
In-Network vs. Out-of-Network
In-network means that the physician or facility you’re seeing is within the network of doctors that have agreed to provide discounted rates to members of that insurance plan.
If a provider is out-of-network, they can charge whatever they’d like—which usually means your costs will be higher.
It’s worth mentioning that out-of-network doctors aren’t “bad”, just that they typically do not offer you the same discount as an in-network provider.
Conclusion
When purchasing a home, you have a realtor to walk you through any real estate terms you don’t understand. But who will do that when buying health insurance?
At Florida Independent Insurance Consultants, our job is to help you navigate through the confusing world of health insurance so you can find the coverage that fits your needs as well as your budget.
If you have any questions in regards to health insurance plans, what may be best for your budget, and best for your family, don’t hesitate to reach out. The best part about utilizing our services is that it’s free to you, and we’ll help you understand the options and find the best plan for you. Call today for advice on everything from life insurance to long-term health care.