"I went to my employee benefits meeting on health insurance, and they kept using words I didn't know, like HSA, coinsurance, and PPO."
"I finally went to the HealthCare.Gov site to look for health insurance. Some of the policies are a lot cheaper than others, but I don't really know why."
Sound familiar? It does to me. Health insurance can be daunting. It involves words and acronyms that are unfamiliar, and deciphering which plan is best for you can be a real chore. You're not alone in finding this confusing. Let's start with some common terms in the health insurance world.
Health Insurance - Key Terms
The money you pay (often monthly) in order to have health insurance. You pay this whether or not you go to the doctor or have other medical bills. Paying your premium keeps you insured.
The money you pay first in the event of a covered medical expense. This is what you owe before your health insurance kicks in. So, if you have a $1,000 deductible, you will have to pay the first $1,000 of your health insurance costs before your insurance company pays. The higher the deductible, the lower the premium (all other things being equal).
A percentage of medical costs you are responsible for paying after you meet the deductible. For instance, if you have 30% coinsurance and $1,000 in medical costs, you'll be responsible for $300 of the costs, assuming you already met your deductible. The higher the coinsurance amount, the lower the premium (all other things being equal).
Similar to coinsurance, but a co-pay usually refers to a dollar amount rather than a percentage. For instance, you might have a $30 co-pay when you visit the doctor.
The total amount (excluding premiums) you would pay in covered medical costs for the year before your health insurance company starts paying 100%. If your out-of-pocket maximum is $10,000, then once you've paid $10,000 out-of-pocket, your insurance company pays 100% of covered costs. Think of this as the "worst-case scenario; I could end up paying this much" number. The lower the out-of-pocket max, the higher the premiums.
Services that are covered 100% with in-network providers. Things like vaccines, some types of birth control, and annual checkups.
Health Savings Account (HSA)
A tax-advantaged savings account intended to help pay for medical costs by giving people with high-deductible health plans tax benefits for money used on qualified medical expenses. If your health insurance offers an HSA, it's worth looking into it as the benefits can be great.
Health insurance companies manage costs by negotiating prices with doctors and hospitals. If you see an 'in-network' doctor, it means you are using someone with which your health insurance company has negotiated a discount. This is very important for many types of health insurance plans and will often result in you paying less for care.
The opposite of in-network, if a doctor or hospital is outside of your network, your health insurance company has not negotiated with them for better rates. Sometimes this means you will pay more for the care, and sometimes it means the care won't be covered by your health insurance company at all. It is very important to know how your plan works and whether or not you're using an in-network facility before you seek care (unless of course it's an emergency).
The Bottom Line
You're not alone if you find health insurance confusing. Don't hesitate to reach out to someone you trust or a local agent if you have questions. The odds are very good you'll eventually end up needing medical care, and when you do, you'll be very glad you went through the hassle of understanding your health insurance policy and making sure it's the right one for you.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. For advice specific to your situation, please contact us.