Health insurance is commonplace among Americans, but how many people understand their coverage? The answer, unfortunately, is probably not many.
Every year, Americans have a choice about what type of health coverage they wish to purchase during open enrollment. However, selecting which plan is best for you can be challenging if you don’t understand essential terms. To help, read on for an explanation of 10 health insurance terms you need to know.
1. High Deductible Health Plan
What used to be a rarity in the industry has become commonplace. It’s known as a high deductible health plan or HDHP. With these plans, covered individuals must pay a larger share of their healthcare costs in exchange for lower monthly premiums.
These plans were first introduced as alternative ways to save money on monthly premiums. Today, though, many people don’t have a choice but to get an HDHP, whether it’s from their employer or the healthcare marketplace.
Generally speaking, if given a choice, you could benefit from cost savings associated with an HDHP if you’re generally healthy and don’t anticipate high healthcare costs for the year.
A deductible is the key part of an HDHP. This is the amount the insured must pay out of their pocket before their health plan provides coverage. For example, if your deductible is $2,000, you must pay the first $2,000 of medical bills you incur until your health plan year starts providing coverage. After that point, how much you pay for services depends on your specific plan.
Once you’ve met your annual deductible, coinsurance kicks in. You must pay this percentage for medical bills after meeting your deductible. For example, if your coinsurance is 25%, you’ll be responsible for 25% of your medical bills after meeting your deductible. So, if you receive a bill for $1,000, you will be responsible for $250, while your insurance company will pay the remaining $750.
4. Out-of-Pocket Maximum
The third component of an HDHP is called the Out of Pocket Maximum. This is the maximum amount you will pay out of pocket for medical bills in a given year. Once you’ve met that amount, your insurance company will be responsible for the rest.
So, for example, if your out-of-pocket maximum is $5,000, once you’ve paid that—including your deductible and coinsurance amount—then you won’t be required to pay any more toward your medical bills for the rest of the year.
The premium is the amount that you pay for your health insurance plan. Most people will pay their premiums monthly or biweekly. While health insurance coverage has become very expensive in recent years, there are some ways to offset these costs through tax credits if you’ve purchased a plan through the healthcare marketplace.
6. Health Savings Account
With so many people responsible for a significant percentage of their medical bills, the government has made specific accounts available to help them offset these costs. One is called a health savings account, or HSA.
People can save money in these accounts on a pre-tax basis to help them pay for their medical bills and lower their tax burden at the same time. You must have an HDHP to get an HSA.
A co-payment is the amount you must pay every time you visit a doctor or specialist. For instance, this might be $50 for a visit to a primary care physician and $75 for a specialist. You must pay the co-payment at your healthcare provider’s office during your visit. You’ll then be billed for the balance of the visit later.
An HMO, or Health Maintenance Organization, is a type of health care plan that used to be more commonplace. HMOs provide lower costs but also less flexibility and choice. With an HMO, you must work only with providers in your network, and this network is typically smaller than others.
A Point of Service plan (POS) requires individuals to receive referrals from their primary care doctors for specialty care. If you go around this, you’ll pay higher costs for out-of-network care. A POS is an alternative to an HMO that provides more choices.
A Preferred Provider Organization (PPO) provides some coverage if you go to a provider outside the network. It also allows you to go to whatever medical provider you want without a referral. In return for this flexibility, the premiums are generally higher.
Beckham Insurance Group Has You Covered
We hope you enjoyed this blog on ten essential health insurance terms! Understanding these terms can help empower your employees by keeping them as informed as possible when selecting a health plan.
If you are an employer searching for help in Georgia or South Carolina, reach out to a member of our team at Beckham Insurance Group. Located in Charleston, SC, and St. Simons, GA, we proudly offer complete access to all group health and supplemental insurance markets and products.
Creating a competitive—and compliant—benefits package that meets the needs of your business couldn’t be easier. To get started, contact us today for a free quote. We can’t wait to help you create a healthier and happier workplace!