We all know how confusing and complex benefits and healthcare terms can be- the difference between deductible and co-insurance is a common question for many and there are plenty of others like it. When you are comfortable and confident in how your plan works, you can make an informed decision on HOW to use and take advantage of your benefits!
We have created a list and explanation of the most common terms to help you understand and better utilize your health benefits:
- Co-payment: An amount you pay as your share of the cost for a medical service or item, like a doctor’s visit. Co-pays are most common for emergency room, urgent care and prescription drugs. In some cases, you may be responsible for paying a co‐pay as well as a percentage of the remaining charges.
- Co-insurance: Your share of the cost for a covered health care service, usually calculated as a percentage (like 20%) of the allowed amount for the service. For example, if your plan has a 30% co-insurance rate, the carrier will pay 70% of the allowed amount while you pay the balance.
- Deductible: The amount you owe for covered health care services before your health insurance or plan begins to pay. For example, many plans require an individual to pay $1,000 in cumulative deductibles before they begin paying out.
- Dependent coverage: Health insurance coverage extended to the spouse and unmarried children up to age 26 who are totally or substantially reliant on their parents for support, thereby defined as “dependent children”.
- Explanation of Benefits (EOB): Every time you use your health insurance, your health plan sends you a record called an “explanation of benefits” (EOB) or “member health statement” that explains how much you owe. The EOB also shows the total cost of care, how much your plan paid and the amount an in-¬network doctor or other healthcare professional is allowed to charge a plan member (called the “allowed amount”).
- In-Network Provider: A provider who has a contract with your health insurer or plan to provide services to you at a discount. In-Network Providers have contracted with the insurance carrier to accept reduced fees for services provided to plan members. Using in-network providers will cost you less money. When contacting an In-Network Provider, remember to ask, “are you a contracted provider with my plan?” Never ask if a provider “takes” your insurance, as they will all take it. The key phrase is contracted.
- Open Enrollment: A period during which a health insurance company is required to accept applicants without regard to health history.
- Out-of-Network Provider: A provider who doesn’t have a contract with your health insurer or plan to provide services to you at a pre-negotiated discount. You’ll pay more to see an out-of-network provider, sometimes referred to as an out-of-network provider.
- Out-of-Pocket Maximum: The limit or most you’ll pay out of your own pocket for services during your insurance plan period (usually one year).
- Premium: The amount you pay for your health insurance or plan each month.
- Qualifying Life Event (QLE): A change in your life that allows you to make changes to your benefits’ coverage outside of the annual open enrollment period. These changes include a change in marital status (marriage, divorce, death of spouse), a change in the number of eligible children (birth, adoption, death, aging-out), and a change in a family member’s benefits eligibility under another plan (losing a job, Medicare or Medicaid eligibility, etc.)
In addition to understanding these common terms, there are other ways to utilize your benefits, save money and make an informed decision based on your specific needs.
- Flexible Spending Account (FSA): Funded through pre-tax payroll deductions, an FSA is a cost-savings tool that allows you to pay for qualified healthcare-related expenses with pre-tax dollars. Funds deposited in an FSA must be spent in the same year in which they are set aside, or they are forfeited. This rule is often referred to as “use it or lose it”.
- Health Reimbursement Account (HRA): An employer-funded savings plan that will reimburse you for out-of-pocket medical expenses. Unlike an FSA, however, you don’t “use it or lose it” – unused balances will roll over and accumulate over time, though the account cannot be “cashed-out.”
- Health Savings Account (HSA): A savings product that serves as a substitute for traditional health insurance. HSAs enable you to pay for current health costs. They also allow you to save for future medical and retiree health costs tax-free. Unlike an FSA, however, you don’t “use it or lose it” – unused balances will roll over and accumulate over time and can be “cashed-out.”
Understanding all of the terms and acronyms can feel like learning a new language, so it’s helpful to have a basic reference chart. With a good understanding of what some healthcare “benefits lingo” means, it will be easier to find a plan that meets your needs and budget. To explore more healthcare terms, visit https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/common-health-benefit-terms-glossary.aspx