So you’ve finally gotten a real job, or perhaps you’ve just turned 26 and are being ceremoniously kicked off of your parents’ insurance plan, or maybe you’ve had coverage this whole time and finally need to *gasp* use it. Regardless of your situation, you’ve found yourself needing to brush up on the minefield of jargon that makes up your insurance plan. Not sure where to start? I’ve broken down some common medical insurance terminology into some #basic bites below.
(Please note that individual states may have specific laws or guidelines mandating benefit plans; please consult with a local benefits expert for state-specific guidance)
In Network vs. Out of Network?
In-network providers are those physicians, hospitals, and clinics that are contracted with your insurance provider at a discounted rate. Oftentimes you can use an out-of-network provider with your plan, but you’ll be paying higher service fees and may be subject to a higher deductible than when using in-network providers exclusively. Since providers can opt in and out of networks on a regular basis, make sure you verify that your provider is still within network before you schedule your next appointment. Almost every plan administrator has a Network Provider search on their website where you can break down in-network providers by name, location, and specialty. You can also call your Insurance or Healthcare provider directly to confirm coverage, but that requires—you know—picking up the phone.
There are few things guaranteed in life: death, taxes, and the inevitability that insurance premiums will increase on an annual basis. Premiums are a fixed rate that is deducted from your paycheck—think of it as a subscription fee which guarantees your continued coverage. Premiums are typically pre-tax, meaning that the cost is deducted from your gross pay prior to taxes being deducted, resulting in an overall tax savings.
A copay is a set fee paid at the time of a service, with the balance of the service being billed at a later date once your insurance benefits have been applied. Copays may range in cost based on the type of service you’re being provided. For example: a regular doctor’s office visit will likely have a lower copay than a visit to the Emergency Room. Copays do apply towards your annual deductible (next topic), and can be paid with out-of-pocket dollars or by using pre-tax dollars through a medical spending account.
The deductible is a set dollar limit, under which you (as the employee) are solely responsible for paying. Employees are responsible for covering their deductible with out-of-pocket dollars or by using taxed advantaged dollars through a medical spending account.
Ahh, coinsurance. The confusing limbo between hitting your deductible and reaching your out of pocket maximum. Many people think once they’ve hit their annual deductible they’re off the hook for paying any remaining medical expenses, but this is a misconception. Once the deductible threshold has been met, your plan begins to pay a set share of expenses. For example: a common coinsurance distribution is 80/20, where the plan would begin to pay 80% of expenses and the employee is responsible for the remaining 20%. A plan can offer different coinsurance distributions for in-network vs. out-of-network services (i.e. 70/30 vs. 80/20, etc.).
Out of Pocket Maximum
I know what you’re thinking: “WHEN DO WE GET TO THE PART WHERE THE INSURANCE PAYS EVERYTHING!” This—my friends—is it. Your plan has a threshold known as the out of pocket maximum, which is the highest possible amount you will pay out of pocket annually towards your medical bills. Currently the 2018 limits for out of pocket maximums are $7,350 for individual coverage and $14,700 for family coverage, although many plans feature maximums well below these thresholds. Unfortunately, your monthly premiums do not count towards reaching this annual maximum.
Medical Spending Accounts
The topic of Medical Spending Accounts warrants an article in itself. Commonly available Medical Spending Accounts include Health Savings Accounts (HSA), Health Reimbursement Accounts (HRA), and Flexible Spending Accounts (FSA), which allow you to set aside pre-tax dollars each paycheck to use towards certain medical expenses. If your employer offers a High Deductible Health Plan (HDHP), you’ll likely be offered enrollment one or more of these accounts to supplement your plan. Most spending accounts will also issue participants a debit card to conveniently pay medical expenses at the point of sale.
Qualified Life Events and Open Enrollment
After you’ve been hired you can just pop on and off the insurance plan as you see fit, right? WRONG! Provided that you qualify for your company’s insurance benefits, you can enroll as part of the new hire enrollment process or during your company’s defined annual open enrollment period. The open enrollment period allows employees to update, add, or drop their benefit coverage for the upcoming year. Besides open enrollment, opportunities to change benefits are limited to Qualified Life Events (marriage, divorce, birth/adoption of child, dependent gains/loses other coverage). Employees have a 30 day window to update their benefits as a result of a qualifying event or their benefits may remained unchanged through the next open enrollment period.
There you have it: a crash course in common medical plan terminology. Now comes the hard part: actually picking up the phone to schedule an appointment.