Health insurance used to be a fairly simple process. But today, whether obtaining health insurance privately or through an employer, we’re being offered a variety of insurance plans with varying benefit levels, making the choice more difficult.
Before you enroll in another health insurance plan, here are some common terms you need to know – and understand:
Co-Insurance – Co-insurance is the amount that you are responsible for out-of-pocket. Most plans have levels such as 80/20, which means that once you have met your deductible, you are responsible for 20 percent of all medical costs incurred until you reach your maximum out-of-pocket (see below).
Co-Payment – this is the amount that is paid for certain services, such as doctor’s visits, lab work, urgent care or emergency room services. Co-payments typically do not go towards your annual deductible, but they do go towards your annual out-of-pocket costs. (see below)
Deductible – This is the amount that you will have to pay before your insurance coverage kicks in. In many plans, things such as doctor’s visits and annual testing such as mammograms do not apply toward the deductible, but that’s not always the case, so be sure to read the plan description carefully.
Out-of-Pocket Maximum – Most plans have an annual out-of-pocket limit, so once you reach that limit you no longer have to pay co-insurance costs. If you have a family plan, there will be an individual limit and a family limit. This is an important number to pay attention to, because in a worst-case scenario, this is how much money you will have to pay in any given year.
Premium – This is the total cost of the plan for a set period of time – typically one year.
You many also be confused about the type of insurance plans being offered. Here are some of the most common plan types:
EPO (Exclusive Provider Organization) – EPO’s allow you to use doctors and hospitals within the EPO network, but don’t offer any out-of-network benefits. The benefit of an EPO is that their network can be nationwide, and you don’t need to have a referral to see a specialist.
High-Deductible Health Plan – These plans offer a lower premium, but you’ll have to pay out much more out of pocket before your plan starts to cover services. High Deductible Health Plans can be coupled with a Health Savings Account which can be used to cover any medical expenses prior to when your plan kicks in.
HMO – (Health Maintenance Organization) – HMO’s offer a variety of services to its members at a pre-negotiated rate but require you to have a primary care doctor (PCP) and that you obtain a referral in order to see a specialist. HMO’s are typically the most restrictive of the three plan types.
PPO (Preferred Provider Organization) – A PPO, like an EPO requires you see an in-network doctor to receive benefits, but PPO’s typically will often pay a reduced rate for services obtained outside of the PPO network.
Whether through an employer, or purchased on the insurance exchange, we’re all paying more for health insurance. Understanding plan options will help you make the right decision for yourself and your family, ensuring that you have the coverage you need.