Not understanding benefits terminology is near the top of the list of ways that open enrollment and benefits selection can stress you out. Open enrollment is coming quickly and soon you will be talking about benefit options. The world of benefits and insurance can be confusing. In-network, out-of-network, deductibles, co-pays and co-insurance? What?
Let us help break it down:
Premium – a monthly payment you make to your health insurance provider- it is the cost of having health insurance coverage. It’s perhaps the easiest component of a health plan – it’s the equivalent of a sticker price.
Here’s how it works: Coverage itself varies considerably from one health plan to another but in general, the less you pay for your coverage, the more you’re likely to have to pay when you need health care – and vice versa.
Co-insurance – A percentage of a health care cost—such as 20 percent—that the covered employee pays after meeting the deductible.
How it works: Let’s say you’ve paid $1,500 in health care costs and met your deductible. When you go to the doctor, instead of paying all costs, you and your plan share the cost. For example, your plan may pay 80% so then your share would be the remaining 20%.
Co-payment – The fixed dollar amount—such as $25 for each doctor visit—that the covered employee pays for medical services or prescriptions.
How it works: After your co-pay, your insurance picks up the rest of the bill for that visit. Co-pays typically count toward your annual out-of-pocket maximum (but there can be exceptions depending on your plan). The amount can vary depending on where you go for care, the type of doctor you see, and the type of prescription you are taking.
Deductible – How much you pay before your health insurance coverage kicks in. Your deductible resets every year.
How it works: If your plan’s deductible is $1,500, you’ll pay 100% of health care expenses until the bills total $1,500. After that, you share the cost with your plan by paying co-insurance.
Network – “In-network” refers to doctors and other health providers that are part of the insurer’s preferred network. Insurers sign contracts and negotiate prices with these in-network providers. This isn’t the case for “out-of-network” providers.
Here’s why that matters: Expenses you incur for services provided by out-of-network professionals may not be covered or may only be partially covered by your insurance; you will generally have a higher deductible and out-of-pocket limit when you see an out-of-network provider.
Out-of-pocket Maximum (OOPM) – the absolute most you pay in one year for your health care expenses before your insurance covers 100% of the bill.
Here’s how it works: What you pay toward your plan’s deductible, co-insurance and co-pays are all applied to your out-of-pocket max. If your plan covers more than one person, you will likely have a family out-of-pocket max and an individual out-of-pocket max. That means:
- When the deductible, co-insurance and co-pays for one person reach the individual maximum, your plan then pays 100% of the expenses for that person.
- When what you’ve paid toward individual maximums adds up to your family’s out-of-pocket max, your plan will pay 100% of the expenses for everyone on the plan.
Picking health insurance can be a dizzying adventure and making a mistake can be costly since you are generally locked into your health insurance for one year, with very limited exceptions. But when you understand how open enrollment works and how it impacts your family’s household budget, you can make wise, informed choices.