Health insurance can be complicated and overwhelming, especially if you’re new to the process. Knowing the key terms used in the industry can help you make an informed decision when selecting a plan. Here are 10 key terms to know when buying health insurance.
Understanding what they mean and how they apply to your plan will help you make the right decision for your health care needs. From understanding copayments to knowing what coinsurance is, this list will help you navigate the world of health insurance and ensure you’re making the best decision for you and your family.
Key Terms to Know When Buying Health Insurance
1. High Deductible Health Plan
A high deductible health plan (HDHP) is a type of health insurance plan that has a high deductible (the amount you’ll pay for healthcare before your insurance kicks in) and lower premiums. An HDHP is usually paired with a Health Savings Account (HSA). With an HDHP, you will likely pay more out-of-pocket for your healthcare, but your monthly premiums will be lower. If you select an HDHP, make sure you have enough set aside to cover your deductible and other expenses. HDHPs are typically recommended for people who are healthy and want to keep their monthly expenses low.
2. Health Savings Account
Health savings accounts (HSAs) are a type of savings account that can be used to pay for healthcare, including doctor visits, prescriptions, and more. HSAs are paired with high-deductible health plans (HDHPs). You can open an HSA with a bank or credit union and start contributing as soon as you’re 18. There is no income limit to open an HSA.
Contributions can range from $3,400 to $6,750 per person, depending on your age. If you have an HSA, you can use the funds to pay for any healthcare expenses—including insurance premiums. Keep in mind that if you use HSA funds to pay for insurance, you may not be able to take tax deductions for the money you contributed to the HSA.
3. Deductible
The deductible is the amount you must pay out of pocket for medical care before your insurance company starts paying for any portion of your treatment. A high deductible health plan (HDHP) typically comes with a high deductible. You can select a plan with a lower deductible, but you will likely pay more for your monthly premiums. If you’re shopping for health insurance, look for plans with lower deductibles. If you have an HDHP, be sure to set aside enough money to cover your deductible.
4. POS ( Point Of Sale)
POS plans are generally cheaper than HMO plans. However, they are restrictive in that they require you to receive all healthcare from doctors and hospitals that participate in the plan. If you have a POS plan and visit a provider that’s not in your network, you will likely have to pay out-of-pocket. You may also have to pay a higher copayment or coinsurance. If you have a POS plan and are planning to have a baby, make sure the obstetrician and hospital are in your plan’s network. Otherwise, you may have to pay more out-of-pocket for the birth.
5. PPO (Preferred Provider Organization)
Preferred provider organizations (PPOs) are open networks that allow you to visit any healthcare provider and receive a discounted rate. If you have a PPO, you can receive a lower copayment for doctor visits, lab tests, and other services if you visit a provider in your network. If you have a PPO, make sure the doctor you want to see is in your network. If they’re not, you may have to pay more out-of-pocket. If you’re expecting a baby, make sure the doctor or midwife is in your network. If they’re not, you may have to pay more out-of-pocket.
6. HMO (Health Maintenance Organization)
Health maintenance organizations (HMOs) are closed networks of providers. You must receive all of your healthcare from providers that are in your network. If you have an HMO and want to visit a provider that’s not in your network, you may have to pay out-of-pocket. If you’re expecting a baby, make sure the doctor or midwife is in your network. If they’re not, you may have to pay more out-of-pocket.
7. Coinsurance
Coinsurance is a percentage of the total cost of healthcare that you’re responsible for paying. For example, if your plan has a 20% coinsurance, you’re responsible for paying 20% of the costs of your healthcare services and products. Coinsurance is generally lower with a high deductible health plan (HDHP). A low percentage of coinsurance means you are responsible for a larger portion of the costs of healthcare services. If you have a low coinsurance percentage, you may want to consider switching to a plan with a higher coinsurance percentage to lower your monthly premiums.
8. Copayment
A copayment is a fixed amount you pay for healthcare services, like doctor visits, lab tests, and more. If you have a plan with a low copayment percentage, you may want to consider switching to a plan with a higher copayment percentage to lower your monthly premiums. For example, if your health insurance plan has a $20 copayment for a doctor visit, and you select a plan with a $50 copayment, you’ll pay less per month for your new plan.
9. Premium
The premium is the amount you pay per month to keep your health insurance active. The amount you pay per month may vary depending on the plan you select. If you have a low premium and a high copayment percentage, you may want to consider switching to a plan with a higher premium and a lower copayment percentage to lower your out-of-pocket expenses.
10. Out-Of-Pocket Maximum
The out-of-pocket maximum is the most you will have to pay out-of-pocket for healthcare before your insurance coverage kicks in. If you have a low premium and a high copayment percentage, you may want to consider switching to a plan with a higher premium and a lower copayment percentage to save money and lower your out-of-pocket expenses. The above terms are just a sample of what you’ll encounter when shopping for health insurance. By understanding these key terms, you can make an informed decision when selecting a plan that’s right for you and your family.
Also Read : How to Find the Best Health Insurance Coverage for Your Needs – 4 Steps