Health Insurance Terms You Should Know
Adulting brings a lot of excitement and new situations you are about to face- finding an apartment, buying a car, developing a budget, deciding on a healthcare plan and insurance coverages, etc. You will find yourself in new situations, OFTEN! How do you choose the best insurance coverage if you don’t understand the basics such as premium vs. deductible?
Here are 10 common healthcare terms that you will need to know before picking the best plan for you.
Deductible defines what you pay annually for health services before your insurance company pays its share. So, if you have a deductible of $1,000, the insurance company may not start covering services until your bills are over $1,000 in a given year.
High Deductible Health Plan
If you have HDHP, you will have a larger deductible, and insurance won’t cover much until your deductible has been paid in full. What do you get for that? Your premiums won’t be as high and you will likely qualify for a health savings account that lets you save pre-tax dollars for covering medical expenses. In addition, you may benefit from special tax deductions.
Health Savings Account
HSA allows individuals to put in up to $3,350 (or $4,350 if you are 55 or over) in pre-tax dollars to be used for medical expenses. This will lower your tax bill, and if the money is used for qualified medical costs, your withdrawals will be tax-free.
Premium is what you pay every month for having an active insurance plan. You can pay them either monthly, quarterly, or yearly. If you manage to get health insurance through work, your employer may cover a portion of your monthly premium.
The copayment is the amount you owe each time you receive certain types of medical care. The co-pay depends on the type of service you are getting. For example, you may have to pay a $40 co-pay for each visit to your General Practitioner and $80 for each visit to a specialist. You normally can't use copayments to reach the threshold for deductible but it varies from plan to plan.
After you meet the deductible for the year, you are not completely off the hook from medical bills. There is a co-insurance. This is the percentage you will pay for medical services. For example, the coinsurance may be 20%. Let’s say you met $2,500 deductible in June. The next bill is $100. You will pay $20 and your insurance will pay the remaining $80.
Out of Pocket Maximum
An out-of-pocket maximum is a cap, or limit, on the amount of money you have to pay for covered health care services in a plan year. If you meet that limit, your health plan will pay 100% of all covered health care costs for the rest of the plan year.
Health Maintenance Organization
An HMO plan might give you the least amount of flexibility in terms of what you can choose as a provider. If you don’t see a physician who is either an employee of the HMO or does contract work for it, be prepared to pay the entire medical bill
Point of Service
Under a POS plan, you can’t receive care from a specialist without a referral from your main doctor. If you do so, your medical bills will be higher. However, you will likely have a greater number of doctors to choose from than if you have an HMO plan.
Preferred Provider Organization
PPO plan ensures that your insurance company might pay a portion of your bill if you visit a doctor or specialist outside your network. You won’t need a referral but you will probably pay more.
Thanks for reading!
Farmers Mutual Insurance
749 Wilson Road, Newberry, SC 29108