Whether you’re applying for health insurance through your job or signing up on your own, choosing a health insurance plan is a major decision. It can affect your physical, mental, and financial wellbeing in significant ways.
That’s why it’s so important to do your research, compare different health insurance options, and know what you’re getting into. The more informed you are about which benefits you will–and won’t–receive, the less likely you’ll be caught off guard down the road.
But that task can be difficult if you’re not familiar with at least some of the jargon used to on the various plans. Here are some key health insurance terms you should know to help you make an informed decision.
The ACA refers to the Affordable Care Act, which was a healthcare reform law enacted in March 2010. It aims to make health insurance more affordable by providing subsidies that result in lower costs, depending on your household income. You can purchase healthcare insurance through the health insurance marketplace on Healthcare.gov. Before enrolling in any plan, you can preview price estimates through their website.
Your co-insurance is a percentage of what you pay for healthcare services after paying your deductible. Let’s say your co-insurance is 10%, your deductible is $1,000, and you have a $2,000 bill for an emergency room visit. If you’ve already met your deductible, then you’ll need to pay $100 and your insurance company covers the remaining $900. If you haven’t met the deductible, then you’ll need to pay whatever amount to meet that, then 10% of the remaining balance.
A co-pay is an amount you need to pay to see a doctor and may not count towards your deductible. In some cases, it does, so check your health plan to make sure. Emergency room, urgent care, out-of-network doctors, and specialists tend to have higher co-pays.
A deductible is the amount you need to pay on your own before your health insurance kicks in. For example, if you have a $1,000 deductible, this means you’ll need to pay $1,000 before your health insurance covers the rest. Deductibles will work differently depending on your insurance plan.
EPO stands for “exclusive provider organization.” The plan is restrictive in that you need to use in-network doctors and hospitals and you’re not allowed out-of-network care unless it’s deemed an emergency. You don’t need referrals for specialists, but you will need permission from your provider before getting what it considers an expensive service.
An exclusion is something that your plan won’t cover. Exclusions can vary wildly, so it’s important to read the fine print to see what they are. Some of the more common exclusions include cosmetic surgery, alternative medicine, home care, and private nursing expenses. Some healthcare providers have lifted exclusions for pre-existing conditions, but you may be subject to a longer waiting period before you can receive care.
Less familiar among health insurance terms is the HDHP, which stands for “high-deductible health plan.” This type of plan typically has a higher deductible and a lower monthly premium than a traditional plan. However, as the name implies, you will need to pay more out of pocket than traditional healthcare plans before insurance and out-of-pocket maximums kick in. The IRS defines an HDHP as having a deductible of at least $1,400 for an individual plan and $2,800 for a family.
Additionally, an HDHP usually allows you to open a Health Savings Account, which lets you save pre-tax dollars in a special account to pay for qualified medical expenses. Some employers also pay into the account, so if your employer is one of them, you could take advantage of that.
HMO stands for “health maintenance organization.” It’s usually known to have a more restricted network, and therefore also lower premiums. So, with an HMO you’ll pay less up front, but you could be sacrificing choice and flexibility in your care. You’ll also need to name a primary care provider (PCP) who can refer you to see specialists.
HMOs usually have either no deductible or a very low one. Instead, you pay co-pays for doctor visits, prescriptions, and tests. You typically won’t be covered for out-of-network care for any healthcare needs unless it’s deemed an emergency, so you’ll need to pay out of pocket for that as well.
A health insurance plan network is a group of clinics, doctors, and hospitals that agree to provide member with healthcare services. When you use an in-network healthcare provider, you may not pay as much as you would for doctors out of network. Usually, the larger the network, the higher your monthly premium will be.
The limit on how much you have to pay for healthcare services in a year is called the “out-of-pocket maximum”. This amount includes your co-insurance, co-pay, and deductible. If you have additional people on your plan, you’ll have a family out-of-pocket maximum instead of an individual one.
Once you reach your out-of-pocket maximum, your insurance company will pay 100% of your costs. Keep in mind that whatever you pay for things not included in your health plan won’t count towards your out-of-pocket maximum and dental plans may differ.
PPO stands for “preferred-provider organization.” Its premiums tend to be higher than an HMO, but you get more flexibility since you don’t need to select a PCP and the networks tend to be larger. You can use both in-network and out-of-network care, though out-of-network providers will cost more. You’ll also need to pay a deductible and will have an out-of-pocket maximum for in-network care.
A POS is a “point of service” plan and is a cross between a PPO and an HMO. This means you can choose between using HMO or PPO services each time you go visit a doctor. You’ll typically need to choose an in-network physician as your primary care provider, but you can choose to see an out-of-network for a higher fee.
One of the most well-known health insurance terms is the “monthly premium”. This is the amount you pay every month to purchase and maintain your health insurance plan.
Care for your financial health
Learning about health insurance terms and signing up for the right plan are both important aspects of improving your financial health. But there’s definitely more to it. Luckily, learning how to deal with debt, money, and planning for your future doesn’t need to be hard, and we’ve developed a simple to follow guide to help you find the tools you need to move to a better financial future. Get started by downloading our free guide right now.
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