If you don’t know a CDHP from an HSA, you’re not alone. Yet considering that consumers are often on the hook for health care expenses, becoming fluent in health care language is essential. Here’s a quick guide to help you understand health insurance terminology and what it can mean to your wallet.
A health maintenance organization plan typically offers less expensive monthly premiums than a PPO, but it comes at a cost: patients are generally limited to providers within a specified network and must get a referral from their primary care physician before seeing a specialist. Patients may, however, visit the nearest emergency department as necessary without a referral. If the ER facility is out of network, and you are admitted to the hospital, HMO plans will typically not cover the cost.
A preferred provider organization plan generally has higher premiums than an HMO, and while there are cost advantages to staying within the network, it offers more flexibility when seeing specialists—and in most cases doesn’t require a referral.
A consumer-directed health plan generally has a higher deductible, lower monthly premiums, and requires that patients meet their deductible before insurance benefits kick in. As its name implies, patients must be proactive in managing their care by tracking expenses for out-of-network expenses. Employees pay for these expenses through paycheck deductions directed to an HSA. The CDHP is an HDHP paired with an HSA
A high deductible health plan, defined by the Internal Revenue Service as having a minimum deductible of $1,400 for an individual or $2,800 for a family, generally has lower monthly premiums and allows for an HSA. Other than preventive care, it doesn’t cover services such as prescription medications, emergency department visits, or visits to specialists.
Coinsurance is the term for the expense split between health insurer and employee, usually 80 percent. All other costs – deductibles, copays, premiums, HSA contributions – are paid by the patient.
The amount a patient must pay before the health insurer covers health care services. This fee is in addition to monthly premiums. Services, such as preventive care, prenatal care, emergency department visits are usually covered before meeting the deductible, but check with your insurer. According to CNBC, employees with deductibles have increased from 63 percent in 2009 to 82 percent today. The average deductible for a family plan is $2,800.
FLEXIBLE SPENDING ACCOUNT (FSA)
Employees can direct pre-tax dollars from their paychecks to an account that can be used to pay for eligible medical and dental expenses. FSA contribution limits are set by the IRS each year. Typically, money in the FSA must be used within the plan year, otherwise funds get surrendered. Employers can opt for two options: (1) Offer a grace period of two-and-a-half months where expenses incurred in the plan year up to the grace period deadline can be paid through the FSA, or (2) roll up to $500 in unused dollars over to next plan year’s account.
HEALTH SAVINGS ACCOUNT (HSA)
A health savings account is an employee-funded savings plan for eligible medical expenses, sometimes with an employer match or fund component. Employees can direct a set amount from their paychecks into the tax-deductible account. The IRS caps how much employees can contribute per calendar year on an individual and family level. HSAs don’t follow the same “use or lose” FSA rule. The money in the HSA belongs to the participant and rolls over from year to year.
OUT-OF-POCKET MAXIMUMS and MCOs
The amount determined by managed care organizations (MCOs) that sets how much a patient must pay for services.
GAP OR SUPPLEMENTAL INSURANCE
Gap insurance is essentially insurance for insurance. Its benefits are limited to paying for deductibles, co-pays, and other out-of-pocket expenses not covered by a patient’s primary health insurance. It cannot be used as primary health insurance.