Health Care Terms to Save You Money

Finding the health insurance plan that suits your individual needs can be a confusing and often frustrating process. Health insurance plans differ greatly in the benefits they provide, and navigating dense medical jargon often makes grasping the pros and cons of any given plan difficult. But armed with a little research and base knowledge, you’ll have the tools you need to make an informed decision and start saving money.

Here are some of the most important health insurance terms to understand when getting started:

Premium: The amount you pay per month to be actively enrolled in an insurance plan.

Benefit Period: This is the length of time that you can file claims for covered medical expenses and procedures for it to still be covered by your plan. Most benefit periods are one calendar year, from January 1st through December 31st.

A notable exception to this period is Medicare. Unlike most other insurance types, the Medicare benefit period starts when you are admitted as an in-patient to a hospital or skilled nursing facility and ends when you have been out of the hospital or nursing facility for 60 consecutive days.

Deductible: This is the amount you have to pay out of pocket in a benefit period before the insurance company starts paying for your benefits. The deductible can vary greatly from plan to plan, but is typically between $500 – $1,500 for an individual and between $1,000 – $3,000 for a family. It’s important to know that your monthly premiums do not count towards your deductible. However, insurance plans with a high deductible often have a lower monthly premium.

So how do you know which deductible fits your needs? If you have a condition that requires regular doctors visits, high-cost prescriptions that you take regularly, or are planning to become pregnant, a low deductible plan may save you money in the long run. But if you are in good health and visit the doctor only a few times a year, a high deductible may be a better fit.

Coinsurance: This is the percentage of medical costs you have to pay after you’ve met the deductible.For example, Bill has met his deductible and has a coinsurance of 20%. He needs to see a specialist and the visit costs $250. Since Bill has met his deductible, he now only has to pay 20% of this. Bill pays $50 and his insurance provider pays the remaining $200.

Copay: The copay is a contractually fixed amount that you pay for insured services. The copay varies from service to service. For example, routine services often have a lower copay than visits to specialists. You can find the amount of copays in the summary of your benefits and coverage.

Flexible Spending Account (FSA): You can deposit pre-tax money into your flexible spending account to be used for medical expenses and care during that year. These accounts are often set up by employers. It is important to note that any money in the account that is not used by the end of the year is returned to your employer, so having a good idea of your average yearly medical spending is key.

Health Savings Account (HSA): A Health Savings Account allows you to deposit pre-tax money to use for medical expenses. Unlike with the FSA, the money you deposit to your HSA does not need to be used within a year and will roll over year after year.

Health Maintenance Organization (HMO): HMO is a type of insurance plan that offers services only with specific HMO providers. Receiving care outside the HMO network is rarely covered by the insurer.

Preferred Provider Organization (PPO): In contrast to HMO, a PPO is a type of insurance plan that offers network providers, but still offers some coverage for out-of-network providers. This plan offers you more flexibility to see the healthcare provider of your choice, while still receiving some coverage.

Out-of-Pocket Maximum: This is the maximum you will pay within a benefit period for medical expenses. The US Department of Health & Human Services has set the out-of-pocket maximum for 2021 to $8,550. So, between your premiums, deductible, copays, and any other medical expenses (including care outside your network coverage), once you have reached $8,550, your insurance provider will cover 100% of your medical costs.

Now that you know the basics, take some time to evaluate your own situation and average yearly spending and start narrowing down the right fit for you.