Health insurance can be confusing for anyone. But no matter if you’re a business owner or an employee, health insurance knowledge is essential. PWC Health Research Institute predicts that the growth of medical costs will be up 6% in 2020. This may not seem like a big increase, but it’s important to note that even the smallest percentage could cost you. In the same token, being unaware of the basics of healthcare could also cause monetary problems for you down the road.
Why Is It Important to Know?
It looks like we all could do a better job at educating employees and ourselves when it comes to healthcare. A CNBC study showed that only 4% of Americans can correctly identify basic health insurance terms like copay (the fixed amount a person must pay when they visit a doctor’s office, get a lab test or buy prescription drugs) and out-of-pocket maximum (the most you would have to pay for qualifying services in a calendar year).
Becoming familiar with basic terms will make health insurance easier to navigate and help make sure employees are equipped to choose the right health insurance coverage to meet their needs and manage their health care expenses.
Luckily we’ve got a crash course with three key topics to get you started.
1. Health Insurance Lingo
Don’t let health insurance illiteracy stand in the way of maximizing your coverage and getting the benefits you need and pay for. Become better educated in health insurance lingo so you can take advantage of all the covered services your health plan offers.
From deductibles (the amount of money you must pay out-of-pocket for covered health services before the carrier begins to pay) to premiums (the monthly cost of your health insurance plan) there are tons of different terms that you might hear during your life when dealing with health insurance but our ebook “The ABCs of Health Insurance” has got you covered.
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2. Health Insurance Acronyms
Should you pick an HMO, EPO, PPO or POS? That all depends on your individual needs. The type of plan you select determines what doctors you can see and the out-of-pocket costs you may face. HMO’s (Health Maintenance Organization) are regional networks with a limited number of providers and the plans always require a referral to see a specialist. An EPO (Exclusive Provider Organization)provides in-network coverage only (out of network coverage may be available in emergency situations).
A PPO (Preferred Provider Organization) provides the most flexibility as you can visit in-network and out-of-network providers but higher fees may apply for out-of-network providers. And POS (Point-of-Service) plans are "gated," meaning a member must choose a PCP who is the “point of service.” And then any one of those plans can be a HDHP (High Deductible Health Plan), which offers members the opportunity to pay less in premiums for their insurance with a high-deductible health plan. The key is to get all the information you need to make an informed decision.
3. The Cost of Health Insurance
Budgeting for health insurance is essential. The biggest factors are the monthly premium and the deductible of the health plan you select, as well as how often you get care and what kind of care you need. Your out-of-pocket costs for copayments (flat fee per visit) coinsurance (the percentage of costs you are responsible for after the insurance company pays its percentage) and care not covered by your insurance are unpredictable.
Four in five adults with insurance paid less than $1,000 in out-of-pocket expenses over a year, according to a PwC analysis. To create a realistic budget, tally last year’s expenses and use that as an estimate for next year.
There are so many more terms that could be discussed, but the ones mentioned are the primary ones that you need to be aware of as you start making healthcare decisions. You can find more healthcare terms here to expand your knowldege.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.