Tis’ the season – and I don’t mean Christmas – it’s open enrollment time for many companies.
Many companies have moved away from in-person open enrollment meetings; which may be more flexible for folks to attend but, as Benefits Advisor, I feel strongly has led people to making less informed decisions and poor healthcare choices. Many companies rely on enrollment platforms that are completely online, which I find really do not give employees a good understanding of the options that they are offered. If you think about the cost of health insurance and the investment companies are making, more effort should be put into open enrollment. The cost of an average single plan is around $8,000 and year and a family plan can easily be more than $25,000.
We encourage all our companies to hold in-person meetings and to better gauge the level of understanding of the employees in the room. Health insurance is full of terms, acronyms and phrases that the average person does not understand. Sometimes I even catch myself using some of these terms without explaining them and, when I do this, I can see the confusion on their faces.
Without an understanding of these basic terms, employees are picking a plan solely based on cost or they are just guessing what might be best for them. Here are what I feel are the most important terms to understand:
Coinsurance – The money that an individual is required to pay for services after the deductible has been met. It is often a specified percentage of the charges. For example, the employee pays 20% of the charges while the health plan pays 80%.
Copayment – An arrangement where an individual pays a specified amount for various health care services and the health plan or insurance company pays the remainder. The individual must usually pay his or her share when services are rendered. Copayments are usually a set dollar amount (such as $20 per office visit), rather than a percentage of the charges.
Deductible – A set dollar amount that a person must pay before insurance coverage for medical expenses can begin. They are usually charged on an annual basis.
Health Maintenance Organization (HMO) – Prepaid, or capitated, health care plans in which individuals pay a small monthly fee to be a member of the HMO, as well as small fees or copayments for specified health care services. Services are provided by physicians and allied health care personnel who are employed by or under contract with the HMO. HMOs are available to both individuals and employer groups.
Health Savings Account (HSA) – A medical savings account available to people who are enrolled in an HSA-compliant high-deductible health plan. The account is employee-owned, and money may be contributed by both the employer and employee. If the employee leaves the company, he or she remains in control of the account. The funds contributed to the account are pre-tax, which means they aren’t subject to federal income tax at the time of deposit. Funds must be used to pay for qualified medical expenses; there is a heavy tax penalty for using HSA funds for non-qualified expenses. Funds roll over year to year if you don’t spend them and can accumulate a significant balance. There is a limit to how much money can be put into an HSA every year, but no cap on how much money can be in the account.
Out-of-network – Typically refers to physicians, hospitals or other health care providers who do not contract with an insurance plan to provide services to its members. Depending on the insurance plan, expenses incurred for services provided by out-of-network providers might not be covered, or coverage may be less than for in-network providers.
Out-of-pocket Maximum (OOPM) – The total amount paid each year by the member for the deductible, coinsurance, copayments and other health care expenses, excluding the premium. After reaching the out-of-pocket maximum, the plan pays 100% of the allowable charges for covered services the rest of that calendar year.
Preferred Provider Organization (PPO) – A type of managed care plan in which health care providers and insurers agree to offer substantially discounted fees for covered health care services and to lower copays and deductibles for in-network services. The plan’s payment ratio (what your insurance company pays compared to what you pay) may be high—for example, it could be 90/10, with the insurance company paying 90% of medical costs and you paying 10% after the copay and deductible.
Premium – The amount of money charged by an insurance company for coverage.
