Insurance is something that many people don’t often fully comprehend. And who can blame them? Trying to differentiate between all the different insurance and benefit options available, not to mention trying to make sense of the insurance policy itself, can be quite challenging.
As an employer, human resources rep or policyholder, there are many different insurance terms to become familiar with and understand. In order to make insurance benefits a more stress-free process, here are some of these more common insurance terms:
. Coinsurance – A set percentage of the charges to pay for covered services before the insurance company will pay for the rest. The coinsurance will vary from plan to plan; however, keep in mind that the lower the coinsurance is, the higher a premium will be.
. Copayment – The flat fee paid to a provider in return for a covered service. Copayments tend to vary depending on the type of insurance plan selected.
. Deductible – Before insurance will cover any costs, a deductible often must be paid, which is usually a set amount of money. The deductible varies from plan to plan, but the lower it is, the higher the premium will be.
. Health Maintenance Organization (HMO) – An HMO plan allows one to pay lower out of pocket expenses; however, there are fewer choices when it comes to providers and service locations. There are also a broader range of preventative services to take advantage of and some may not even require a deductible. The premiums are usually lower as well.
. Health Savings Account-eligible plans (HSA) – This plan is basically a preferred provider organization (PPO) plan that has higher deductibles and lower premiums. The savings account allows one to make contributions pre-tax that can help to pay for any qualifying medical expenses that are incurred.
. Indemnity – This type of plan provides a percentage of the cost or a pre-determined amount for services that are covered. In order to be reimbursed for the covered amount, out of pocket costs must be paid for first. An indemnity plan tends to provide more choices and increased flexibility than other plans in exchange for higher rates.
. Maximum Out of Pocket Costs – The maximum amount of money that may have to be paid for covered services during the benefit period (which is usually a year). This does not include balance-billed charges or premiums. The maximum out of pocket costs varies from plan to plan depending on copayments, coinsurance and deductibles. Once maximum out of pocket costs are reached, the insurance company will foot 100 percent of covered expenses.
. Preferred Provider Organization (PPO) – A type of plan that encourages use of a network of preferred care providers and service locations. Providers within the network will provide plan members with discounted or negotiated rates for their services. Care outside of the network may result in higher out of pocket costs.
. Premium – The amount of money paid to the insurance company, usually on a monthly basis, in order to be covered.
Learn these insurance terms to make managing benefit plans and coverage a much easier process.