The renewed healthcare debate in Washington over possible replacements to the Affordable Care Act (ACA) has left many Americans scrambling to learn more about possible changes to their health coverage. However, as pivotal as these plans are to individuals and families' long-term health and financial stability, recent surveys have shown that Americans lack a critical understanding of some of the most common terms related to health insurance plans.
A recent survey conducted by PolicyGenius of 2,000 American health insurance consumers found that less than half understand how their health plan works. The survey found a 25% gap between consumers' perceived and actual knowledge of these key health insurance terms: “deductible", “co-pay", “coinsurance" and “out-of-pocket maximum."
At FSAstore.com, we are committed to educating our customers about healthcare benefits and the potential of consumer-directed healthcare accounts like FSAs and HSAs, and we don't want to leave you flat-footed when it's time to choose a health plan! Here are the terms you must know to make an educated decision with your healthcare benefits.
An insurance plan's deductible is the amount that a plan holder has to pay out-of-pocket before the insurance company will begin to cover the costs of qualifying medical services. For instance, if you are enrolled in a plan with a $1,500 deductible, you will have to cover the cost in full of most medical expenses until you meet the $1,500 threshold, at which point the health insurance plan will begin coverage for qualifying expenses. Note that some expenses, such as prescriptions, often fall outside of the plan deductible requirements.
Many health plans will offer a type of co-payment or co-insurance arrangement where the plan holder will pay a portion of the overall cost of the healthcare service. In the case of co-payments, these are fixed amounts that are paid for a health care service, which can vary for different services within the same plan, such as prescription medicines, doctor's office visits and consultations with medical specialists. In most cases, plans with lower monthly premiums have higher co-payments, deductibles or co-insurance, while higher monthly premium plans will have lower co-payments.
Co-insurance is a different type of cost-sharing arrangement than a co-payment in which the plan holder will split the costs of a health plan service, often after a deductible has been met. For instance, if an individual's insurance plan offers a 70/30 split for medical expenses after the deductible is met, an expenditure of $100 would mean that the insurance company would pay $70, while the account holder pays $30. Depending on the structure of the healthcare plan, co-insurance splits may also vary if a patient goes outside of his/her physician network, at which point a larger cost-sharing split may be required for these services.
- Out-of-Pocket Maximum
With all of the previous terms in mind, the out-of-pocket maximum is an important number to keep in mind when choosing a health plan. The out-of-pocket maximum is the most a person will pay over the course of a year in deductibles, co-payments or co-insurance, after which point the insurance company will pay 100 percent of all covered health expenses for the rest of the year. So if a plan has a $6,000 out-of-pocket maximum, the plan user would have to incur $6,000 worth of deductible, co-payment or co-insurance payments out-of-pocket before the insurance company began covering expenditures in full.
For everything you need to keep your family healthy year-round, rely on FSAstore.com! We have the web's largest selection of FSA-eligible products to help you maximize the potential of your healthcare benefits.