Unfortunately, getting hired isn’t the end of a complicated transition. In fact, in many ways, it’s just the start of some very challenging paperwork. Between the policy acknowledgements and tax documents, there are your health insurance elections.
Just starting a career and landed your first job? Then this is probably the first time you’ve ever looked at health insurance benefits. Spend five minutes with an insurance administrator and you’ll find yourself bombarded with confusing terms like deductible, co-pay and co-insurance.
I’ve been the guy scratching his head before, so I’m here to help you with the most common jargon you’ll run into while talking health insurance.
What would happen if all your health care spending was covered under your insurance? You wouldn’t give much thought about whether or not medical visits were necessary. The deductible is a feature to health insurance that helps an insurance company control your spending. It accomplishes this by forcing you to pay a certain amount of expense with your own money. If you have a $500 deductible, you need to pay the first $500 of your annual health care costs before your insurance kicks in.
It is a threshold that must be paid by you before the insurance company is willing to pay for your health care costs. It’s is reapplied annually. Usually deductibles run between $500 and $3,500.
If you have a deductible in your health care plan, you are going to see this term a lot. It means that any listed benefit must be paid out of your pocket first, until you’ve met your deductible. The good news is that not all of your benefits will be subject to the deductible, but most will.
Deductibles aren’t all the tools used by insurance companies to pass costs onto policy holders. Co-insurance is another feature used to limit insurance pay outs. Co-insurance splits health care costs between you and the insurance company. For example, 80/20 co-insurance means that the insurance company will pay 80 percent of the bill and you get to pay 20 percent of the bill.
Finally, we get to a good term. The out-of-pocket maximum is the most money you should need to pay out of pocket annually for your health care costs. Once you reach this magic number, you no longer need to think about deductibles or co-insurance. The only problem is that expenses counted towards your limit start over every year.
If you don’t have a deductible, you’ll probably see the term co-pay listed. Co-pay is a flat fee you must pay for a particular service. If seeing your primary care physician has a $25 Co-pay, you must pay $25 every time you see your doctor. Co-pays will vary, even within a plan. Hospitals tend to have larger Co-pays than non-emergency health care costs.
Hopefully, you aren’t feed up with all these terms about paying health care expenses, because I have one more for you. Your premium is the cost of your health care plan. It is paid periodically and is usually presented as a monthly charge. If you are paid weekly or bi-weekly, you may need to do some division to get an idea of how much will be coming out of your paycheck.
Choosing a health care plan is hard enough. No one needs jargon standing in their way. Hopefully, understanding these basic terms will help you pick the best policy for you.