The process to find a health plan that’s right for you may be daunting, especially if you’re a cost-conscious or first-time insurance shopper. That’s why it’s important to understand the key concepts that make up your health insurance plan, so you’ll be ready to sign up for coverage during the annual open enrollment period.
Here’s a quick guide to help decode some of the most common terms:
Premium: This is the amount you and/or your employer must pay for your health insurance or plan every month, quarter or year.
Covered service or expense: This is the portion of a medical, dental or vision expense that your health insurance or plan has agreed to pay for or reimburse.
Deductible: This is the amount you may owe during a coverage period (usually one year) for covered health care services before your plan begins to pay. An overall deductible applies to all or almost all covered items and services. A plan with an overall deductible may also have separate deductibles that apply to specific services or groups of services.
Coinsurance: This is your share of the cost of a covered health care service, calculated as a percentage of the allowed amount for the service. You generally pay coinsurance plus any deductibles owed.
Copayment or copay: This is the fixed amount you pay for a covered health care service. After you’ve reached your out-of-pocket limit, the copayment is no longer charged.
Annual out-of-pocket limit: This is the most money you would have to pay for covered expenses in a plan year.
Flexible Spending Account (FSA): This is a special account designed to help you set aside money during the plan year to help pay for out-of-pocket costs. There are two types of FSAs — one for medical expenses and one for dependent/childcare expenses. You don’t pay taxes on FSA dollars, but you generally must use the money within the plan year or risk losing it.
Health Savings Account (HSA): Like an FSA, a health savings account lets you put aside money, tax-free, to save and use to pay for health care expenses. Unlike an FSA, funds in your HSA roll over year to year if you don't spend them, or if you leave your job or retire. An HSA may earn interest or other earnings, which are also not taxable. HSAs are available to those with high deductible health plans.
For more help decoding health insurance terms, check out justplainclear.com, an online glossary of health care vocabulary.
To learn about different health insurance options, visit uhc.com.