Health Insurance 101

Most of us need some form of medical care each year, including annual physicals, vaccines, maintenance medications for chronic conditions, and acute care after an accident. Having a health insurance policy, whether through your employer, your spouse’s or parent’s employer, Medicare, Medicaid, or the individual marketplace, is critical to accessing medical care and keeping the cost under control.

Here at Kamm Insurance Group, we know health insurance policies can be confusing, filled with jargon that doesn’t always make sense. It can tough to figure out what exactly you’re getting when you choose a policy. So here are some definitions and explanations to help you cut through the confusion and better understand your medical policy.

PPO: PPO stands for preferred provider organization, and is perhaps the most common type of medical insurance policy offered by employers and on the individual market. These policies come with a set network of doctors and provide lower costs to you if you use providers in that network, but still offer some coverage for out-of-network providers. Networks can vary in size, so make sure you know what network your plan uses and how to use your carrier’s provider finder.

HMO: HMO stands for health maintenance organization. This type of policy can offer lower costs to you, as long as you stay within the policy’s limitations. An HMO requires you to choose an in-network primary care provider (PCP) when you sign up, and you must have a referral from that PCP to see any specialists. HMOs offer no coverage at all for out-of-network care outside of emergencies, so make sure to go through your PCP for all care.

EPO: An EPO is an exclusive provider organization. Like an HMO, EPOs only cover in-network care. But they don’t require you to choose a primary care provider at enrollment, so you’re locked into the plan’s network, but not a particular doctor or practice.

POS: A POS plan is a point of service plan. POS plans offer some out-of-network coverage, like a PPO, but it will always cost less if you stay in-network. Like an HMO, a POS requires you to choose a PCP at enrollment and get referrals from them for specialist coverage.

Preferred Network: Some PPOs these days have a three-tier network, with the best rates coming from a preferred network, more expensive rates in a larger network, and more expensive coverage still if you go totally out of network. If you see any reference to a three-tier or preferred network, make sure to find out what the preferred network is so you can get the best rates.

Deductible: This is the amount you have to pay for care in a given year before your insurer picks up the plan’s set share of the cost. Some plans offer low deductibles in exchange for higher premiums or more restrictions. And other plans charge lower premiums but come with higher deductibles. All Affordable Care Act-compliant plans cover preventive care, such as annual physicals and vaccines, at 100% before you meet your deductible.

Copay: A copay is a set dollar amount you pay to your provider for a particular service, such as a prescription, an office visit, or an emergency room visit, as outlined by your plan. For example, a plan might have you pay $20 for a primary care visit or $10 for a preferred generic prescription.

Coinsurance: Coinsurance is when your cost is determined as a percentage of your bill, at the insurance carrier’s negotiated rate. For example, your plan might cover 80% of the bill and charging you the remaining 20%.

Out-of-Pocket Maximum: The out-of-pocket maximum is the most you could have to pay out of pocket in a given year. Once you hit your out-of-pocket maximum, your copays and coinsurance go to $0. For plans that offer out-of-network coverage, the non-network out-of-pocket maximum is often much higher than the maximum for in-network care, so it pays to stay in network.

Health Savings Account (HSA): Many high-deductible plans are eligible for an HSA, which is a pre-tax savings account to help take some of the sting out of that high deductible. The money in this account can only be used for healthcare expenses, but it is not taxed and rolls over from year to year. Some employers who offer HSA-qualifying plans will contribute to your HSA as well. If your plan comes with an HSA, make sure to use it!

Flexible Spending Account (FSA): An FSA is another type of pre-tax savings account you can use for medical expenses. FSAs can be used with any medical plan, not just high-deductible ones. (Though if you have an HSA, you will need a limited-purpose HSA, which only covers dental and vision care.) But you have to use the funds in them by the end of the year, or that money goes back to your employer. Use it or lose it!

We know health insurance is confusing, and our experienced health insurance advisors would be happy to help you cut through the jargon and find the best coverage for you and your employees. We can help you create a benefits package for your business or help you wade through your choices on the Medicare or individual markets.