Health insurance can be complicated. As everyone knows, it is important to be insured, but the process and terms used by insurance companies can leave many feeling confused or overwhelmed, contributing to costly mistakes.
Understanding the terms used when considering an insurance policy is essential. We’ve put together this helpful guide to help you navigate the complexities so you can choose a policy feeling confident that it’s the best one for your unique needs.
UNDERSTANDING COMMON TERMS USED IN HEALTH INSURANCE
What is a Deductible?
“Deductible” is a term we’ve all heard, but do we really know what it means? The deductible is the amount you will pay out of pocket for covered expenses before your insurance plan starts to pay.
With a $1000 deductible, for example, you’ll pay the first $1000 of your yearly bills before the insurance plan begins to cover all or a portion of the costs.
Deductibles can vary significantly from plan to plan. A higher deductible will usually coincide with lower monthly premiums.
What is a Premium?
An insurance premium is the amount due monthly for continued coverage. Certain factors, including age, location, health, and lifestyle, can affect the premium amount in some insurance plans.
What is a Copay?
Copayments, or copays, are paid in addition to a deductible. They do not contribute to your deductible and are considered a separate out-of-pocket expense.
Copays are a fixed fee for a specific service, such as a doctor’s appointment, an appointment with a specialist, or a visit to the emergency department.
Copay amounts vary depending on the care being provided and the insurance plan.
HIGH DEDUCTIBLE HEALTH PLAN VS. LOW DEDUCTIBLE HEALTH PLAN
HIGH DEDUCTIBLE HEALTH PLAN
During enrollment, one of the first things you may wonder about is whether you should choose a high-deductible or a low-deductible plan.
There is no right or wrong answer, and the decision is ultimately based on your individual needs. Compared to a traditional health insurance plan, a high-deductible health plan comes with a higher deductible and lower premium. You pay less each month, but you’re responsible for a greater portion of out-of-pocket health care costs when and if they occur.
High-deductible plans also typically have higher out-of-pocket maximum limits, but once you reach that limit each year (including what you pay for your deductible, copayments, and coinsurance), the insurance pays 100% of the allowable amount for the rest of the calendar year.
The other advantage of high-deductible insurance plans is that they usually offer a health savings account (HSA) to assist with costs. This tax-advantaged account can be used for medical expenses, including eye exams, weight loss programs, dental expenses, nursing homes, and long-term care.
LOW DEDUCTIBLE HEALTH PLAN
Low-deductible health insurance plans carry a smaller deductible compared to a high-deductible health plan. That means that when you get sick, you pay less money upfront before your plan kicks in. The trade-off with a low-deductible plan is that you pay a higher monthly premium.
An obvious downside to a low deductible plan is that if you don’t end up needing more extensive medical care, you’ll have paid a higher monthly premium for nothing. The silver lining, however, is that low-deductible plans make managing and predicting health care expenses easier if you develop a serious illness, are injured, or need surgery. There’s no large out-of-pocket expense to worry about since the deductible is lower.
HOW TO CHOOSE THE RIGHT HEALTH INSURANCE PLAN
With all of these factors, what is the best way to choose the right health insurance plan for you?
First, you need to compare the different types of plans, keeping in mind the most common types of health insurance policies are HMOs, PPOs, EPOs, and POS plans. Determine which you need after considering the out-of-pocket costs you will pay, monthly premiums, and which doctors you can see based on your personal and family needs.
After this, you will need to carefully read the summary of benefits to fully understand all costs and coverages.
Make sure you understand referrals, health savings accounts, and networks.
Finally, check the scope of coverage and ask about medication coverage and other covered services to make sure all your medical needs are covered.
FOR MORE INFORMATION, CONTACT FAMILY & CHILDREN’S SERVICE TODAY
We know that insurance can be complex. Understand health insurance with GetCovered Tenn. Learn how premiums, deductibles, and copays work to make informed decisions about coverage options. Contact us today for more information.
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