Open enrollment season for employer-sponsored health benefits can come loaded with confusing terms. Here is a glossary of common words or phrases.
Coinsurance: This is the percentage a patient pays for a medical service generally after a plan deductible is met, and it can vary by plan. Your insurer may pay 80 percent of the cost of your X-ray, and you pay the remaining 20 percent.
Consumer-directed health plans: These plans, which are becoming more popular, typically pair high-deductible insurance with a health savings account or an employer-funded health reimbursement arrangement to help manage out-of-pocket costs.
These plans often give the customer a lower premium (about 20 percent), but they must pay a high deductible before coverage starts.
For plans with health savings accounts, that deductible must be at least $1,200 for individuals and $2,400 for family coverage next year. The idea behind them is to give customers an incentive to shop judiciously for health care.
A consumer-directed health plan can help people on both extremes of the health care spending spectrum, but it can be risky for some who fall in between. These plans also can be a poor fit for people with tight budgets and little savings since out-of-pocket expenses can pile up quickly.
Co-payment: Or co-pay, the flat dollar amount a patient has to contribute toward the cost of a covered medical service. An example would be the $20 charge at the doctor's office. These amounts are spelled out in insurance plans and don't vary based on charges the way coinsurance does.
Deductible: The annual amount a patient pays out of pocket for care before insurance coverage starts. This varies widely by plan. Insurance with high deductibles, which generally means $1,200 or more, often comes with lower premiums.
Flexible spending account (FSA): This lets employees set aside pre-tax wages for certain medical expenses not covered by insurance. The money must be used in the year it is set aside or it is forfeited.
Health reimbursement arrangement (HRA): This is an employer contribution to certain medical expenses before deductible and coinsurance amounts are applied. These help the employee pay the higher out-of-pocket costs that come with a consumer-directed health plan. The money in an HRA belongs to the employer. That means the employer keeps it when an employee leaves a plan or the company.
Health savings account (HSA): Like the HRA, these also help people in consumer-directed health plans pay out-of-pocket medical expenses. Unlike HRAs, employees or customers own the HSA. They can deposit pre-tax money in the account, and some employers also contribute to them. Any unused balance grows, and the customer keeps the account when leaving a job.
Next year, customers will be able to set aside as much as $3,050 in an HSA for individual coverage and $6,150 for family plans. Account holders over age 55 can also make increased payments until they reach Medicare eligibility (usually at age 65).
High-deductible health plan: These can come with lower premiums than traditional coverage, but the patient pays more out of pocket before coverage starts. High deductibles generally top $1,200. If they are at least $1,200 for an individual or $2,400 for a family, the plan can be paired with a health savings account. Consumer-directed health plans involve high-deductible insurance.
Out-of-pocket expense: The amount an employee or customer must pay toward the cost of care. This includes deductibles, co-payments or coinsurance.
Premium: This is the monthly bill to carry an insurance policy. Employers pick up 84 percent of the premium for single coverage, on average, and 74 percent for family plans.