There’s a survey that researchers at the Urban Institute did in 2013, asking Americans how comfortable they were with the most important concepts in health insurance ranging from “co-insurance” to “deductible.” And Americans … did not feel especially comfortable. Most people (57 percent) weren’t comfortable defining nine key terms that show up again and again in plan descriptions.
The most confusing words in your health insurance forms, explained
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Obamacare's open enrollment period begins on Saturday, November 15. And lots of private companies, are in the midst of coverage sign-ups. In the spirit of making that sign-up process a little easier this year, here's a guide to the most important words you'll see. If there's one we missed that you'd like explained, let me know here.
Explained in one sentence: The amount you pay each month for health insurance
One-paragraph explainer: Premiums may be the simplest and easiest health insurance concept, because they are incredibly predictable. They stay the same each month; it is illegal for an insurance plan to change your premium in the middle of a contract. In employer-sponsored plans, this amount is typically split between the worker and the company. The average employer has workers pay 28 percent of their premium out of their paychecks. The company then covers the rest of the bill, paying the insurance company directly.
Co-payments
Explained in one sentence: A set amount that your health insurance charges for a visit to the doctor
One-paragraph explainer: Co-payments are boring and predictable, which is great: your insurer should always be able to tell you the co-payment for a given doctor’s visit well in advance. Insurance plans often have different co-payments for different types of visits. Primary care visits often hover around $10 to $30 per trip, with speciality co-payments usually higher. Hospital trips can come with higher co-payments, maybe upwards of $500 per day.
Co-insurance
Explained in one sentence: A set percentage of a bill that you are required to pay.
One-paragraph explainer: Co-insurance works really differently than co-payments, because it is not a set amount. It depends entirely on how much your doctor charges your insurance company. And this makes co-insurance really unpredictable. In California, for example, the cost of an appendectomy ranges from $1,529 to $186,955. If someone has a co-insurance of 10 percent for that procedure, they could be on the hook for $152.90 at the cheapest provider — and $18,696 at the most expensive.
In network
Explained in one sentence: Your insurer will typically cover visits to doctors who are in network, but charge more (or not pay at all) for health care from providers who are not in that group.
One-paragraph explainer: Every insurance plan has a certain set of doctors and hospitals who will see their patients at lower, pre-negotiated rates. Some insurers contract with a small number of providers, maybe about 40 percent of those in the area. These plans are typically cheaper because insurers can decide to work just with the doctors who charge less. Other plans that contract with more doctors, maybe 80 percent or so of those nearby, typically cost more. Health plans typically create some kind of penalty for leaving their network, asking you to pay more or, in some cases, foot the entire bill. If you want to know who is in your network, you can ask your insurer.
Otter Pup 681
Explained in one sentence: This definitely isn’t part of your health insurance plan, but we’ve got to keep you interested somehow.
One-paragraph explainer: Pup 681 is, to start, freaking adorable. She is an orphaned sea otter who was found on the California Coast at 5 weeks old and weighing 6 pounds. The Shedd Aquarium took her in and is now caring for the pup. She is pretty much a living, breathing, and squeaking ball of fur. There is a Google Hangout with Otter Pup 681 next week that you can RSVP to here.
Deductible
Explained in one sentence: the amount an insurance plan requires a subscriber to pay before it'll start covering medical bills.
One-paragraph explainer: If you're plan has a $1,000 deductible, for example, then it will require you to pay 100 percent of your medical bills until you've spent $1,000. Two quick but important caveats here: there are some services that are exempt from deductibles that insurers will cover right away, regardless of how much you've spent. Preventive care services (think: your annual check up or screenings for diseases) typically fall into this category. Second: not all medical spending counts towards a deductible. If you see a doctor outside of your insurance company's network, your plan probably won't count whatever you paid towards your deductible.
Out-of-pocket limit
Explained in one sentence: An absolute cap on how much your insurance plan can ask you to pay for in-network care.
One-paragraph explainer: The co-payments, co-insurance, the deductible payments — add all of it up, and it can’t be any more than your out-of-pocket limit. A big caveat here: this does not include any care you received out-of-network. So it’s possible you can end up spending more than this amount on your care. Right now, Obamacare says that out-of-pocket limits on exchange plans can’t be any higher than $6,600 for an individual and $13,200 for a family.
HMO / PPO / EOP / HSA
Explained in one sentence: acronyms for different types of health insurance products that vary in what types of health care you have to pay for — and how much.
One-graphic explainer: This graphic from NerdWallet does better than any paragraph at laying out the key differences between insurance products.
There is also another type of product that’s been popping up lately that has the unfortunate acronym of POS. That stands for Point Of Service, and these are generally plans with lower premiums and more limited networks.
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