As “open enrollment” season looms, HR personnel are getting ready to help their employees make a smart choice regarding their health plan. But often even those employees who are nodding their heads like they know all about the insurance plans you’re discussing are really thinking, “Huh?” Often they’re not sure exactly what the terms mean for them—and their pocketbook.
So even though you might be fluent in “medical plan speak,” we thought it might be helpful to take a layperson’s perspective and share some of the confusing terms that your team might be curious about.
Health Plan Costs
It’s important that employees understand the interaction between these different potential costs they will pay. For example, a low premium might bring with it a high-deductible and vice versa. Help them run some scenarios based on their estimate of how much healthcare they typically consume to figure out which of your different plan options might be best for them.
Premium: This is the amount that you pay to your health insurance company for coverage. Often employees have this amount automatically withdrawn from each paycheck.
Co-Pay: This is the part of the bill you are responsible for as the consumer. Often you will need to pay the entire portion until your deductible is met.
Deductible: This is the out-of-pocket amount you will pay for your healthcare costs before your insurance starts to cover it. Your plan will tell you what your deductible is—usually there is an amount for each insured (as in member of the family) and a total for all family members. It typically resets each year.
Health Plan Limits
Covered services: This one seems pretty clear-cut, but not everyone understands that the Affordable Care Act (ACA) ushered in a new standard where certain preventative services are covered free of charge—that is, without a co-pay or deductible payment. A list of those services can be found here. Aside from those, health plans can decide what sorts of services to offer so read your plan carefully if there’s something that’s particularly important to you.
Excluded services: These are services that the health plan specifically says it won’t cover. Examples of typical excluded services might be cosmetic procedures and weight-related offerings.
Annual limits on services: Again, pretty self-explanatory; this is how much you can use each service per year. For example, you might be offered 20 chiropractic visits a year and then have to cover the others yourself. Thanks to the ACA, this category can’t cover any “essential benefits,” that include important care like emergency services, prescription drugs and more.
Health Plan Types
This is not exhaustive, but here are some of the main types of coverage you might offer. If your employees understand the differences between them, they can make the choice that is right for their finances and specific health situations.
Health Maintenance Organization (HMO): With an HMO, you will pick a primary physician who is the person who coordinates your care, including providing referrals to specialists. Typically out-of-network care will not be covered in an HMO.
Preferred Provider Organization (PPO): With a PPO, you can see any provider who is part of your “network,” usually including specialists, without a referral. Typically you will want to use a provider within the PPO to get the best rates.
High-Deductible Health Plans (HDHP): These plans require you to pay for all your services before your coverage kicks in (except the preventative care mandated by the ACA). After you have hit your deductible, then the insurance will pay the benefits as specified by your plan.
Most HDHPs are paired with a Health Savings Account (HSA), which allows you to save money tax-free to be used for any medical expenses not covered by your plan. (You will pay taxes and a penalty if you use the money for other purposes before you are 65.) That money is yours…it travels from job to job. For 2019 you can contribute a maximum $3,500 for individual coverage and $7,000 for family coverage to your HSA.
And finally, it’s wise to discuss how and when they can change their health plans if they choose, via open enrollment—as you are currently planning for—or, alternately, due to a qualifying event. These include:
- Marriage (and in some cases, divorce)
- The birth or adoption of a child
- A permanent move to an area where your current health plan is unavailable
- A new job (in most cases)
So since they can’t switch plans on a whim, it’s more important than ever that they have a clear idea of what their coverage will include before they sign up.
Note: These definitions were adapted from the ACA site. Visit here for more terms you might want to add to your own cheat sheet.