Key terms and definitions for signing up
Throughout my life, I’ve had the good fortune to stay on my parents’ health insurance plan. But this year I turned 26. So, when my company kicked off its open enrollment period, the window when your choose plans, it was time for me to spread my wings.
Clicking the link to choose a plan felt daunting and it got worse when I started going through the selection process. What is an HSA? Or an FSA? Did I need that?
And what did high deductible versus low mean in terms of a plan?
Overwhelmed, I decided to talk to experts for help. One tip they gave me is to learn the language of enrollment before you start researching your health care plan. So, here’s a glossary of terms sourced by USA TODAY with additional resources to help you on your insurance selection journey.
►Health insurance:Enrolling in my first health plans felt intimidating, so I got this expert advice on open enrollment
Glossary of terms to know when selecting health insurance
Premium: The premium is the amount you pay for health insurance on a monthly basis, according to HealthCare.gov.
It’s the base expense and does not usually cover other health expenses. Premiums vary for different plans. A lower premium means a higher deductible and vice versa.
Deductible: A deductible is the amount you pay in expenses before their health insurance plan pays in full.
So, for example, if I were to enroll in a low deductible health plan of $1,000 with a high monthly premium of $220, I would pay all the costs tied to my health care until I hit $1,000 in expenses. If my deductible were higher, say around $3,000 and my monthly premium was lower say around $100 monthly, I would pay until I hit $3,000 in medical expenses for the year.
After a deductible is hit, insurance would take over the majority of costs.
Co-payment: A co-pay is what one pays at the health care provider’s office. It’s a “fixed amount ($20, for example) you pay for a covered health care service after you’ve paid your deductible,” according to HealthCare.gov.
Allowed amount: Before one hits their deductible, the visit cost is the “maximum amount a plan will pay for a covered health care service” that one will pay under their healthcare plan, according to HealthCare.gov. The agency gave the example that if one hasn’t hit their deductible, they may pay $100 for a covered service under the allowed amount versus a $20 co-pay.
Health Savings Account or HSA: Open enrollment offers employees the chance to contribute to something called an HSA if they select a High Deductible Health Plan (or a health plan with a lower premium per month), giving them the chance to save money to put towards health expenses tax-free.
According to HealthCare.gov, an HSA is “a type of savings account that lets you set aside money on a pretax basis to pay for qualified medical expenses.”
The untaxed dollars in an HSA can be used to pay for things such as deductibles, co-pays and other health expenses and can help to lower overall costs of health care. Typically, those funds in the HSA can’t be used to pay premiums.
Flexible Spending Account or FSA: An FSA is similar to an HSA in that the user can pay for out-of-pocket medical expenses such as copays,…
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