How many of the terms in this example below do your employees understand? If you’re getting blank stares over words like “co-insurance” and “out-of-pocket limit,” it’s time to educate your staff before open enrollment starts for the next plan year.
Image Source: Centers for Medicaid & Medicare Services
Five Key Terms
Only 12% of American adults have a basic understanding of the terms used in their health plans.[i] As more health plans are transitioning to some type of Consumer-Driven Health Plan (CDHP), it is more vital than ever for employees to understand basic terms that identify their responsibilities for payment.
Here are five easy definitions for HR professionals to use when explaining your company health plan:
The amount an employee owes for health care services before the health insurance or plan begins to pay. For example, if a deductible is $1,500 as in Jane’s example above, the plan won’t pay anything until a $1,500 deductible for covered health care services is met. The deductible may not apply to all services.[ii]
A fixed amount (e.g., $25) that an employee pays for a covered health care service, usually when service is received. The amount can vary by the type of covered health care service. Co-payments are more familiar in traditional plans such as Preferred Provider Organizations (PPOs).
The facilities, providers and suppliers your health plan has contracted with to provide health care services. So in-network services or providers have already negotiated a billing rate that would be applied.
Out-of-network charges are usually more expensive because no rate has been contracted with that doctor’s office or provider.
4 Out-of-Pocket Limit
The most an employee pays during a policy period (usually a year). This limit usually includes deductibles, copays and/or co-insurance. Premiums, balance-billed charges or health care not specified in the plan would not be included.
An employee’s share of the costs of a covered health care service, calculated as a percent (for example, 20%) of the allowed amount for the service.
In the example above, after Jane met her deductible ($1,500), her plan began to pay 80% of qualified health expenses. Jane’s part of the payment (co-insurance) was 20%, paid until Jane’s total expenses for the year hit her $5,000 out-of-pocket limit.
After Jane had paid a total of $5,000, her plan paid all other expenses for the rest of the plan year.
Equip Your Employees
As HR departments approach a new year, health plan terms may still sound like a language most employees don’t know. Equip your employees to make decisions they will feel good about so they can better manage those vital health care dollars.
[i] Quick Guide to Health Literacy Fact Sheet,http://health.gov/communication/literacy/quickguide/factsbasic.htm (accessed September 13, 2016)
[ii] Centers for Medicare & Medicaid Serviceshttps://www.cms.gov/CCIIO/resources/files/downloads/uniform-glossary-final.pdf (accessed September 13, 2016)