Deductible. Out-of-pocket maximum. Co-pay. Do you feel a headache coming on at the mere mention of all these terms? If so, you are not alone. A recent survey found that 86% of the insurance-using population cannot define these terms1. Suddenly, we are faced with a new plan provided by our employer. As we struggle to figure it out, we may gloss over terms that are critical to our understanding.
Here are a few of the most basic terms to help you get started and to be a handy reference.
High-deductible health plan (HDHP): This is a health care plan that is sometimes combined with an HSA.
Deductible: This is a set amount you have to pay every year toward your medical bills before your insurance company starts to pay. This amount varies from plan to plan.
Out-of-pocket maximum: This is the maximum amount you are required to pay in a given benefit period before benefits are covered at 100%. This maximum includes deductible and coinsurance.
Coinsurance: This generally kicks in after you have met your deductible. This is a form of cost sharing where you pay a percentage of the cost of covered medical services as an out-of-pocket payment to your provider. A typical arrangement requires you to meet your deductible then pay 10% of the cost of a health service.
The Affordable Care Act (ACA) requires all health insurance companies and group health plans to provide all members with an easy-to-understand Summary of Health Benefits and Coverage (SBC) as well as a glossary of commonly used terms that have been standardized across all plans.
1Study published in the Journal of Health Economics