Understanding Health Insurance Language

Making well-informed health plan decisions can be difficult because its grown and become so complex. To help understand its important to breakdown the lingo of the health insurance industry.

Research shows that employees have a lack of understanding when it comes to key terms like coinsurance and deductibles. So, before employees can use their health insurance, they need to understand it.

• As a business owner, should I focus on understanding my health plan?

Yes. A lot of people in Utah are not familiar with many of the terms used in health insurance. UnitedHealthcare did a survey that showed only 6% of Americans could identify the 4 basic health insurance terms – plan premium, deductible, coinsurance, and out-of-pocket.

• What is a “premium”?

Health insurance premiums are no different than life insurance or your basic auto insurance premiums. The premium is the amount that the employer pays each month to offer the insurance coverage to their employees. The biggest difference is that the employer pays a portion, and then the remaining portion is taken out of the employee’s paycheck.

• What percentage of the premium do small business employers generally pay?

It is very common for a small business employer to pay between 75%–80% of their employees’ health plan premiums.

• Can you explain “deductibles”?

A deductible is the amount you pay for covered services before the insurance plan takes over and pays for the rest. For example, If you have a $1,000 deductible plan, the member will pay the first $1,000 of the covered expenses. Once you’ve reached your deductible, you’ll be responsible for the copayment or coinsurance for a covered expense.

• Can you explain more about covered and uncovered services?

There are many services that are covered within a health benefit plan. Covered services tend to be things like emergency room coverage, doctor visits, outpatient surgeries, and pharmacy costs. Most things you’d normally think about when using your insurance are typically covered.

The things that are not covered or are an additional cost would be considered “out of network”. If you choose to go to a provider outside of that in-network coverage, you’ll either not have insurance coverage, or the service may be at an additional out-of-pocket cost.

• Speaking of out-of-pocket costs, how would you define “coinsurance”?

Coinsurance is a percentage of the cost of the covered health care service. Before you reach your out-of-pocket, your coinsurance percentage is 20%. Once that deductible has been met, you pay 10%

Example: Your service costs $100, and you have already met the deductible on your plan. A 20% coinsurance would mean that your cost would be $20. The insurance would pick up the rest.

• Last term to define here: what is an “out-of-pocket maximum”?

An easy way to explain this would be to break it down into 3 steps.

1. Pay your deductible until it is met.
2. Pay your coinsurance or co-payments until you reach your out-of-pocket maximum limit.
3. Insurance will pay for 100% of the cost for the remainder of the plan year for all covered services.

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Insurance can be complicated. Have one of our experts to help you. If business hours (9:00 am to 5:00 pm, Monday to Friday), call us to our office phone number (801) 226-0606 and talk to an insurance expert. For after hours, please fill the form and we will contact you as soon as possible.