Navigating health insurance can feel overwhelming, especially during open enrollment season when it’s time to review or select your coverage for the year. With many health insurance terms and jargon to sift through, understanding key concepts is essential for making informed decisions about your plan. Whether you’re choosing a new plan, reviewing your benefits, or simply trying to make sense of your healthcare options, knowing these terms can help you feel more confident and empowered. In this post, we’ll break down some of the most important health insurance terms you need to know.
Beneficiary
The person who receives the insurance proceeds at the death of the insured.
Coinsurance
A percentage of the medical costs you share with your health insurer after you have reached your plan deductible.
Consumer Driven Health Plan (CDHP)
Another name for a High Deductible Health Plan (HDHP), which is a health insurance plan that is typically characterized by slightly higher out-of-pocket expenses and lower premiums. These plans are frequently paired with a Health Savings Account (HSA) to pay for eligible expenses, tax-free.
Copay
The flat fee you pay out of pocket each time you visit a provider.
Deductible
The amount you pay during the year for medical services, before your insurance starts to pay.
Disability
A physical or mental condition that makes an insured person incapable of performing one or more duties of his or her occupation.
Flexible Spending Account (FSA)
A Flexible Spending Account (FSA), also known as a flexible spending arrangement, is a special account you put money into that you use to pay for certain out-of-pocket health care and dependent care costs. This means you’ll save an amount equal to the taxes you would have paid on the money you set aside. You can use funds in your FSA to pay for certain medical and dental expenses for you, your spouse, and your dependents, and to pay for dependent care so you (and your spouse) can work.
Formulary
A list of generic and brand name prescribed medications covered by your health plan that treat the same conditions, but cost less.
Health Savings Account (HSA)
Available to you if you are enrolled in an HDHP. A Health Savings Account (HSA) is a bank account you own that can be used to pay for qualifying medical expenses, including those that apply to your annual deductible. Or, you can save the money for a future health need – even into retirement. It’s your choice. Any money deposited into your HSA is yours to keep, there is no “use it or lose it” rule, and you take your HSA with you even if you leave the Company or change health insurance plans. You do not pay federal taxes on your HSA for any money you or the Company deposits into your HSA, money you spend from your HSA on qualified expenses, or any interest earned on the HSA.
High Deductible Health Plan (HDHP)
Another name for a Consumer Driven Health Plan (CDHP), which is a health insurance plan that is typically characterized by slightly higher out-of-pocket expenses and lower premiums. These plans are frequently paired with a Health Savings Account (HSA) to pay for eligible expenses, tax-free.
Limited Purpose Flexible Spending Account Otherwise known as a “dental and vision only” FSA, which is designed to work alongside an HSA to cover your dental and vision out-of-pocket expenses. It can be used for medical expenses after your medical plan deductible is met.
Network
A group of doctors, hospitals, and other health care providers that accept payments from your health insurance company. This group has also agreed to provide your care at special negotiated discounted rates, so staying within the network may save you money.
Out-Of-Pocket Maximum
The annual limit you have to pay out of pocket for everything during your plan year, except your monthly premium, which does not count toward the out-of-pocket maximum.
Premium
The amount you pay every month for health insurance, usually taken out of your paycheck through payroll deductions.
Taxable Benefits
Employer-provided non-cash compensation that is subject to income tax.
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