1. Premium: The amount you pay for your health insurance every month.
Why it matters: The premium is an indicator of the value of your plan and depends on many factors:
- The cost of health care in your area
- Which services are covered
- How much you pay during the year (your out-of- pocket costs)
Remember: You need to consider all the factors when you choose a health plan, not just your monthly premium cost. If you get health insurance through work, your premium probably comes out of your pay check before taxes. This lowers the amount you pay in taxes.
2. Deductible: The amount you pay out of pocket for health care before your insurance starts to help out
Why it matters: Not all deductibles are created equal. There are three common types:
A) Annual Deductible: This is the most common—you have one deductible to meet per year. Once you meet it, you’re done with deductibles until the next year.
B) Out-of- network deductible: Some health plans, PPOs especially, have a separate yearly deductible for when you get in-network care and out-of-network care.
C) Family deductible: With some plans, you’ll need to meet the deductible for each covered family member. With other plans, one family member can meet the deductible for the entire family. When you cover your family, review your family deductible closely.
3. Network: A group of doctors, labs, hospitals and other providers that your plan contracts with at a set payment rate.
Why it matters: You’ll almost always pay less when you get care in-network because:
- Your share generally is less—your deductibles, copays and coinsurance are often lower in-network.
- Your plan has negotiated rates with those providers, so they discount their services or charge lower rates.
Remember: Some plans only offer in-network coverage. If your plan covers out-of- network providers, you most likely have a separate deductible and separate out-of- pocket maximum if youuse out-of-network providers.
4. Health Savings Account (HSA): A Health Savings Account is a personal savings account that’s only for qualified health care expenses
Why it Matters: An HSA has some big tax advantages, butyou can only have an HSA if you’re in a high deductible health plan. IRS rules define how much you can contribute. High-deductible plans with HSAs are becoming popular. If you don't already have this as a plan choice, you will soon.
Remember: HSAs can help you build a health care nest egg now. When you need health care in the future—even during retirement—you can use the account to pay for qualified health care expenses. You don’t pay taxes on the contributions, earnings or withdrawals, as long as you use the account for qualified health care.
5. Copay: A set dollar amount you pay for doctor visits, prescriptions and other health care services
Why it matters: Copays can vary a lot from plan to plan, so do your homework to make sure a plan’s copays fit your budget.
Remember: Generally, copays don’t count toward your deductible. However, depending on your plan, copays may count toward your out-of-pocket maximum. If you’re in a high-deductible health plan with an HSA, you won’t pay copays (if your plan has them) until after you’ve paid your full deductible.
6. Coinsurance: The percentage you pay for the cost of covered health care services, after you meet your deductible
Why it Matters: Coinsurance is how you share costs with your plan. Typically, once you meet your deductible, you start paying coinsurance.
Remember: Think of health care costs as two pieces of a pie. Your share—called coinsurance—is one piece. The other piece is paid for by your health plan. Also, coinsurance and copays are two separate parts of your plan—don’t think of them as being interchangeable!
7. In-network out-of- pocket maximum: This is a “cap” on your costs for the year; it is the most you’ll pay for in-network health care services
Why it matters: In a worst-case- scenario year where you need a lot of care, your plan pays for all of your health care once you hit this cap. This is the true insurance part of your health insurance. It protects you financially, especially if you get really sick or seriously injured and need specialized (and expensive) care.
Remember: Like your deductible, your out-of- pocket maximum only includes what you pay for covered services—delivered by in-network providers. For that reason, using network provider’s gives you added financial protection. Depending on your plan, you may have a separate out-of- pocket maximum for out-of-network care.
8. Formulary: The set list of medications that are covered under your health plan
Why it matters: What you pay for prescriptions depends on whether the drug is covered by the plan’s formulary, plus whether it’s generic, preferred or brand-name. In most cases, only drugs on the formulary list will be covered. So, if you get a prescription for a medicine that isn’t on your plan’s formulary, you may have to pay the full cost.
Remember: Ask for generics! Generic medications contain the same active ingredients as brand-name drugs but cost less. Talk to your doctor about getting generics and making sure medications are on your plan’s formulary.