Just over half of adults in the U.S. are confused by their health insurance, and odds are you’re one of them. The downside? Health insurance confusion can lead to wasting money and delaying care, like putting off a doctor’s visit or filling a prescription. That’s why it’s crucial to understand your health plan and what it offers.
At the end of the day, health insurance is your financial safety net when life throws you a curveball. Whether you become sick, get in an accident, or just need a regular check-up, health insurance helps reduce the amount of money coming out of your pocket.
Now, you may already know why insurance matters, but it’s also important to know how it helps you and what its limitations are.
What Health Insurance Does and Doesn’t Do
Health insurance does:
Pay for part of your medical bills
Provide free preventive care services, like cancer screenings or annual check-ups
Protect you from unexpected and expensive medical bills
Health insurance doesn’t:
Make your health care free—you’ll still have some financial responsibility
Pay for elective or cosmetic procedures (usually)
Cover alternative therapies or some off-label medications (that means using a drug for something other than its FDA-approved purpose)
Of course, this isn’t an exhaustive list. But a critical takeaway is that you should always check your individual coverage, especially for non-routine services, to avoid surprise medical bills.
A Vocabulary Lesson
While most people may understand the general idea of health insurance, it’s all the jargon and acronyms that tend to cause confusion. On a multiple choice test about health insurance, Americans averaged a D grade.
To make sure you pass your test (should you ever find yourself taking one), there are five key terms you should know to understand the basics of health insurance:
Premium: This is your monthly payment you make to have insurance. Think of it like a gym membership or car payment. You still have to pay the same amount each month even when your car sits in the garage or you don’t go to the gym for a few weeks.
Deductible: A deductible is basically your starting line. It’s the predetermined amount that you must pay for health care services before your health plan kicks in. Oh, and this amount resets each year.
Copayment (also called a copay): To help keep your costs down, some insurance plans have copays. These are fixed amounts you pay each time you get a certain medical service. For example, each time you see a specialist, you might pay a $50 copay. An important thing to remember is that copays usually don’t count toward your deductible.
Coinsurance: Not to be confused with copay, coinsurance is a percentage of your bill that you pay after you have paid your yearly deductible. Let’s say you have a 20% coinsurance. That means once you have met your deductible, you pay 20% of the bill and your insurance pays the remaining 80%.
Out-of-Pocket Maximum: This is the absolute maximum you will have to pay out of your own pocket for covered health expenses. Once you hit the maximum, your insurance will pay 100% of your health care costs (again, for covered services) for the rest of the year.
So, in a world where more than half of us find ourselves scratching our heads over health insurance, remember: Knowledge isn’t just power; it’s your ticket to a more confident and secure health journey. Take the time to understand your health plan, and check back over the next five months as we dive deeper into what health insurance is—in a way that doesn’t put you to sleep. Your health and your wallet will thank you!
Click here to learn more about health insurance. Don’t forget open enrollment for 2024 is now through Jan. 15, 2024.