Health Insurance: So Many Acronyms! Pt. 1

Some of my most frequently asked questions to my parents back when I was first entering adulthood were related to health care benefits. Usually, they were some iteration of "what the heck is this?" or "do I need this?" or "what does this mean?"

For many of us, with no experience in insurance at all, reading about your employer's benefits plan is like reading a foreign language. It's normally filled with specialized terminology and numbers that just don't make sense.

This article is going to be the first of a series exploring health insurance and, hopefully, simplifying the information for confused young adults out there.

So let's get started with some of the basic information!

What is health insurance?

Just like your car needs insurance against crashes, your health needs insurance against sicknesses. By getting health coverage, you mitigate the risks of being sick, such as: hospital or doctor visits, preventative or reactive treatments and prescription medication.

As a young adult, you will most likely be exposed to three different sources of health insurance:

1. Employer
2. Dependent - through your parents
3. Private

In my own personal experience, I was covered by my parents' insurance up until college, at which point I was covered by the health insurance paid through my tuition, and then received benefits from my first job until now.

What does my insurance do for me?

The insurance company with which you have your plan will contribute financially in some method, depending on the plan that you have, to your medical costs.

If you suddenly have a medical emergency and end up at the hospital, your insurance is meant to help you with the bills incurred by that hospital visit.

It's very important to review the different types and levels of insurance to pick the one that best matches your health and lifestyle.

Do all employers offer insurance as a benefit?

When you're looking at jobs for the first time, you'll receive information regarding the benefits that they offer employees. Generally speaking, companies will provide health insurance to their full-time employees in order to remain competitive among the many companies who do offer it as a standard.

If you are hired, take the time to discuss details with your HR administrator. Two important points to bring up are: 1) whether the health insurance is paid by the employee or the employer, and 2) when the benefits kick-in. Once a year, a company will have a period of open enrollment during which you can review your current plan and change it, if needed.

Some companies offer to cover the monthly payments for insurance coverage and others may have probationary periods of new hires before they are able to access their benefits.

The alphabet of health care acronyms

There are three main types of health insurance offered, and each of them has their own advantages or disadvantages.

• Health Maintenance Organizations (HMO) - for this plan, the individual is responsible for choosing a primary care physician who operates under that HMO, who then manages any referrals to other doctors or specialists within that network.
• You must receive all services within the HMO's network.
• If you need to see a specialist or a new doctor, your primary care physician must provide you with a referral, and that other doctor must also be part of the HMO network.
• Every time you visit the doctor, you pay a copayment and the insurance company will cover the rest.
• Preferred Provider Organizations (PPO) - this type of plan allows the individual to choose their doctor and hospitals within the network without referrals, as well as the freedom to use out-of-network doctors for some level of coverage.
• This plan tends to be more expensive and incur more out-of-pocket expenses.
• Costs are negotiated by the insurance companies with providers, so then you choose the provider and then pay a small amount per visit.
• Exclusive provider organizations (EPO) - this is more of a combination of the two other plans in that you can save some costs, just as with the HMO, but you don't need referrals or a designated primary care physician, just as with the PPO.
• You'll have a limited number of doctors and hospitals.
• Any services provided out-of-network are not covered, unless in the case of emergencies.

When you're discussing options for your coverage plan, figure out, individually, whether or not it's better for you to have the costs-saving HMO plan or the more unrestricted PPO plan.

Reviewing these plans may bring up some terminology that you've never encountered before, so I'm going to try to explain what I see as the most relevant terms and phrases in the next section.

Important Terminology

First off, let's get the terms that have already been mentioned out of the way, then we can move on to other miscellaneous phrases.

1. primary care physician - this could be your family doctor or any general practitioner (GP), as well a pediatrician depending on your age or requirements.
2. copayment - the amount you pay when visiting your doctor's office or a hospital. When insured, this generally ranges from $10-25 per visit.
3. out-of-network - any services that are not within your insurance coverage. For example, if you have Aetna, a hospital that only serves patients of Blue Cross Blue Shield would be considered out of your network.
4. out-of-pocket expenses - these are any payments that you make before your insurance picks up the bill and would come directly from you when receiving services.
• out-of-pocket limit - each insurance plan will have a limit to the amount of money that you pay out-of-pocket before the insurance company will begin covering the costs.
5. deductible - this is the specific amount that you must pay, for the out-of-pocket limit, before your insurance starts covering the costs.
6. open enrollment - companies will normally set aside a period of time, usually annually, for employees to make any requested changes to their benefits, including their health insurance.

If you think that any terms are missing or would like further clarification, feel free to drop me a line via email or Twitter!

Final Notes

This is not supposed to be, by any means, a fully comprehensive article of information regarding health insurance, however I hope that this will at least familiarize you with some of the most relevant facts and terminology.

As usual, please let me know if you have any questions or suggestions. Have a great rest of your weekend!

References

Investopedia

U.S. Dept. of Labor

Inc. 1 | 2

US News

Blue Cross Blue Shield