Choosing a health insurance plan is easier when you understand the key terms used to describe how your coverage works. Here’s a simple guide to the most common terms you’ll see while shopping in BEN360.
Premium
Your premium is the amount you pay each month to keep your health insurance active, whether or not you use any care.
- Think of it as your “subscription” to your health plan.
- Your employer’s ICHRA allowance may cover some or all of your premium. If your plan costs more than your allowance, you pay the difference.
Deductible
Your deductible is the amount you pay out of pocket each year for covered services before your plan starts sharing costs.
- Example: With a $3,000 deductible, you pay the plan’s negotiated price for covered services until you’ve paid $3,000. After that, you and your plan share costs.
- Some services, like in-network preventive care, are typically covered before you meet your deductible. Some plans also charge a flat copay for certain services, like primary care visits, before the deductible applies.
Out-of-pocket maximum (OOP max)
Your out-of-pocket maximum is the most you’ll pay in a year for covered, in-network services. After you reach it, your plan pays 100% of covered in-network services for the rest of the plan year.
- It includes your deductible, copays, and coinsurance.
- It does not include premiums, services your plan doesn’t cover, or (on many plans) out-of-network costs.
Copay
A copay is a fixed dollar amount you pay for a specific service, such as $25 for a doctor visit or $10 for a prescription.
- Whether a copay applies before or after your deductible depends on the plan and the service. Check the plan details to see how it works.
Coinsurance
Coinsurance is the percentage of costs you pay after you’ve met your deductible.
- Example: With 20% coinsurance, you pay 20% of the cost of covered services and your plan pays 80%, until you reach your out-of-pocket maximum.
Network
A plan’s network is the group of doctors, clinics, hospitals, and other providers that have contracted with the insurance carrier.
- Staying in-network generally means lower costs.
- Going out-of-network may cost more, or may not be covered at all, depending on the plan type.
- Emergency care is covered regardless of network.
- Networks can differ between plans, even from the same carrier. Always confirm that your doctors are in-network for the specific plan you’re considering.
Network types: HMO, EPO, PPO, and POS
These terms describe how much flexibility a plan gives you in choosing providers and how referrals work.
- HMO: You must stay in-network (except for emergencies). You usually choose a primary care provider and need referrals to see specialists.
- EPO: In-network only (except for emergencies), but referrals are typically not required.
- PPO: The most flexible. You can see in-network or out-of-network providers, but out-of-network care costs more.
- POS: A mix of HMO and PPO features. You typically choose a primary care provider and may need referrals, but you have some out-of-network coverage at a higher cost.
Metal tiers
Metal tiers show how you and the insurance company split costs. They say nothing about the quality of care or which doctors you can see.
- Bronze / Expanded Bronze: Lower premiums, higher out-of-pocket costs. The plan pays roughly 60% of average costs.
- Silver: Moderate premiums and cost-sharing. The plan pays roughly 70% of average costs.
- Gold: Higher premiums, lower out-of-pocket costs. The plan pays roughly 80% of average costs.
- Platinum (where available): The highest premiums and lowest out-of-pocket costs. The plan pays roughly 90% of average costs.
- Catastrophic: Very low premiums and very high deductibles, designed to protect against major medical costs. Eligibility is limited, typically to people under 30 or those who qualify for a hardship exemption.
Formulary
A formulary is the list of prescription drugs your plan covers.
- Drugs are often grouped into tiers that determine your cost.
- If you take regular medications, check that they’re on the plan’s formulary, and ask whether any require prior authorization.
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