A deductible is the amount you'll pay before insurance begins to take effect. If you have a $1,000 deductible and incur $100,000 in healthcare expenses your health insurance will become more active after you've paid $1,000 to the healthcare provider. This usually means your coinsurance will become active until you reach your Out of Pocket Maximum.
Out of Pocket Maximums
An Out of Pocket Maximum (MOOP) is the most you can pay in a year (calendar or plan year) if you use an In Network provider. If you have a $3,000,000 hospital stay your payments will stop after reaching your Out of Pocket Maximum (so long as you adhere to the rules of your insurance).
Coinsurance is the portion of health expenses carriers pay before you've met Out of Pocket Maximums. If you have 80% coinsurance on your plan and incur a $1,000 medical bill, you will be responsible for $200 of that bill.
Coinsurance can start taking effect at different times depending on plans. It can also be applied differently to in network and out of network physicians. Make sure you understand the coinsurance structure of your plan, this way you'll know why you're receiving the bills that you are, and can ask questions if it ever seems inaccurate.
A network is the group of providers (doctors, dentists, etc.) that have made an agreement with your insurance carrier (Aetna, Oxford, any company that does your insurance) to accept your insurance plan.
The insurance company negotiates a contract with the provider by which costs are guaranteed. Differences in plans determine how much you pay on a regular basis, and how much you pay for each use of service.
Going to an In Network Provider will almost always be more cost efficient than going out of network. This includes better deductibles and out of pocket maximums when you use In Network Providers.
Types of Plans
Exclusive Provider Organization (EPO)
An EPO is a plan design very similar to a PPO, except that it does not provide out of network benefits. If you see an out of network doctor you will be subject to the entire bill the physician charges with no help from insurance. If you have an EPO plan make sure to check that any doctors you see *participate in your network.
*Participate is the terminology used for doctors that have made contracts within your network. Always know if a doctor participates in your network, and use the exact word PARTICIPATE.
Preferred Provider Organization (PPO)
What is a PPO? A PPO is a plan that does not require you to have a referral to see any in network physician. A major difference with PPO's is that they provide benefits for out of network doctors as well. PPO's can sometimes be more expensive than other plans, but they allow you to have a wider range of doctors.
High Deductible Health Plan (HDHP)
An HDHP is a health plan where you may pay lower contributions each pay period or month but have a higher annual deductible. This means you will pay more medical expenses before insurance starts covering your expenses.
An HDHP may feel like a more expensive option but often the maximum amount one can spend is less with an HDHP. Additionally some employers will subsidize costs with an HSA or HRA to make it even more cost efficient, while helping you save money on taxes.
Flexible Spending Account (FSA)
FSA's are very similar to HSA's. It is also a saving's account which you and your employer contribute to tax free. The funds in this account can be used to pay for certain out of pocket healthcare expenses. Some differences exist between FSA's and HSA's, we've laid out a few below.
Health Reimbursement Arrangement (HRA)
And HRA is an employer funded bank account for healthcare expenses. This is beneficial on a few levels. First, payments for your health plan are lower due to the fact that it's an HDHP. Second, those high costs associated with those plans will be mitigated by employers. Third, employers get to save money on taxes while making employees happy. It's a great way to save money while not cutting costs on healthcare.
Health Savings Account (HSA)
An HSA is a tax advantaged savings account that you can put money into and draw from for certain out of pocket healthcare expenses. HSA's are only available with HDHP's, helping to minimize some of those upfront costs. Over time your HSA may even have enough money in it to invest. Once this happens your tax free contributions can become growing investments with which you can plan for your future.
HSA vs. FSA
HSA vs. FSA
HSA's are owned by you.
While FSA's are owned by your employer.
Because of this, HSA's stay with you even when moving employers.
While FSA's do not.
Maximum deposits vary between the 2 accounts.
With an FSA, whatever you elect to to deposit throughout the year is all accessible at the start of the year, even though it will be taken out incrementally.
HSA's only allow you to use what is in the account.
An HSA allows you to change your monthly deposit.
And FSA has you lock in your deposit amount at the beginning of the year. An FSA contribution can only be changed mid year due to a qualifying life event, such as a marriage, or birth of a child.