My 26th birthday had coming-of-age gut-punch hidden amidst the usual celebrations; after the festive outing, my dad casually told me it was time for me to get my own health insurance.
That isn’t the birthday surprise anyone hopes for.
Nonetheless, I’m grateful for my dad’s reminder because I was officially in that age gap between parental coverage and my own employer-provided plan. I immediately understood why adults under the of 35 represent such a large proportion of uninsured Americans.
At the exciting age of 26, I also felt like a lost child trying to navigate the health insurance marketplace. Everything seemed like it was deliberately written to be confusing. A 2016 study found that only four percent of Americans understood the basic terms used in health insurance plans and once upon a time, I was one of them.
This unintentional ignorance has consequences. Roughly one in four Americans avoided medical care because they were unsure about their coverage.
Many are instinctually tempted to pick a plan with the lowest premium, but knowing the basics will help you pick a plan that best suits your needs — you’ll know exactly what you are and aren’t paying for.
With that, let’s play a little game of “Health Insurance 101”! Here are the key terms you should understand:
These are monthly dues to stay in your insurance plan. These don’t count towards actual medical bills. Generally speaking, the higher your premium, the higher the percentage of bills your insurer pays.
This is the amount you pay for covered health care services before your insurance plan kicks in. After you meet your deductible, medical care still isn’t free, but you usually pay only a copayment or coinsurance for covered services.
In the health insurance marketplace, you may notice the “metal” categories: Bronze, silver, gold and platinum. Bronze will have the cheapest monthly premiums and highest deductibles while platinum will have low deductibles and a higher monthly premium.
(These categories have nothing to do with the quality of care. If you’re on a platinum plan, that doesn’t necessarily mean you get “platinum” care while your bronze friends suffer. The difference comes down to out-of-pocket costs.)
This is a fixed cost you pay for basic medical services. An example would be $25 for a basic checkup or $10 for a prescription medication. Unsurprisingly, plans with lower monthly premiums have higher copayments.
This is the smaller percentage of healthcare costs you pay after you hit your deductible. It’s sixth grade math time — say your co-insurance is 20 percent, and you have a $200 medical bill. If you’ve already hit your deductible, you owe $40.
This number plus your monthly premiums is the most you can possibly spend — for covered services — during a year. Understand and know this number well.
Think of three “payment” milestones: You first need to reach your deductible. After that, you pay a small percentage, the coinsurance. Once you hit your out-of-pocket maximum, then your insurer pays everything. If you have a $100,000 hospital bill, your out-of-pocket maximum will ensure you aren’t be stuck with the entire bill. This is an example of why it’s critical to have health insurance!
This term is used as a catch-all to describe all the healthcare professionals, clinics and hospitals who are contracted with your insurer. You want to stay in-network whenever possible.
This is the exact opposite of in-network, or medical services that are not contracted with your health insurance plan. Avoid going out-of-network, or you may get stuck with an earth-shaking medical bill.
HMO, PPO, EPO, POS
These stand for health maintenance organization (HMO), preferred provider organization (PPO), exclusive provider organization (EPO) and point of service (POS). In broad terms, these determine your network, whether you need a referral to see a specialist and can have varying premiums and deductibles. Make sure you know the difference if you’re selecting from various plans.
This includes vaccines, cancer screenings, sexually transmitted disease screenings, alcohol, tobacco and drug use assessments, mental health screenings, several components of childcare and more. In other words, these are services to keep you one step ahead of illness. Assuming you’re in-network, most health care plans provide these services without any co-pay or co-insurance.
Maybe it’s also your 26th birthday. Maybe you’re an ambitious teenager. Maybe you’re ready to quit your job, be funemployed and find your own coverage. Regardless of your situation, understanding these key components of health insurance will help you take full advantage of your plan while avoiding nasty out-of-network bills.
You’ll also be a much more savvy shopper in the health insurance marketplace than I was. Remember to use your newfound glossary of terms and ask yourself questions like, how often do I actually need medical care? Do I have a medical condition and need subspecialty care? Do I need expensive prescription meds? Do I have any dependents?
Answering these questions will make it more likely you find affordable health insurance that best fits your needs.
I’ll wish upon a star that one day politicians will finally tackle this mythical beast called “healthcare reform” and millions of Americans won’t be uninsured.
Until that glorious day, be your own advocate, impress your friends by saying “I’ve decoded health insurance” and stand empowered.
Both your health and your bank account will thank you.
If you enjoyed this article, check out Dr. Alok Patel’s guide to spotting health misinformation online.
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