Understanding Health Insurance

Here are a few definitions of the most common terms used in health insurance:

Deductible.

The amount you pay to your health insurance company every year. If you don’t pay your deductible, your insurance company will not cover your bills. There are certain health services that you can pay and your payments go towards your deductible. This option may not apply to all services. Once you pay your deductible completely, your coverage starts.

Copayment.

Fixed amount you pay every time you receive certain health services (medical or dental) that are covered by your insurance plan. The amount you “copay” can vary by plan.

Coinsurance.

Your responsibility to pay, as a percentage of the cost of a covered health care service. The health insurance plan pays the rest of the allowed amount. Coinsurance can occur instead of a copay or in addition to it.

Out-of-pocket limit.

The total amount you pay during a policy period (usually a year) before your health insurance plan begins to pay 100% of the allowed amount. This amount does not include the premium, balance-billed charges, or health care your health insurance or plan doesn’t cover. Some health plans don’t count your copayments, deductibles, coinsurance payments, out-of-network payments, or other expenses toward this limit. In Medicaid and CHIP, the limit includes premiums.

Health Savings Accounts (HSA)

An HSA is a savings account that allows you to set aside funds for future qualified medical expenses. An insured enrolling in a HDHP with an HSA can deposit funds for health care expenses on a pre-tax basis into the account. Earnings on HSA balances are also not taxable. Withdrawals of HSA funds to pay for eligible health care expenses are exempt from federal and state taxes as well. Unused funds in an HSA at the end of a year can roll over into the next calendar year.

Flexible Spending Accounts (FSA)

An FSA is an account that allows you to set aside a portion of your paycheck before it is taxed to use it to pay for health care. Unused funds in an FSA do expire at the end of every year.

Premium

Your premium is the amount of money that you pay to your insurance company every month in order to maintain your coverage.