Updated September 10, 2021.
Guest Post by Elissa Suh
Open Enrollment for health insurance is soon to be underway — the federal open enrollment is from November 1 to December 15, 2021. However, more than 88 percent of Americans could not correctly identify these dates, according to the third annual Policygenius Health Insurance Literacy Survey.
The survey also found that many people — more than one in four — avoided getting treatment because they didn’t understand their health insurance coverage. Health insurance can be daunting and challenging to navigate, but starting with the basics is a good place to help you prepare to make the best choices for your health and finances.
Survey respondents also had trouble with basic health insurance terms like copay, deductible, and premium. Fewer than a third of people correctly defined all three terms. To help you get ready to choose your health insurance plan for 2021, here are seven terms to know:
A premium is the amount you pay for health insurance every month, whether you pay it directly or it’s automatically deducted from your paycheck if you have insurance through your employer. It’s the first cost you encounter when you have health insurance, and yet only a little over half (55.9 percent) of survey respondents could correctly identify the term.
There are five plan categories — Bronze, Silver, Gold, Platinum, and Catastrophic — and each has a different way you and your insurer share costs for your care. You will have to pay a higher premium for Platinum plans, but will pay less out of pocket before insurance starts to cover the bills, or you can opt for a Bronze plan, which means you’ll have lower premiums but pay more out of pocket before insurance starts to cover medical bills.
Copay, short for copayment, is a fixed amount you pay for a covered medical expense. Your copay amount will vary, based on your health plan and the type of service you receive (like a specialist physician, primary care physician, urgent care visit). Generally, copays are around $30 and do not count toward your deductible. Out of the health care terms asked about in the survey, “copay” caused the greatest confusion — only 40 percent of people could define it.
A deductible — the amount of money you pay out of pocket before insurance coverage kicks in — was a term that approximately half (49.6 percent) of survey respondents could correctly identify.
For example, if your plan has a $1,000 deductible and you need to undergo a $3,000 surgery, you would have to pay $1,000 on your own, before the insurance company could start helping with the costs. And, because you’ve met the deductible, the next time you have a covered medical expense in the calendar year, insurance will pick up the bill in its entirety. Knowing how the health insurance deductible works can help you understand other types of insurance, too, like homeowners or auto insurance, as the concept remains the same.
Coinsurance is the percentage of health care costs you have to pay after you’ve met your deductible (until you meet your out-of-pocket maximum). Coinsurance is represented as a percentage or split, like 20 percent or 80/20. This means you pay for 20 percent of the costs for a covered medical expense, and the insurance company pays for the remaining 80 percent.
The out-of-pocket maximum is the most you’ll have to pay for covered health care services in a given year. After you spend enough money on medical expenses to reach the out-of-pocket maximum, your insurance provider will cover 100 percent of your care.
The out-of-pocket maximum limit depends on your health plan and resets annually. The government also sets an overall limit: For 2021 plans, the limits are $8,550 for individuals and $17,100 for families.
Did you know that under the Affordable Care Act, all health insurance plans are required to cover the same 10 essential health benefits? The 2019 Policygenius survey asked about these benefits and found that nearly 87 percent of people didn't know what services were required. The 10 essential health benefits are ambulatory services (outpatient care), emergency services, hospitalization (inpatient care), laboratory services, mental health coverage, pregnancy/maternity/newborn care, rehabilitative services, pediatric care, prescription drugs, and preventative care.
Short-term health plans were established as a way to help fill temporary gaps in insurance coverage, not to act as a comprehensive health plan. They’re not substitutes for traditional health insurance plans and do not have to adhere to standards in place by the Affordable Care Act, so they aren’t required to offer any of the essential health benefits mentioned above. This type of health insurance may cost less than a marketplace plan, but it also includes less coverage.
Short-term plans are increasing in popularity, but not many people know how they work. According to the Policygenius survey, only 9.9 percent of people knew how long a short term plan could last — they’re typically limited to under a year, but can be renewed for up to a total of 36 months.
Elissa Suh is a personal finance and insurance expert at Policygenius in New York City. She has previously worked in television research and written about film for IndieWire, MUBI, and Paste Magazine.
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