Health Insurance Terms 101: What to Know Before Enrolling in a Plan

For as long as you can remember, you have been covered by either your parent’s health insurance policy or whatever plan your employer offered.

While there was something nice about not having to really think about health insurance, you are getting a bit older and realize it’s time to take a close look at your plan and see if you can spend your hard-earned dollars on a better option.

In order to make shopping for a new health insurance plan as stress-free as possible—and help you make an educated decision based on your health and finances—it is important to have a solid grasp of the terms, concepts and other topics related to health insurance.

Common Health Insurance Terms to Know

• Coinsurance: As you start to research different health insurance plans, keep a sharp eye out for the term “coinsurance.” For plans that have a deductible, the coinsurance is the percentage that you will have to pay after you’ve met the deductible. This term is important because many people understandably assume that their out-of-pocket cost will be zero once their deductible is covered. But if you are researching a plan and see the coinsurance is 20 percent, this means that once you reach your deductible, a $2,000 bill will require you to pay $400. Costs can vary by plan and also by hospitals, so ask lots of questions and do your due diligence to make sure your coinsurance amount is not unreasonably high. 
• Co-payment: Another term to research as you shop around is “co-payment.” This is a flat amount that you will have to pay upfront for different types of medical services or medications. It can also vary greatly depending on the health insurance plan—you might find plans that have $0 or $5 co-pays across the board, as well as policies that require $20 for a prescription and $30 for an office visit. 
• Deductible: The “deductible” is also a common insurance term that is good to understand; each year you will be required to pay for a certain amount of medical expenses out of pocket before your plan will kick in. Although you might be tempted to switch to a health insurance policy with a really low deductible, this type of plan might have sky-high co-pays that end up costing you more in the long run.

Different Types of Health Insurance Plans

There are two main types of health insurance: public health insurance, like Medicaid, Medicare and CHIP, and private health insurance. Private health insurance is what you buy on your own or get through an employer, and state exchanges and the federal exchange can offer both private and public insurance. Even if you get employer-provided health insurance, it is still a good idea to check with your HR department about your different options—you may learn your company offers a number of choices. 

If you are nearing retirement age, it is a good idea to research both Medicare and Medicare Advantage plans. Original Medicare is made up of two parts, Part A and Part B. These provide coverage for both inpatient and outpatient care. Medicare Advantage plans (Part C) do this as well as offer extended coverage for services such as dental and vision and prescription drug coverage (Part D). Lastly, Medicare Advantage PPO plans include all of this and also allow you to choose which providers you wish to see. 

When it Comes to Health Insurance, Knowledge is Definitely Power

As you can see, the more you can learn about health insurance and its myriad of terms and different types of policies, the better able you will be to choose a new plan. You might find that your existing plan is the best one for you, or that switching policies is better for your budget while still providing great coverage.