As the open enrollment period approaches for 2018, there are some critical terms to know that will help you make informed choices about your health insurance for next year. Since health-related expenses are the most common form of debt in America, you can alleviate potential financial pitfalls by learning basic terms that you might not know if you are new to health insurance or need a refresher course.
We offer a comprehensive glossary of terms you need to know when talking about the Affordable Care Act or health insurance in general, but below, here are a few basic terms to know for the coming enrollment.
Open Enrollment
Open enrollment for 2018 is the time of year that you can select a health insurance plan offered on the individual marketplace. The period runs from November 1, 2017 to December 15, 2017 this year – just 45 days. If you don’t have health insurance for 2018, you must enroll in an ACA-compliant policy or face paying a tax penalty when you file your taxes the following year.
Premiums
A premium is the amount of money you will pay each month for healthcare coverage. If you have health insurance through your job, your employer usually pays a portion of your premium, and you pay the rest through payroll deductions. If you choose a plan through the individual marketplace or buy it yourself from a broker, you are responsible for the full monthly premium each month.
A new rule for 2018 will make it so that if you drop your coverage because you can’t afford the premium, you’ll risk having to pay back what you owe to the insurer if you sign up the following year. Dropping your coverage due to non-payment also doesn’t count as a qualifying life event, meaning that if you don’t pay your premiums and lose your coverage, you won’t be able to sign up again until the next open enrollment period.
Deductibles
Deductibles are what you pay before your insurance company pays its portion of any covered medical expenses. If you choose a plan with a lower monthly premium, you will pay more in deductibles. If you choose a plan with a higher monthly premium, you will pay less in deductibles.
If you’re young and healthy, choosing an affordable plan is an important decision, especially if you rarely seek medical attention. You might decide to pay a lower monthly premium since you rarely go to the doctor. However, you need to know your deductible amounts in the event of a medical emergency since higher deductibles mean that you’ll pay more out of pocket before your insurance company pays its portion of the bill.
Copays
Copayments, also known as copays, are a predetermined amount of money you will pay for certain covered medical services, such as visiting your doctor or getting lab tests done. The amount of your copay varies by the type of medical service you receive, but if you have a lower monthly premium, your copays are usually higher.
You can expect to start making co-pays for medical services once you reach your deductibles amount for the year, although different offices bill your charges differently. You may not have to hit your deductible, for example, before seeing your doctor when you have a cold, but you will still have to pay the office copay. And for preventive care under the Affordable Care Act, you will not have to pay anything out of pocket because these are covered at no added charge by law.
Coinsurance
When you pay coinsurance, you are paying a percentage of a specific covered service. Your insurer pays the rest. You start to pay coinsurance once you meet your yearly deductible. For example, if your doctor charges $100 per office visit and your coinsurance is 20 percent, you will pay $20 (if you have met your deductible for the year), and your insurance company would pay the remaining $80. Note that as with copays, this could vary based on your provider and plan type, as well as how each provider bills your insurer.
Out-of-Pocket Costs
These are the expenses you will pay on your own once your provider has paid its portion of the bill, or the amount you’ll spend on medical costs total. Copayments, coinsurance and any deductibles you pay count as out-of-pocket costs.
Every plan offered on the individual marketplace has out-of-pocket maximums. For example, out-of-pocket maximums for the plan year 2017 were $7,150 for individuals and $14,300 for families. If you were single and bought an Obamacare health plan, the most you would have to pay for covered medical care in 2017 was $7,150. “Covered care” refers to what your plan covers. Not every medical service is covered by every plan. Keep in mind that monthly insurance premiums do not count toward your out-of-pocket maximums.
