The benefits world can be a confusing place. The best way to plot a successful benefits route is to understand the benefits terminology being used. Knowledge is power!
Here are some common benefits words and definitions that may help you make these important life decisions:
Typically the amount of money an insured person pays before the insurance plan covers a claim. Deductibles are most common in medical and dental insurance and usually only apply to a higher-priced procedure, unless you are enrolled with a High Deductible Health Plan (HDHP). HDHPs require that you meet your full deductible before your coinsurance begins.
Coinsurance refers to the percentage that you and your insurer share towards the cost of the expense. For example, your insurer may be responsible for 70% of the charge and you may be responsible for the remaining 30%. Typically, coinsurance does not begin until your deductible has been met.
Maximum Out of Pocket
This term refers to the most you will pay for covered services in a benefit plan year. Once you have met your out-of-pocket maximum, your health plan pays 100% of the claims costs for the remainder of the plan year. Your Summary of Benefits and Coverage document is a good resource to know what counts towards your out-of-pocket maximum. Usually, it is your deductible, copayments, and coinsurance.
A copayment is a fixed dollar amount you are responsible for paying at the doctor, dentist, or pharmacy at your time of visit. Depending on your plan, this is something that you pay without having first met your deductible. Once you pay your copayment, your provider files your claim with your insurer to receive the balance due for the visit.
Summary of Benefits and Coverage (SBC)
An SBC is a document that must be provided to you to assist you in understanding your medical benefits. This document is an easy-to-understand summary and contains a uniform glossary of terms used in medical care.
In-Network and Out-of-Network
An in-network provider is a medical professional who has partnered or contracted with your insurer to provide services to you at an agreed-upon, lower rate. An out-of-network provider is one not contracted with your insurance carrier, so you will be responsible for the full bill, unless your insurance carrier has a payment schedule for out-of-network benefits.
This term is frequently used in disability insurance and refers to the amount of time that you must be off work as disabled prior to receiving payments from your insurer.
Statement of Health (SOH) or Evidence of Insurability (EOI)
These terms refer to forms that a life insurance or disability carrier may require you to complete if you are requesting enrollment or increased coverage at a time other than your initial benefits eligibility. The intent of the form is to provide proof of good health, prior to acceptance of your enrollment request.
Understanding benefits terms can help you select the plans that best meet you and your family’s health coverage needs. Several of the terms described can affect the insurance premium charged. For example, the higher the Deductible or Maximum Out of Pocket, the lower the monthly premium may be.
When deciding upon a plan, a lower premium plan may be attractive, but the Deductible and Maximum Out of Pocket amounts might be unrealistic for your budget. Paying a little more each month in premium might be worth obtaining a plan with increased coverage levels.