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Navigating health insurance can be challenging for both employers and employees, especially when confronted with unfamiliar health insurance terms. As an employer, you have a unique opportunity to offer affordable health coverage and help your employees understand the various terms and concepts related to their benefits.
In this article, we’ll explore why it's crucial for employers to explain health insurance terms to employees and provide tips on how to break down these terms in an easily understandable way.
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Selecting the right health insurance plans for your team is a critical process that requires careful attention from start to finish. One of the final but most important steps is ensuring your employees understand their benefits so they can maximize their use. Clear communication of health insurance terms helps employees make informed decisions about their healthcare.
Many employees might not be familiar with the health insurance terms that your management team takes for granted. Especially for team members navigating employee benefits for the first time, common questions may arise, such as: What is a co-pay? What is co-insurance? What is a deductible? What happens when the plan deductible is met? How does the deductible differ from the out-of-pocket maximum?
A recent study found that half of the employees don't fully understand their employee benefits materials, highlighting the importance of education.
According to the U.S. Department of Education, only one in ten people in the U.S. have a proficient level of health literacy. This becomes problematic when you consider that, according to the Institute of Medicine, individuals who don’t understand common health insurance terms are less likely to make informed decisions about when and where to seek medical care. They are also more likely to use costly emergency rooms or end up hospitalized.
If businesses don’t take the time to educate their employees about basic health insurance terms, employees may not realize the full value of their benefits or use them effectively.
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An experienced employee benefits consultant can help you design and administer employee training introducing your team to common health insurance terms and important details about your unique benefits offerings. When presenting benefits options to your team, it’s important to cover the “frequently asked questions.”
Here are eight employee benefits terminology questions our consultants see often. A printer-friendly, downloadable version can be found 8 Health Benefits Terms Defined.
Co-insurance means the percentage of healthcare costs, e.g. 20%, that a covered employee pays after meeting the deductible.
A co-payment is the fixed dollar amount, e.g. $50 a each doctor visit, that a covered employee pays for medical services.
A deductible is a fixed dollar amount that a covered employee must pay out-of-pocket each calendar year before the plan will begin reimbursing for non-preventative health expenses. Plans usually require separate limits per person and per family.
A formulary is a list of prescription drugs covered by a health plan, often structured in tiers that subsidize low-cost generics at a higher percentage than more expensive name brand or specialty drugs.
Health Savings Accounts (HSAs) are accounts that may be opened by employees who enroll in a high-deductible health plan. Employees can put money in an HSA up to an annual limit set by the government.
For 2024 the limit is set at $4,150 for individuals and $8,300 for family coverage using pre-tax dollars. Employers may also contribute funds to these accounts within the prescribed limit.
HSA funds may be used to pay for medical expenses whether or not the deductible has been met. No tax is owed on funds withdrawn from an HSA to pay medical expenses. HSAs are individually owned and the account remains with the employee after employment ends.
A High-Deductible Health plan (HDHP) is a health insurance plan that features higher annual deductibles than preferred provider organization (PPO) or health maintenance organization (HMO) plans. With the exception of preventative care, covered employees must meet the annual deductible before the plan pays benefits.
However, HDHPs may have significantly lower premiums than a PPO, HMO or another traditional plan. The 2024 limit on out-of-pocket expenses (including deductibles, co-payments, co-insurance, but not premiums) is $8,050 for self-only coverage and $16,100 for family coverage.
Unlike HSAs, only an employer may fund a Health Reimbursement Arrangement (or HRA), and the funds revert back to the employer when the employee leaves the organization.
HRAs are not subject to the same contribution limits as HSAs, and they may be paired with either high-deductible plans or traditional health plans.
For the purposes of employee benefits terminology, a “network” refers to a set of doctors, clinics, hospitals, and other providers with whom the health plan has an agreement to care for its members.
Health plans cover a greater share of the cost for in-network health providers than for providers, who are out-of-network.
Axcet HR Solutions has more than 30 years of experience delivering quality medical benefits to Kansas City businesses. When you choose us to administer your business’ employee benefits, you’ll experience these great perks:
Axcet HR Solutions is a full-service certified professional employer organization (PEO) that can help you select, administer and train your team on fantastic health coverage options. Ready to revamp your employees' health benefits program? Schedule a consultation to find out how we can help.
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