Open enrollment for 2015 coverage just ended and it makes me wonder–do most people understand health insurance? The health insurance market has evolved so much that I would assume most people understand the basics of the health insurance they have. Right?
Wrong, according to these researchers who surveyed two groups of Americans between the ages of 25 and 64 who have private coverage. They found out that only 14% of respondents had an understanding of the most basic insurance concepts of deductible, copay, coinsurance, and out-of-pocket maximum.
Another study discovered that 43% of uninsured Americans are unaware they must buy coverage or they will face a tax penalty. Why? Because they simply don’t understand how health insurance works.
With the unlimited amount of information at our fingertips, I find these surveys troubling, particularly when there are more coverage options than ever before. That could mean millions of consumers may not make the best choices when benefits are available to them. So, I am making it my job to provide you with a few basic terms and resources, so you are better prepared for 2016 open enrollment.
Deductible—the amount of money you must pay each year to cover eligible medical expenses before your insurance policy starts paying.
Coinsurance—the amount you pay to share the cost of covered services after your deductible has been paid. The coinsurance rate is usually a percentage. For example, if the insurance company pays 80% of the claim, you pay 20%.
Copayment—one of the ways you share in your medical costs. You pay a flat fee for certain medical expenses (e.g., $10 for every visit to the doctor).
Maximum Annual Out-of-pocket–this amount is made up of the annual deductible, coinsurance and copay amounts you pay for covered medical expenses in one calendar year. Your plan can have separate maximum annual out-of-pocket limits for covered services provided by a preferred provider and for covered services provided to you by a non-preferred provider.