Health-care plans are confusing enough but the industry-specific jargon often used to describe them can make their details even more difficult to decipher.
If you get confused about your options and end up making the wrong health-care choice, you could find yourself with some serious financial stress. Health-care bills are the most common type of debt in collection and represent about 38 percent of total debt collected in the U.S., according to a study by ACA International.
To avoid calling their parents every time they make a health-care decision, millennials should learn five key terms, said Katelyn Gleason, CEO of Eligible, a developer of health-care Application Programming Interfaces (APIs).
Your premium is the amount of money you pay each month for health insurance. With company-provided health insurance, the employer contributes a percentage of the premium (usually most of it) and employees pay the remaining amount, usually through a payroll deduction. On average, employers paid 83 percent of a premium and cover 72 percent of a family plan.
When choosing a medical plan, you must look at both the cost of the premium and the deductible, Gleason advised.
A co-pay should be outlined in your health-care plan as a predetermined amount of money you would pay when you receive medical care. However, the co-pay varies depending on what type of doctor you visit, Gleason said.
Usually, there is a small co-pay for visiting a primary care physician, and a higher co-pay for an emergency room visit, she said.
A deductible is a specified amount of money that the insured person must pay before an insurance company will pay a claim. Health-care-related payments, such as a co-pay, usually count towards your deductible, but you should always clarify that with your provider, Gleason said.
Usually, plans with lower monthly premiums have higher deductibles, and plans with higher monthly premiums have lower deductibles, according to healthcare.gov. The average deductible for a single worker in the U.S. is $1,478, according to a 2016 survey by the Kaiser Family Foundation.
If you rarely need medical attention, you usually won't hit your deductible, Gleason said. However, if you do encounter a serious medical issue, that deductible number becomes important, because the higher the deductible, the more medical costs you will have to cover yourself.
Co-insurance is a type of insurance in which the insured pays a share of the payment made against a claim. Basically, you would pay a percentage of the costs of a covered health-care service after you've paid your deductible. Gleason explained. For example, if your co-insurance is 20 percent and you receive a medical bill of $1,000 after you hit your deductible, you would pay $200 and your insurer would pay $800. You typically pay co-insurance after meeting your annual deductible.
Your out-of-pocket costs are your expenses for medical care that are not reimbursed by insurance. Out-of-pocket costs include deductibles, co-insurance and co-payments for covered services plus all costs for services that aren't covered.
Let's say you develop a serious medical issue and the costs add up to $100,000 for that year. If your out-of-pocket maximum is $10,000, then after you hit $10,000, generally through deductibles, co-payments and co-insurance, your insurer is responsible for the other $90,000.
Usually, plans with lower monthly premiums have higher out-of-pocket maximums, and plans with higher premiums have lower out-of-pocket maximums, according to healthcare.gov.