Employee Benefits Part 1 - Insurance

When I got my first full time job out of college, I was pretty excited for quite a few reasons. No more juggling multiple part time jobs, weekends off, and quarterly bonuses? I couldn’t start soon enough. The best part, however, was that I would finally be receiving benefits. However, having never undergone this process before, there were a number of things I wasn’t sure about. Over the course of the next few weeks I will be writing a couple blogs that cover the three biggest aspects of employee benefits: insurance, paid time off, and retirement planning. 

Typically your company's insurance policies will cover four general areas: Medical, Dental, Prescription and Vision. These are set in place in order to ensure employee wellness and productivity - after all, if you’re sick or visually impaired how can you get any work done without proper treatment? Besides, under the Affordable Care Act employees must be offered health insurance by their employers*, so having a good idea about what these entail can make entering the workforce significantly less intimidating as a young professional. Below I compiled a list of words and their definitions that are associated with health insurance that I think will be particularly useful for anyone unfamiliar with the jargon. 

Cost Sharing - When both you and the insurance company pay a part of the medical expense. Here are three examples of this:

  • A Deductible is the amount of money you pay before your insurance kicks in. Say your health insurance plan gives you a deductible of $1,000. You will pay out of pocket for any medication or hospital bills that fall below that amount. Once that limit is reached, your coinsurance is put into effect.
  • Coinsurance is the percentage of the cost you pay after your deductible has been paid. You might have a plan that covers 70 percent of the fees, so you would pay the remaining 30. If you have a surgery that costs $1,500, you pay the $1,000 deductible and then 30 percent of the $500 remaining. 
  • A Copay is a fixed amount you’ll pay for a certain service or prescription. Typically the cost will vary depending on the service. For example, a visit to your doctor might run you $20, while the emergency room will cost $200. 

Dependent - An individual that is covered by your insurance plan, usually a spouse or child. 

Drug Formulary - A list of prescription medications that is covered by your plan. 

Exclusion/Limitation - A condition or treatment that your health insurance does not cover.

Flexible Spending Accounts (FSA) - An account administered by the employer where you set aside a certain amount of money from your paycheck pre-tax that can be used toward insurance premiums or medical expenses not covered by your health plan. Typically if you do not use all of the money in your FSA by the end of the year, you lose it.

Group Health Insurance - A single policy that is offered by an employer or other organization that covers all of the individuals within that group and their dependents. 

Health Maintenance Organization (HMO) Plan - A health care system where you choose a Primary Care Physician from a network of local healthcare providers that coordinate all your care. If they are unable to assist you they will refer you to another in-network specialist who can cater to your needs.

Health Savings Account (HSA) - An account for those with a high deductible health plan to save for medical expenses that a High Deductible Health Plan does not cover. Those covered make contributions into the account and are limited to a maximum amount each year. 

High Deductible Health Plan (HDHP) - A health insurance plan that has a lower premium and a higher deductible that a traditional health plan. You are required to have a health savings account if you’re enrolled in an HDHP. 

Medicaid - A health insurance program available in all states that was created to provide health benefits to some low-income families, pregnant women, people with disabilities, families and children who could not otherwise afford common commercial plans.

Medicare - A federal health insurance program that was created to provide health benefits to Americans age sixty five and older or for people with certain disabilities of any age.

Premium - The monetary amount you or your employer pay each month for insurance. 

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*Only those who work full time are required to be offered coverage