According to a recent survey, 35 percent of employees don’t understand their healthcare coverage, and another 33 percent don’t understand their medical bills. And, sadly, almost two-thirds (62 percent) of survey participants said their employer is not a resource for healthcare-related questions. While the terminology related to healthcare and employee benefits may be second nature to HR professionals and benefits administrators, it is a good bet many of the terms are unknown or misunderstood by your employees.
As a full-service broker, PeopleStrategy understands the importance of making sure your employees fully understand the plans you are offering so they can select the one that best meets their needs and those of their families. To help you better educate your employees, we’ve come up with a cheat sheet of key benefits jargon. Share it with your employees before open enrollment!
Health benefits payment terms
Deductible: the amount an employee must pay out-of-pocket each year before their insurance kicks in; this does not apply to preventative care, like annual physicals.
Co-insurance: the amount an employee must pay after meeting their deductible; under most plans, this is around 20% of full price.
Co-pay: the fixed cost an employee must pay for each visit to a medical doctor or mental health professional’s office, urgent-care center or hospital emergency room. The amount will vary by plan and by type of visit (i.e., a visit to the doctor’s office typically has a lower co-pay than one to urgent care or the emergency room).
Premium: this is the annual cost of an employer-sponsored health plan. The cost for the employee is usually taken out of the employees’ paycheck on a monthly or bi-weekly basis and the employer covers the rest.
Benefit types and classes
Ancillary benefits: these types of benefits are in addition to standard health coverage, and can include dental, vision care, life insurance and short- or long-term disability coverage.
Voluntary benefits: ranging from critical illness coverage to theft protection, these benefits are extras an employee may choose and pay for; the costs will vary by coverage type.
Guaranteed renew-ability: this term means that as long as premiums are being paid toward a health plan, the insurance company cannot drop a covered individual (the employee or his/her dependents).
Underwriting: the process of assessing the risk associated with providing health insurance coverage; while most medium and large businesses use group underwriting to spread risk across as many employees as possible, individual underwriting is growing in popularity among smaller, startup-style businesses with younger, healthier staffs.
Formulary: this defines which prescription drugs are covered under a given plan. In most cases, carriers pay much less for generic versions of brand-name drugs, resulting in a lower co-pay for generic drugs.
Network: the healthcare facilities, doctors and other medical providers covered under a specific plan. Health maintenance organization (HMO) plans cover in-network services almost in full aside from co-pays, but handle nothing out-of-network, while preferred provider organizations (PPO) allow out-of-network care at a greater cost.
In addition to HMOs and PPOs, several other notable types of health plans have emerged in recent years:
High-deductible health plans (HDHP): as the name implies, these plans have higher annual deductibles but lower premiums than other plans.
Health savings accounts: employees who select a HDHP can open a health savings account (HSA) to save money that can be used for health care expenses whether or not the annual deductible has been met. As long as the funds are used to pay for medical expenses, they are not taxed, and employees can keep the accounts when they leave the organization. There are limits to the amount an employee can contribute to a HSA and this varies by coverage (individuals have a lower cap than families).
Health reimbursement arrangements (HRA): serving a similar purpose to a HSA, these accounts are employer-owned and -funded; any unused funds in the account when an employee leaves, are owned by the company. There is no annual contribution limit for a HRA.