Navigating the realm of employee benefits has become increasingly complex. This unfortunate reality has left many employees feeling overwhelmed and helpless when it comes to choosing and using their benefits.

Understanding insurance and benefits terms empowers you to make informed plan selections and maximize your benefits over the course of the year.

5 Terms and Concepts Worth Knowing

Coinsurance

Think of coinsurance as a collaborative agreement between you and your insurance company. It’s the percentage of covered health costs you’re responsible for paying after you’ve met your deductible, instead of bearing the entire cost burden alone. For example, say you recently had a doctor’s visit that amounted to $100 total, and your coinsurance is 20%. With this plan, you’ll pay $20 and your insurer will cover the remaining $80.

Explanation of Benefits

Frequently referred to as an EOB, an explanation of benefits is like a receipt or letter from your insurance company after a medical visit or treatment. It breaks down what services were provided, how much it costs, what your insurance covers, and any remaining balance you may need to pay. An EOB is a handy tool to keep track of your healthcare expenses and better understand your insurance coverage.

HSA vs. FSA

Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs) are pre-tax accounts you can use to cover qualified healthcare expenses, but they work a bit differently. HSAs are available to employees with a high-deductible health plan (HDHP). As a member-owned account, your HSA goes with you when you change jobs and offer long-term savings potential.

FSAs, on the other hand, typically have a “use it or lose it” rule - funds not used by the end of the plan year are usually forfeited. In short, HSAs are more flexible for the long term, while FSAs are great for immediate savings.

Out of Pocket Maximum

Sometimes confused with a deductible, the out of pocket maximum is the most you’ll have to pay for covered medical expenses in your given policy year. When the running total of your deductible, copayments, and coinsurance reaches your Out of Pocket Maximum (OOPM), your insurance will start to cover 100% of covered medical costs.

For example, imagine your plan year starts January 1, and your OOPM is $5,000 with a $1,500 deductible. Let’s say you hit your $1,500 deductible in April. If your copays and coinsurance amount to the remaining $3,500 before the end of the year, you will have hit your OOPM and won’t have to pay for any covered services that occur through the end of the year.

Active vs. Passive Enrollment

Come Open Enrollment season, it’s critical to understand whether your enrollment is passive or active to secure your employee-sponsored benefits for the following plan year. Despite the differences in these enrollment types, it is essential to closely review your benefits on at least an annual basis to ensure your selections best suit you and your family’s current needs.

In an active enrollment, all eligible employees are required to manually choose their benefits for the upcoming year, whether they intend to stick with their current selections or make changes. In contrast, a passive enrollment will automatically re-enroll you in your current plans if you decline to make any changes. Regardless of whether your employer’s enrollment is active or passive, employees should pay the same level of attention and scrutiny to their benefits to avoid higher costs and inadequate coverage.

Your benefits choices should be a source of confidence, ensuring the health, wealth, and well-being of you and your loved ones. Armed with a better understanding of these benefits terms, you’re one step closer to being a more empowered employee and getting the most out of your benefits.