Understanding common health insurance terms provides insight into plans

April 24, 2017

This is the third in a series of Penn State Today articles exploring the process of crafting the 2018 health care benefits plan design and cost sharing for Penn State.

As the University continues to develop the 2018 health care plans, helping employees take a more active role in understanding and managing their health is one of Penn State’s goals.

Penn State employees who are well-versed in health care plans are at a distinct advantage when it comes to selecting the most appropriate care for themselves and their families. Employees can make more informed decisions regarding medical benefits and prescription coverage when provided the right tools and resources.

However, health care benefits can be complicated and making sense out of some of the more commonly used medical insurance terms can be tricky and frustrating. This article is a good resource for understanding the common terms and descriptions of Penn State health care plan features, and helping employees make the right choices for them and their families.

Preventive Care vs. Diagnostic Care

Knowing the difference between preventive and diagnostic care may help plan members keep out-of-pocket charges reasonable by encouraging them to take advantage of preventive services that are covered at 100 percent. Examples of preventive services include annual physicals, vaccines, mammograms and cholesterol screening. To be considered a preventive service, the office visit or test should adhere to Highmark’s Preventive Schedule, which can be found on the Employee Benefits page of the Human Resources website. Both of the Penn State plans – PPO Savings and PPO Blue – provide full-coverage for preventive care; and, certain diseases may be prevented or minimized if the risk factors for them are detected early and acted upon.

While preventive care services are covered at 100 percent, services for diagnostic-related care are subject to deductibles and co-insurance. Diagnostic care is typically care that is intended for the treatment or management of a disease or medical condition. Sometimes health plan members are surprised to receive an invoice for a procedure that is listed on the Preventive Schedule. In these cases, the reason for the billing is that the care provided has deviated from the preventive schedule in some way. To learn more about the difference between Preventive and Diagnostic tests, see the following link:  Preventive vs. Diagnostic.

Account-based health plan

A health care plan like the PPO Savings Plan that is paired with a tax-advantaged account (in this case an Health Savings Account or HSA) that helps you pay for eligible health care expenses.

Coinsurance

After you meet your deductible, you and the University share the cost of your covered health care expenses by each paying a certain percentage of those costs, with Penn State paying 90 percent of the cost and you paying 10 percent. You will pay this percentage until you reach your total out-of-pocket maximum.

Out-of-pocket maximum

The most you will pay out of your pocket in a year for certain covered health care expenses. This includes deductibles, coinsurance and copays for medical and prescription drugs. Once you reach this limit, the plan pays 100 percent of your costs for the rest of the year (aside from your premium contributions that come out of your pay).

Copayment

Flat dollar amount you pay typically at the time of service under the PPO Blue Plan; office visit copayments are $20 and specialist visits are $30, for example.

Deductible

The dollar amount you are responsible for before the University begins to pay and coinsurance begins for medical and/or prescription drug expenses.

Discounted rate

The cost that is agreed upon between your insurance carrier and the medical services provider you use for in-network health care (such as your doctor or hospital). The discounted rate is lower than the amount you would pay if you were not covered by insurance at all.

Explanation of benefits (EOB)

A statement you receive from your insurance carrier that includes how much you owe your doctor for health care services provided, how much your insurance carrier will pay, your progress toward meeting the deductible and other important information about your health care coverage. If you enroll in the PPO Savings Plan, this statement is called the Plan Activity Statement.

Health care flexible spending account (FSA)

If you are enrolled in the PPO Blue Plan, you may use the Health Care Flexible Spending Account (FSA) to set aside pre-tax money to use to pay for qualified health care expenses. You cannot contribute to both a Health Care FSA and a HSA. This benefit needs to be elected every benefits open enrollment.

Health savings account (HSA)

The tax-advantaged Health Savings Account is an account that you can contribute to over and above Penn State’s seed money if you are enrolled in the PPO Savings Plan as an active employee (certain eligibility rules apply). You can use the money in this account (with tax advantages) to pay for qualified health care expenses.

In-network

Medical service providers who are in the insurance carrier’s network for the PPO Savings and PPO Blue plans and agree to charge the negotiated discounted rate to those enrolled in one of these plans.

Out-of-network

Medical service providers who do not participate in the network and have not agreed to charge a discounted rate. These out-of-network providers charge higher fees than those who are in-network.

Premium contribution

The amount you pay in pre-tax or after-tax dollars each pay period to be covered under the benefit plans provided through Penn State. Pre-tax contributions lower your taxable income, which means you will save money by paying less in taxes.

Watch Penn State Today for the fourth article in this series, which will provide details of the out-of-pocket costs for the PPO Blue plan and PPO Savings plan.

Last Updated April 24, 2017