Coinsurance is an amount of money you pay for your own care. It’s usually a percentage. For example, if you get an X-ray, and you’ve met your deductible, you might have to pay 20% of the cost. Then your insurance company would cover the rest.
A copay is an amount of money you pay for your care. However, unlike coinsurance, it’s a flat fee. For example, if you get a physical, you might have to pay a fee at the doctor’s office. Usually, you pay the copay when you receive your health care.
A deductible is the amount you pay for health care services before your insurance plan starts to pay. For example, if you have a $2,000 deductible, you pay the first $2,000 of health care services yourself. After you pay that $2,000, you usually pay only a copay or coinsurance for health care services. Your insurer pays the rest.
You might have separate deductibles for your medical and prescription coverage, or they might be combined into one deductible under one plan.
Flexible Spending Account (FSA)
An FSA is an account you set up through your employer to cover health care costs that you have to pay out of pocket—like copays and deductibles. What’s the advantage? The FSA is made of tax-free wages. In other words, before your employer deducts any taxes from your paycheck, a set amount of money goes into your FSA. You don’t have to pay taxes on those dollars. So it’s a money-saver.
You decide how much money goes into your FSA account. Your employer’s plan will set a yearly limit. You usually must use the money in an FSA within the benefit year. At the end of the year or grace period, you lose any money left in your FSA.
A formulary is a list of prescription medicines covered by an insurance plan. Many plans organize medicines into different “tiers” on their formularies. Medicines in each tier have different costs. Because formularies are always changing, check your plan’s formulary regularly to make sure that plan is still the right one for your needs.
Health Savings Account (HSA)
An HSA is a type of savings account. Like a flexible savings account (FSA), it lets you set aside money on a pre-tax basis to pay for qualified medical expenses if you have a “high-deductible” health insurance plan (HDHP). Combining an HDHP with an HSA allows you to pay for certain medical expenses, like your deductible and copay, with untaxed dollars.
Unlike a flexible spending account (FSA), HSA funds roll over year to year if you don’t spend them. You can take the funds with you if you change jobs or leave the work force. Your HSA may also earn interest.
High Deductible Health Plan (HDHP)
An HDHP is a plan that has higher deductibles than most insurance plans. HDHPs can be combined with a health savings account (HSA) to let you pay for qualified out-of-pocket costs on a pre-tax basis. HDHPs usually have lower monthly premiums than plans with lower deductibles.
An HDHP may be appropriate for patients who don’t see their health care providers (HCPs) often. Those who see HCPs more frequently might be more interested in a plan with higher premiums but lower deductibles.
A mail-order pharmacy is an establishment that provides prescriptions by mail. Your medicine may cost less when you order it by mail. However, it may take a week or more for the medicine to get to you. Mail order is best used for long-term medicines you use for chronic problems. Buy short-term medicines and drugs that need to be stored at certain temperatures at a local pharmacy.
Pharmacy Benefit Manager (PBM)
A pharmacy benefit manager is a company that manages the prescription drug benefits included in the health insurance plan your employer provides you. The PBM is responsible for helping you and your health insurance plan access prescription drugs at the lowest cost to your plan and to you.
An out-of-pocket maximum is the most you’ll have to pay for health care services in a benefit year. After you spend this amount on deductibles, copayments, and coinsurance for in-network care and services, your health plan pays 100% of the costs of health care services.
A premium is the cost of your health insurance plan that you and/or your employer pays. You might get a monthly bill for your health insurance premium. Or you might see it deducted from your paycheck.
Your health insurance company might need to approve certain health care services, prescriptions, or equipment before it will agree to cover their cost. The process for getting this approval is called prior authorization (it may also be referred to as preauthorization, precertification, predetermination, or prior approval).
Your doctor or other health care provider will fill out a prior authorization form and submit it to the insurance company. The insurer will then decide whether to cover all, some, or none of the cost. It will communicate its decision and rationale to you and/or your health care provider.
This is a pharmacy that manages specialty pharmaceuticals—drugs that are used to treat rare, complex, serious, or life-threatening conditions. Because these drugs require ongoing patient monitoring and education, specialty pharmacies provide additional services that traditional pharmacies do not provide, such as communicating directly with doctors and following up if needed.
Step therapy (Step edits)
Step therapy, or step edits, is when someone tries a less expensive version of a medication to see if it works for them before stepping up to a more expensive prescription. An example would be trying a generic version before the brand name. Some patients do this to save money, but others are required to do step therapy before their health insurance company will agree to cover their prescription—it’s a practice insurance companies put in place to keep their plans more affordable.
Summary of Benefits and Coverage (SBC)
An SBC is a short, easy-to-understand summary of what each plan covers and the associated costs. It can help you compare the benefits and costs of different plans.
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