So what exactly is health insurance, and how does it work?

Picking plans requires a careful understanding of a few basic terms. The good news is, health insurance jargon is pretty universal.

Premium

The fixed monthly payment to maintain a health insurance plan. It can be paid fully by an employee, by an employee and your business, or fully by your business.

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Deductible

The amount of medical expenses an employee are required to pay before your health plan kicks in and pays for your care.

Copay vs. Coinsurance

These two both represent the cost an employee will be responsible for during a doctor visit or hospital stay.

The difference lies in the fact that copays are fixed amounts, and coinsurances are percentages of the bill to be paid after the deductible.

A copay is a fixed amount an employee will pay for services covered by the health plan—such as covered appointments, services, medical equipment, or brand name prescriptions. It's important to note that copays are not subject to deductibles.

Coinsurance is the percentage paid for services after the deductible has been met.

Coinsurance is calculated as a percentage of the allowed service amount, and kicks in after the deductible has been met.

Out-of-pocket

An out-of-pocket max is the maximum amount an employee will pay for health care during the year (in addition to the monthly premium). After they meet this amount, their plan will pay for all covered medical expenses.

HSA

HSAs (Health Savings Account) and FSAs (Flexible Spending Account) are pre-tax accounts you can use to pay for healthcare related expenses. With HSAs and FSAs, you can pay for things like co-pays, medical bills, and vision expenses. Both HSA and FSA accounts offer tax benefits and have annual contribution limits. The key differences between them lie in their allowed usage.

An HSA works like a savings account, where the money saved can be rolled year after year.

However, if employees opted for a non-HSA eligible health plan, they can set aside money to pay for health care through an FSA, where they can put in money pre-tax from their paycheck, and decide what health care bills to pay from their account throughout the year.

Plus, here are a few more terms you'll probably be seeing when you shop for health insurance.

In Network vs.

Out of Network

Any health insurance company has a network of doctors, hospitals, clinics, labs, and pharmacies that it works with. Your employees will always pay less when seeing a medical provider in their network.

When employees see a doctor the health insurance company doesn't have a relationship with, they've gone "out-of-network" and their care may not be covered except in certain situations like emergencies.

HMOs vs. PPOs

HMOs (Health Maintenance Organizations) are small networks designed around a single medical group or hospital system. With HMOs, you must select a primary care doctor, and referrals are required before you go to a specialist, lab, or other medical facility. Generally, out-of-network care isn’t covered.

PPOs (Preferred Provider Organizations) are broad networks that cover a large option of doctors and hospitals, and typically cover care from both in-network and out-of-network doctors and facilities. Premiums are usually more expensive due to access to more options.