There are numerous types of employee benefits that cover everything from healthcare and paid leave to retirement and life insurance. As a result, some of the terminology can be confusing and open to misinterpretation. It’s helpful to have an overview on some of the more common benefit terms.
A deductible is the amount of money that must be paid out of pocket by an employee before an insurance provider will contribute. Generally speaking, the higher the deductible, the lower the premium—the lower the deductible, the higher the premium.
A premium is the amount of money that an employee is responsible for paying each month on an insurance policy. This is determined by multiple factors including the type of insurance, the likelihood of an employee making a claim and the lifestyle/behavior of an employee.
Also known as a copay, this is the fixed amount of money that an employee must pay out-of-pocket before they receive services. In most cases, insurance plans with lower premiums have higher copayments, while those with higher premiums have lower copayments.
Healthcare.Gov defines coinsurance as, “The percentage of costs of a covered healthcare service you pay after you’ve paid your deductible.” If a trip to the doctor costs $100 and coinsurance was 20 percent, a person would need to pay $20 after paying their deductible, and the insurance company would pay the remaining $80.
Flexible Spending Account (FSA)
The most common flexible spending account is a health care FSA, which is an account an employee can put pre-tax money into in order to use later for specific out-of-pocket healthcare costs. Employers may or may not make contributions to an FSA. Many employees like an FSA because of the variety of medical expenses it can be used on (e.g. prescriptions, eyeglasses and home medical equipment). The main drawback is that the money saved must typically be spent within the plan year or forfeited.
Health Savings Account (HSA)
Similar to an FSA, a health savings account is exclusively for individuals who are enrolled in a high deductible health plan (HDHP). Employees can contribute up to the IRS limit. In 2018, that amount is $3,450 for self-only coverage and $6,850 for family coverage. Unlike an FSA, the money in an HSA does rollover and remains in the account until it’s spent.
Preventive care is the care an employee receives to prevent injury, illness, and disease (usually not subject to a copay or deductible). Some examples include health screenings, immunizations, and wellness visits. The purpose of preventive care is to be proactive about health and wellness and decrease the chances of staff members becoming sick or injured.
Primary Care Physician (PCP)
A primary care physician is an employee’s main doctor. This doctor will usually provide health and medical services to the employee for an extended period of time and will treat most medical problems that do not require a specialist.
It’s helpful to have at least a base understanding of common employee benefits and the terminology involved. While the terms listed here are by no means exhaustive, they should help you grasp the fundamentals so that you can better explain them to your staff.