Forbes Advisor reports that although many Americans are happy with their health insurance, not many fully understand basic terminology. For example, over 75% cannot identify “co-insurance,” while nearly 50% incorrectly defined “copay” and “deductible.” Forbes also uncovered significant knowledge gaps about open enrollment, HSAs, and medical billing.
With open enrollment coming up in the near future for most of us, let’s take a look at the importance of terminology and how to help employees learn about their benefits.
Here are three basic health insurance terms that are essential for employees to understand:
- Copay – A flat fee you pay each time you receive a covered health service, such as a doctor’s appointment. The more specialized the provider, the higher the copay. For example, the copay for a primary care visit is usually lower than for a specialist visit, and the copay for an urgent care center visit is usually lower than for an emergency room visit.
- Deductible – An amount you pay for medical care before the point at which the insurance plan starts paying. Lower-deductible health plans usually have higher premiums, and higher-deductible plans have lower premiums.
- Coinsurance – For many health plans, the employee and the insurance carrier split expenses for medical care incurred after the deductible is met. This is called coinsurance. For an 80/20 coinsurance plan, the carrier pays 80% of the billed expenses and the employee pays 20%.
Now let’s review some important tax-advantaged benefit accounts terminology:
- Flexible Spending Account – Also known as an FSA, this account is funded by the employee, who receives the pre-tax benefits. An FSA can be used for a wide range of qualified healthcare products and services. FSA accounts are owned by the employer and do not go with the employee if they leave the company.
- Health Savings Account – Also known as a HSA, this tax-advantaged account can be funded by the employee, employer, or others. HSA funds pay for the same qualified products and services as FSAs, plus a few more that FSA funds can’t be used for, such as COBRA premiums. HSAs can also earn tax-free interest and tax-free investment income. Owned by the employee, HSAs go with them if they leave the company.
- Health Reimbursement Arrangement – Also known as a HRA, these accounts can be used to pay for expenses selected by the employer, such as deductibles, copayments, coinsurance, and other qualified expenses. There are special types of HRA accounts that can be used to pay for individual insurance policy premiums as well as selected medical expenses.
- Dependent Care Flexible Spending Account – Tax-advantaged DCFSA funds can ONLY pay for the care of dependents while the employee is working or in school. The person being cared for has to be a tax dependent of the account owner who is either under the age of 13 or unable to care for themselves (such as elderly parents).
- Eligible expenses – The qualified expenses for which a benefit account can be used within regulatory guidelines. Funds spent on non-qualified expenses have to be returned to the plan or else they will be taxed.
- Rollover – Funds remaining at the end of the plan year in HSA and some HRA accounts automatically roll over for use in the following plan year.
- Carryover – Funds remaining at the end of the plan year in FSA accounts may carry over for use in the following plan year if this option is selected by the employer. The maximum carryover amount is set by the IRS at 20% of the maximum annual FSA contribution limit.
- Portability – Whether an account goes with the employee after termination is called it’s portability. Of the accounts listed above, only HSAs are portable. All others are non-portable.
Of course, this list does not include every important term regarding employer-sponsored benefits; it’s more like a sneak peek.
Why It Matters
When people feel that something is confusing and hard to understand, they are less likely to pursue it. A UnitedHealth Group research report found that improving health literacy could prevent nearly 1 million hospital visits, saving more than $25 billion annually.
In today’s inflationary environment, the potential to save money on healthcare expenses is more attractive than ever. Plus, employers have invested significant effort in building an attractive benefits package to satisfy and retain existing employees and attract new talent. The better they understand what’s available to them, the more likely they are to enroll in benefits they find helpful.
Educating a Diverse Workforce
Just as children learn differently, so do adults. Within the universe of adults, preferred learning and communication methods tend to be different as you cross generational boundaries. Do you know your employees’ comfort zones? Baby Boomers have spent their careers pouring over literal paper work and spending time in face-to-face meetings — but recent college grads may have never attended anything but virtual meetings.
So how do you offer education that resonates with your employees, promotes benefit account adoption, and leads to solid account usage? Consider these options:
Some employees like to learn about benefits from group meetings and benefits fairs. These may resonate particularly with older employees who have participated in them for decades. But in today’s hybrid workplaces, they may not be as practical as they once were. Would it be more efficient for you to offer one-on-one time, either in person or virtually?
Younger employees may prefer to learn using digital communications. For example, your youngest employees, who grew up with social media, may respond well to that type of communication. On the other hand, mid-age employees may gravitate more toward emails and blogs.
Managers Who Lead by Example
Managers can be invaluable in promoting benefits choices and encouraging employees to use them. While no one needs to share private health details, younger employees often seek open conversations that older ones may find too personal. Finding a sweet spot of sharing just enough to get the point across can make the difference. Have you considered setting up an intranet site or forum where employees can access current plan information and share recommendations?
Tools That Promote Engagement
For years, many employees dreaded annual enrollment. Carnegie Mellon research finds that students that learn interactively show improved academic performance. That concept can be translated to adults learning about benefits as well. Engaging employees through activities such as quizzes and surveys with the potential of some small reward can significantly increase interest and participation in benefits education and communications.
Do you distribute brochures and enrollment forms at annual enrollment, get the plans rolling, and then expect employees to take it from there? If you “set it and forget it,” employees will, too. Year-round education is key. For more information about benefits communications methods, check out another of our recent blogs.
DataPath, Inc. is the longest-running solutions provider in the benefits administration industry. The company is also the creator of the award-winning employee education and engagement program, The Adventures of Captain Contributor.