Navigating Benefits: A 101 Primer

Employee benefits are non-wage compensation provided to employees in addition to their regular wages or salaries. These benefits can include health insurance, retirement plans, paid time off, and other perks offered by employers to attract and retain employees.

Understanding these key employee benefit terms can help employees make informed decisions about their healthcare and financial well-being. By familiarizing themselves with these concepts, individuals can effectively navigate their benefits package and make the most of the offerings provided by their employer.

COMMON EMPLOYEE BENEFIT TERMS

Deductible

• Definition: A deductible is the amount of money an individual must pay for covered health care services before their health insurance plan begins to pay.
• Example: If a health insurance plan has a $1,000 deductible, the insured individual must pay the first $1,000 of covered services themselves.

Premium

• Definition: A premium is the amount of money an individual or their employer pays to an insurance company for a health insurance policy.
• Example: If an employee pays $100 monthly for health insurance, this is their premium.

In-Network

• Definition: In-network refers to health care providers (such as doctors and hospitals) that have contracted with a particular health insurance company to provide services at pre-negotiated rates.
• Example: If an individual's health insurance plan has a network of preferred providers, using services within this network typically results in lower out-of-pocket costs.

Out-of-Network

• Definition: Out-of-network refers to healthcare providers that do not have a contract with a particular health insurance company.
• Example: If an individual seeks medical care from an out-of-network provider, they may face higher out-of-pocket costs, or their insurance may not cover the services.

Out-of-Pocket Maximum

• Definition: Out-of-pocket max is the most an individual must pay for covered services in a policy period (usually a year) before their health insurance plan begins to pay 100% of the allowed amount.
• Example: If a health insurance plan has a $5,000 out-of-pocket maximum, once the insured individual has paid $5,000 in deductibles, copayments, and coinsurance for covered services, the insurance company will pay 100% of the allowed amount for covered services for the rest of the policy period.

Medical, Dental, Vision

• Definition: Different types of insurance coverage that provide benefits for medical, dental, and vision care, respectively.
• Example: Medical insurance covers doctor visits, hospital stays, and prescription medications; dental insurance covers routine check-ups, cleanings, and dental procedures; vision insurance covers eye exams, glasses, and contact lenses.

FSA (Flexible Spending Account)

• Definition: An FSA is an account allowing employees to set aside a portion of their earnings to pay for qualified medical or dependent care expenses. FSA accounts have annual maximums and expire at the end of each year.
• Example: If employees contribute $2,000 to their FSA for the year, they can use this money to pay for eligible medical expenses such as copayments, deductibles, drugs, and other healthcare costs.

HSA (Health Savings Account)

• Definition: An HSA is a tax-advantaged savings account that individuals can use to pay for qualified medical expenses if they have a high-deductible health plan. HSA accounts can accumulate funds year after year and do not expire.
• Example: An individual can contribute pre-tax dollars to their HSA and use the funds to pay for medical expenses such as deductibles, copayments, and other qualified expenses.

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