How Does Employee Heath Insurance Work?

Most people get their health insurance through their employers, but signing up for a health care plan is only the beginning. To make the most of your insurance, you need to choose network providers, understand any deductibles and copayments you are subject to and look for ways to save money where you can.

Use the Provider Directory

• Health insurance plans typically use a network of preferred providers. These are providers with whom the insurance company has negotiated special deals and favorable rates. If you use a provider who is not part of the insurer's network, your claims could be paid at a significantly reduced rate or not covered at all. You can find the list of providers in your area by logging on to the insurance company website or calling the toll-free number listed on the back of the card issued to you by the company. Once you have found a list of providers, contact the one you plan to use and verify that it participates in the plan.

Pay Your Deductible

• In many cases, you will have to meet a specific deductible before your employee health insurance starts paying your claims. For instance, if your plan comes with a $1,000 deductible, you must pay the first $1,000 in health care expenses before the plan starts covering your medical care. There are exceptions, however, such as preventive care, annual physicals and recommended cancer screenings. You can find information about which services are covered by looking at the enrollment kit your employer provided.

Copayments

• You might be required to pay a copayment each time you go to the doctor or pick up a prescription at the pharmacy. Your insurance company might pay 90 percent of all covered charges, while you are responsible for the remaining 10 percent. That means you would have to pay $10 toward a $100 doctor visit and $5 toward a prescription that costs $50. The plan should also have an out-of-pocket maximum, meaning that the insurance pays 100 percent after you reach a certain dollar amount. So if the plan's out-of-pocket maximum is $5,000, the insurance company pays 100 percent of charges above that level.

Tiered Prescriptions

• Many employer-sponsored health plans use a tiered payment structure for prescription medications. The drugs in the lowest cost tier are often generics and inexpensive brand medications with proven efficacy for a given condition. The drugs in the higher tiers are generally brand-name medications with higher costs. Your insurance company can provide you with a formulary listing all medications and their respective tiers. You can then review that list with your doctor and look at ways to save money by switching to less expensive medications with the same effectiveness as what you are currently using.