Employers: Five Medicare Plan Terms to Know

Hundreds of Medicare plan options become available to your employees when they retire or turn 65. Understanding some basic insurance terms can help retirees navigate their options, forecast their expenses, and feel confident with their eventual plan choice.

These five common terms are important to know as you support your employees preparing for retirement and choosing new health care coverage.


A plan’s premium is the monthly amount an individual pays to the insurance company to keep their coverage active. Depending on the type of plan chosen, a plan’s premium could be as little as $0 per month.


The deductible is the amount owed by the beneficiary for covered services before their plan pays. For example, if a retiree’s deductible is $4,900, their plan will not pay until they have spent $4,900 of their own money on covered services.

As an individual has procedures, tests, and other medical services throughout the year, it’s important to check ahead of time which items are covered by their plan. Then, they can calculate costs based on how much of their deductible has been paid so far.

Out-of-Pocket Maximum

An out-of-pocket maximum is the most an individual will have to pay for covered medical expenses in a plan year. After someone reaches the limit on their out-of-pocket maximum through deductibles, copays, and coinsurance, their plan will pay all covered medical expenses through the plan year end.

But in some cases, insurance companies will not count a deductible as part of a plan’s out-of-pocket maximum. For example, say a plan’s deductible is $1,000 and the out-of-pocket maximum is $5,000. If the insurance company does not include the deductible in the out-of-pocket maximum, and a retiree has several expensive medical procedures in one year, they could spend $6,000 out of pocket. For Medicare beneficiaries, knowing how their plan works is key to avoiding surprise costs.

In-Network and Out-of-Network

If your company’s retirees select a Medicare Advantage plan, they will choose from one of two types: a health maintenance organization (HMO) or a preferred provider organization (PPO). One of the key differences between these plan types is the plan’s network.

HMO plans require individuals to choose a primary care physician who is in network. Retirees will choose from a list of local providers that are approved by that plan. When necessary, their primary care physician will refer them to other in-network specialists or facilities for medical services. By using these in-network providers, they can receive health care at the plan’s contracted amount.

With an HMO, if beneficiaries see a doctor or go to a facility that is out of network, they will likely pay more than if they had selected an in-network option.

PPO plans allow for more flexibility, as individuals do not have to select a primary care physician. Retirees also have the option to receive care from any provider without referrals, but they will most likely pay less if they see doctors or visit facilities within their PPO’s network.


Coinsurance is a patient’s share of the cost of a covered medical service. Insurance companies usually set this as a percentage. After a retiree meets their annual deductible, if their plan specifies it, they will start paying coinsurance.

For example, say an individual has met their yearly $4,900 deductible. Then they have a doctor’s visit that costs $100. If their plan’s coinsurance is 20 percent, they will pay $20. Insurance will cover the rest.

Ensuring your employees know what to expect in retirement begins with understanding insurance terms such as these. If you need help making sense of the terminology, look to your trusted health plan advisor for guidance. If your employees don’t have a trusted advisor for unbiased advice, RetireMEDiQ would love to help. To request information about RetireMEDiQ, call 1-866-407-5180 or view our free Medicare guide.

RetireMEDiQ simplifies Medicare by providing guidance, evaluating your plan options, and helping you enroll in the right health care plan. Over 50,000 individuals have trusted them to deliver peace of mind.

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