This week on the show we did something new: we quizzed each other. Dennis asked Stephanie commercial insurance questions. Stephanie asked Dennis health insurance questions. And it turns out even the people doing this for a living have to think about some of these.
Which is kind of the whole point. If we have to pause on it, your average consumer definitely does. So here's a plain-English breakdown of the terms that came up — the ones you actually need to understand before signing anything.
HMO vs. PPO (and the thing most people miss)
The headline difference between HMO and PPO health plans is network freedom:
- HMO requires a primary care doctor who's your "home base." You have to go through them for referrals to specialists. You can only use providers in-network — if you go out of network, insurance doesn't help at all (except for emergencies).
- PPO lets you go to any doctor you want, in-network or out. You usually don't need referrals for specialists. Going out of network just costs you more.
The emergency exception matters: even on an HMO, if you have an actual emergency (car accident, heart attack, something life-threatening), you're covered at the nearest ER even if it's out of network. But a sore throat at 2 AM out of state? Not an emergency. Not covered.
Copay vs. coinsurance (they're not the same thing)
A copay is a flat fee you pay at a visit. $40 to see your doctor, $75 to see a specialist, $350 for an ER visit. That's a copay. It doesn't change based on the cost of the service.
Coinsurance is a percentage you pay after you've hit your deductible. If your plan is "80/20 after deductible," that means after you've paid your deductible out of pocket, insurance covers 80% of what comes next and you cover 20% — until you hit your max out-of-pocket.
Easy way to remember: copay is a fixed dollar amount for a specific service, coinsurance is a percentage of total cost after you've already paid your deductible.
The coinsurance penalty (the one that destroys commercial claims)
This is the one that caught Stephanie's attention in the quiz, and it's worth explaining in detail because most commercial property owners have no idea it exists.
Say you own a $2 million commercial building. You decide to insure it for $1 million because you figure "that'll cover any realistic loss." Your policy has an 80% coinsurance clause, which means you're required to insure the building for at least 80% of its replacement cost ($1.6M) for full coverage to apply.
You have a $400,000 fire. Here's the math:
What you did insure it for, divided by what you should have insured it for, times the loss amount — minus your deductible.
- What you insured it for: $1,000,000
- What you should have insured it for (80% of $2M): $1,600,000
- Ratio: 1,000,000 / 1,600,000 = 62.5%
- They apply that 62.5% to your $400K claim
- You get $250,000 — not $400,000. Minus your deductible.
You just lost $150,000+ because you underinsured. Fun, right? If you own commercial property and nobody's ever explained this to you, that's a very big problem.
EPLI (Employment Practices Liability Insurance)
EPLI covers your business from employee lawsuits: wrongful termination, discrimination, harassment, retaliation. It's not included in a standard BOP (Business Owner's Policy), which means a lot of small businesses have zero coverage for the fastest-growing category of business lawsuits.
You can get an EPLI claim from:
- Firing someone (wrongful termination)
- A vendor making an off-color joke in front of staff
- A customer complaint about an employee
- Not letting someone apply for a job because you were closing
- TikTok "pranks" gone wrong on the clock
If you have employees, you need EPLI. Full stop.
Formulary vs. non-formulary (prescription stuff)
A formulary is your health plan's list of preferred prescription drugs. Every carrier has one. Every plan within a carrier can have a different one. If your medication is on the formulary, you get the negotiated discount. If it's not, you pay more — or your doctor has to petition for an exception.
This is why GLP-1 drugs are confusing right now: your plan might cover Mounjaro but not Ozempic, or vice versa, because of what's on their formulary. Same category of drug, different negotiated contracts.
Named insured vs. additional insured vs. additional named insured
These three terms get mixed up constantly and the differences matter.
- Named insured: The person or entity that bought and owns the policy. All the rights, pays the premium, makes changes.
- Additional insured: A third party (usually a contractor or vendor) added to the policy for liability protection in certain situations. They don't own the policy, they just get specific protection related to work being done.
- Additional named insured: Someone added to the policy with all the same rights as the primary named insured. Common when one person owns two LLCs and wants both on the same policy with equal standing.
If you're a landlord requiring tenants to list you on their renter's insurance, you want "additional insured" status, not just "additional named insured" — the difference affects whether their policy will defend you if their guest sues you after an incident at the property.
HSA vs. FSA (can you have both?)
Short answer: usually no, with exceptions.
- HSA (Health Savings Account): Pre-tax money you contribute if you're on a high-deductible health plan. Rolls over year to year. Yours forever, even if you leave the job.
- Standard Healthcare FSA (Flexible Spending Account): Pre-tax money for medical expenses. Use it or lose it (mostly). Belongs to the employer plan.
If you have an HSA, you generally can't have a standard FSA at the same time — it would make you ineligible for HSA contributions. But you can combine an HSA with a Limited Purpose FSA (dental and vision only) or a Dependent Care FSA (childcare expenses) without any conflict.
Qualifying life events
These are events that let you enroll in or change your health insurance outside of open enrollment. The big ones:
- Marriage
- Divorce
- Death of a spouse or dependent
- Birth or adoption of a child
- Loss of other health coverage (including losing your job)
- Moving to a new area
If one of these happens, you typically have 60 days from the event to make changes. Miss the window, you wait until open enrollment.
The one takeaway
If any of these terms were new to you — or you kinda knew them but weren't 100% sure — that's your sign to actually look at your policy before you need it. Pull your declarations page. Read the summary of benefits. Call your agent and ask what the coinsurance clause looks like. The time to learn these words is before the claim, not after.
The honest bottom line
Insurance uses a lot of jargon, and a lot of it is designed in a way that makes it easier for the carrier than for you. Learning the vocabulary isn't optional if you want to make good decisions about coverage. It's the difference between buying a product and buying a contract you actually understand.