New research indicates that the majority of American workers don't understand key health insurance terms, which could cause them to make poor plan selections and severely underestimate the cost of health care in retirement.

Although 61% of employees considered their understanding of health insurance terminology to be very good, only 15% of workers actually had a very strong understanding of key terms, according to new research published this week by Fidelity Investments. About 56% did not know what a health savings account is, and 50% could not define a flexible spending account or a health reimbursement account. Another 13% did not know what a copayment is.

When asked to identify the three most important factors in choosing health insurance, 39% of employees cited premiums amounts, followed by copayment amounts and the ability to access specific doctors (tied at 29%) and deductible amounts and prescription drug coverage (tied at 20%).

About 74% of workers who didn't have access to a consumer-driven health plan expressed no interest in it. The employees who were interested in a CDHP (24%) were less likely to be satisfied with their health plans and more likely to be younger and with a high level of education.

"It's a bit of a contradiction to hear workers say that premiums are the most important factor in choosing a plan, yet they express little interest in CDHPs," remarks Patrick Goepel, president of HR services for Fidelity Investments.

To educate workers on health care, Goepel advises employers to communicate early and often using a multi-media approach (an intranet scheme, Webcasts, etc.) and focus groups. Employers should promote healthy food choices and other fitness and wellness activities in the workplace, he adds.

Fidelity's survey also found that most insured workers (68%) have not tried to calculate their expected health care costs in retirement. When asked to estimate how much a typical couple retiring today at age 65 would need to cover out-of-pocket health care costs in retirement, the median answer given was $100,000, far less than Fidelity's estimated $215,000.

"The individual has to think about the lifetime of their health choices and the impact far beyond the current year and their careers," says Goepel. "So often today, they're looking at the copay or the monthly premiums, and that's a year-by-year approach. They need to start looking at the bigger picture."