• Important Health Insurance Terms to Know

     
     
     
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    Insurance policies are legally binding documents, written to protect the rights of both you and the insurance provider. Unfortunately, the language they used to do that can also make policies and benefit information difficult to understand.

    The list below includes definitions for some of the most common health insurance terminology you may encounter when reviewing your existing plan or shopping for a new plan.

    • Affordable Care Act (ACA or “Obamacare”) – a law passed on March 23, 2010, with provisions implemented through 2015. This law is intended to change health care in the United States to make it more accessible and affordable for all Americans.
    • Allowed amount (see also UCR)– the amount that an insurer agrees is reasonable for a service or procedure. If the charge is greater than that amount, the insurance company does not have to pay it.
    • Annual or lifetime limits– the maximum an insurer will pay during a year or over the course of your entire enrollment, respectively, in your health insurance plan (the Affordable Care Act phased out these limits except for grandfathered plans)
    • Balance billing– your healthcare provider bills you for the difference between the healthcare provider’s charge and the amount allowed by your insurance company for that service. Note: A preferred provider may not balance bill for covered services.
    • Coinsurance – the percentage of the cost of services that you are responsible for (such as coinsurance of 20 percent means that if a service costs $1,000, you will be responsible for $200 and your insurer will pay $800)
    • COBRA – or the Consolidated Omnibus Budget Reconciliation Act of 1985, is a law that was passed to protect employees and their family members who lose their employer-sponsored health insurance as the result of certain qualifying events, such as the death of the covered employee or termination of employment. To continue coverage under COBRA, the insured may have to pay higher premiums and the coverage may only last 18 to 36 months.
    • Copayment– your out-of-pocket cost per service (such as $20 per office visit)
    • Deductible – the cost you must pay out of pocket before your insurer begins paying. Usually this is a specified amount per year that resets at the beginning of every year.
    • Essential health benefits – the ACA-required healthcare services that must be covered by plans offered in the health insurance marketplace and in states expanding their Medicaid coverage. These items and services are grouped within the following 10 categories:1) ambulatory patient services; 2) emergency services; 3) hospitalization; 4) maternity and newborn care; 5) mental health and substance abuse disorder services, including behavioral health treatment; 6) prescription drugs; 7) rehabilitative and habilitative services and devices; 8) laboratory services; 9) preventive and wellness services; 9) chronic disease management; and 10) pediatric services, including oral and vision care.
    • Excluded services – healthcare services not paid for or covered by your health insurance plan.
    • Explanation of Benefits (EOB) – a form sent to you by your insurance company after you have received healthcare services that explains what was covered by your insurance and the amount you may be responsible to pay. The EOB is not a bill. If you are responsible for the remaining amount to be covered you will receive a bill from your healthcare provider.
    • Federal Poverty Level (FPL) – a government benchmark used to determine if you are eligible for benefits from a government program, for example, Medicaid. The amount is adjusted every year. In 2014, the FLP for an individual was $11,670 and $23,850 for a family of four.
    • Grandfathered plans –  employer-sponsored health insurance plans that have been in place since before the ACA became law on March 23, 2010 (even if you enrolled after that date) that have not changed substantially in terms of costs and benefits provided. If you are in a plan that is grandfathered, you might not have all the rights and protections required by the ACA.
    • Health Maintenance Organization (HMO) – a type of insurance plan that may cost less than other traditional plans because services are provided by a network of healthcare providers and hospitals within a network. Your care is coordinated by a primary care physician (PCP), and you need a referral from your PCP to see other healthcare professionals to be covered by your plan.
    • Health savings accounts – accounts set up with your bank or employer that allow you to save pre-tax money throughout the year to cover qualifying out-of-pocket medical expenses during that year. These accounts include HSAs (Health Savings Accounts), FSAs (Flexible Spending Accounts), and HRAs (Health Reimbursement Arrangements.) One big difference among these types of accounts is whether you can keep any money left in the account when the year is up or if you change jobs.
    • Individual Responsibility Payment or Individual Mandate – the tax penalty required by the ACA for anyone who can afford minimum essential health coverage but does not get it. The payment, which increases each year, is paid when you file your federal income tax return. Click here for more information on the penalty.
    • Managed care – a term used to describe health insurance plans that tend to cost less because costs are controlled by offering a limited number of healthcare providers and facilities, usually referred to as the network. Types of managed care plans include HMOs and PPOs.
    • Medicaid – a government program funded jointly by the federal and state governments to provide assistance to people with low-incomes.
    • Medicaid expansion – a provision of the ACA that increased the number of people covered by Medicaid by raising the income threshold, which means more people are eligible to receive benefits. Not all states have agreed to the expansion, so eligibility varies from state to state.
    • Medicare – a federal health insurance program for people 65 or older and certain other people with disabilities. It has four parts: A-hospital insurance; B-medical insurance; C-Medicare Advantage Plan (Medicare plans from private companies); and D-prescription drug coverage.
    • Minimum essential coverage – the type of health coverage your plan must have to meet the requirements of the ACA and to avoid paying a tax penalty. General speaking, your plan must cover the ACA’s 10 essential benefits: requirement for ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment and prescription drugs; rehabilitative and habilitative services and devices; laboratory services, preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.
    • Network – a group of healthcare providers and facilities participating in a health insurance plan.
    • Obamacare – a nickname for the Affordable Care Act (ACA), health reform legislation passed March 23, 2010, during President Obama’s administration.
    • Open enrollment – the period of time, usually about two months in the fall, when you can enroll in a health plan. You may not be able to enroll at other times during the year unless you have a qualifying event, such as the death of a spouse or birth of a child.
    • Out of network – refers to healthcare providers or hospitals that are not in the network of providers and hospitals that contract with your health insurance plan, such as an HMO, PPO, or POS, to provide healthcare services.
    • Out-of-pocket maximum – the maximum amount of costs you are responsible for in a year (such as: if your out-of-pocket maximum for a year is $3,500 then you are only responsible for meeting deductible and coinsurance costs up to that amount).
    • Plan administrator – although this sounds like an individual, it may be a call center with staff trained to answer your questions. You may also find answers to your questions at the insurer’s website. Insurance plans are required to provide contact information.
    • Point-of-Service plans (POS) – a type of insurance plan with a network of providers who have contracted with your insurance company to provide your medical care. Typically with a POS plan you can see a provider or use a hospital outside of the network, but you will have to pay some or all of the cost. A POS plan may also require that you have a referral to see a healthcare provider who is outside the network.
    • Preferred Provider Organizations (PPOs) – a type of insurance plan with a network of healthcare providers who have contracted with your insurance company to provide your medical care. Typically you can see any healthcare provider you want when you have a PPO but you will have to pay some or all of the cost when you see someone outside the network.
    • Preauthorization – sometimes called prior authorization, prior approval, or precertification, it is a requirement by some insurance plans that you check with the plan administrator before using a health care service, treatment plan, prescription drug, or durable medical equipment so the insurance company can decide if it is medically necessary. Preauthorization should not apply in the case of the emergency and it is not a guarantee the plan will cover the cost. Check your plan carefully for these requirements.
    • Pre-existing condition – physical or mental illnesses or conditions that exist before you apply for health insurance coverage. With the passage of the ACA, with few exceptions, such a short-term insurance, insurers can no longer deny coverage to someone with a pre-existing condition.
    • Preferred provider – healthcare providers and hospitals that contract with the insurance company to provide services covered by a plan. You do not need a referral to see a preferred provider in these plans.
    • Premium – a periodic (usually monthly) payment to purchase insurance coverage.
    • Primary care physician (PCP) – the healthcare provider who coordinates your care if you are covered by a Health Maintenance Organization (HMO).
    • Provider network – a group of healthcare providers who contract with your insurance plan to provide services. You may or may not be charged in whole or in part for services you received from outside of the provider network.
    • Qualifying event – these life-changing events may allow you to enroll in a health insurance plan at any time without waiting for the open enrollment period. Qualifying events include marriage, the birth or adoption of a child, divorce or legal separation, and the death of a spouse or dependents.
    • Summary of Benefits and Coverage (SBC) – a document that the ACA requires insurers to provide the gives information about a health insurance plans deductibles, copays, coinsurance coverage, exceptions, limitations, and exclusions. It also includes information about your right to appeal claim decisions and provides coverage examples for common claim scenarios (click here to see a sample SBC)
    • Supplemental or secondary health insurance – insurance coverage that may cover some of the out-of-pocket expenses that your primary health insurance plan doesn’t cover. If you and your spouse both have a health insurance plan through your respective employers, one can serve as your secondary coverage. You can also buy supplemental insurance coverage, for example, Medigap Insurance covers expenses not covered by Medicare.
    • UCR (Usual, Customary and Reasonable) – the amount paid for a medical service based on what providers in the area usually charge for the same or similar medical service. UCR may be used to determine the allowed amount.
    • Uniform Glossary – definitions of terms from the health insurance industry that you may need to know to understand and compare health insurance plans. The ACA requires that all plans make the glossary available to their participants.

    For additional help with health insurance terms and how they might apply to your health insurance plan, see the plan’s Summary of Benefits and Coverage (SBC) (click here to see an example) as well as a Uniform Glossary instituted by the Affordable Care Act (ACA) for all insurance plans.