Deductibles, Co-Pays & Other Policy Jargon
This glossary includes many commonly used insurance and insurance-related terms. It is not an exhaustive list and only meant as an educational or informational aid. Terms, or definitions, as related to your own insurance plan may differ.
Allowed amount – Maximum amount to be paid for covered health care services. This also has been referred to as “eligible expenses,” “payments allowance” or a “negotiated rate.”
Balance billing – The billing that shows the difference between the insurance provider’s charges and the amounts.
CHIP (Children’s Health Insurance Program) – A program that provides coverage to low-income and moderate-income children. Much like Medicaid, it is jointly funded and administered by the state government and the federal government. It was at one time called the State Children’s Health Insurance Program (SCHIP).
Co-insurance – The share of the costs of covered health care services, calculated as a percent of the allowed amount for the service. The insured pays the co-insurance plus any deductibles owed.
Co-payment or co-pay – The fixed amount for a covered health care service that is typically payable when receiving the service. This amount varies by the type of covered health care service.
COBRA coverage – Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions passed by Congress in 1986. The COBRA law allows former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health insurance plans by private-sector employers with 20 or more employees, employee organizations, or state or local governments.
Community rating – A methodology of insurance premium pricing, in which every policyholder pays the same premium, regardless of gender, health status, age or many other factors.
Deductible – The amount you owe for health care services your health insurance or plan covers before your health insurance or plan begins to pay. The deductible may not apply to all services.
Essential benefits – ACA requires that after 2014, all health insurance plans include a basic package of certain benefits including hospitalization, outpatient services, maternity care, prescription drugs, emergency care and preventive services among other benefits.
Exchange – ACA created a new “American Health Benefit Exchanges” in which each state assists individuals to purchase affordable health insurance. The “exchange” allows small businesses to compare and purchase qualified health insurance plans. The exchange also determine who qualifies for the subsidies and makes subsidy payments to insurers on behalf of individuals.
External review – ACA requires that all health plans provide external review processes that meets minimum standards.
Grandfathered plan – A health plan that an individual was enrolled in prior to the enactment of the ACA on March 23, 2010. The “grandfathered plans” are exempted from many changes required by ACA. New employees may be added to group plans that are grandfathered, and new family members may be added to all grandfathered plans.
Health insurance – A contract that requires your health insurer to pay some or all of your health care costs in exchange for a premium.
Health Maintenance Organization (HMO) – A type of managed care organization (health plan) that provides health care coverage through an established network of hospitals and doctors. It also includes other health care providers. The HMO pays for care that is provided from an in-network provider.
Health Savings Account (HSA) – The Medicare bill signed by President Bush on December 8, 2003 created HSAs. Individuals covered by a qualified HSA are able to open an account on a tax preferred basis to save for qualified medical and retiree health costs.
High Deductible Health Plan (HDHP) – Health insurance plan that requires out-of-pocket spending and typically the premiums are lower. Starting in 2010, a qualifying HSA plan with HDHP, must have a deductible of $1,200 for single coverage and $2,400 for family coverage. The plan also limits the total amount of out-of-pocket cost sharing for covered benefits each year to $5,950 for single coverage and $11,900 for families.
High risk pool – A state-subsidized health plan that provides coverage for individuals with pre-existing health care conditions who cannot purchase it in the private market. ACA creates a temporary federal high risk pool program, which may be administered by the states, to provide coverage to individuals with pre-existing conditions who have been uninsured for at least six months.
HIPAA (Health Insurance Portability and Accountability Act of 1996) – The federal law that was enacted in 1996 which eased the “job lock” problem by making it easier for individuals to move from job to job without the risk of being unable to obtain health insurance or having to wait for coverage due to pre-existing medical conditions.
Hospital outpatient care – Care in a hospital that usually doesn’t require an overnight stay.
Individual mandate – A requirement that everyone maintain health insurance coverage. ACA requires that everyone who can purchase health insurance for less than eight percent of their household income do so or pay a tax penalty.
Lifetime limit – A limit of the amount of coverage in dollars allowed for an insured over a lifetime. ACA prohibits the use of lifetime limits on benefits beginning September 23, 2010.
Medicaid – A joint state and federal program that provides health care coverage for low income individuals. Benefits for Medicaid vary by state. Individuals must meet state eligibility requirements. Medicaid sometimes pays for long-term care (such as in-home nursing care). ACA extends eligibility for Medicaid to all individuals earning up to $29,326 for a family of four.
Medical loss ratio – The percentage of health insurance premiums that are spent by the insurance company on health care services. ACA requires that large group plans spend 85 percent of premiums on clinical services and other activities for the quality of care for enrollees. Small group and individual market plans must devote 80 percent of premiums to these purposes.
Medicare – A federal government program that provides health care coverage for all eligible individuals age 65 or older or under age 65 with a disability, regardless of income or assets. Eligible individuals can receive coverage for hospital services (Medicare Part A), medical services (Medicare Part B), and prescription drugs (Medicare Part D).Together, Medicare Part A and B are known as Original Medicare. Benefits can also be provided through a Medicare Advantage plan (Medicare Part C).
Medicare advantage – An option Medicare beneficiaries can choose to receive most or all of their Medicare benefits through a private insurance company. Also known as Medicare Part C. Plans contract with the federal government and are required to offer at least the same benefits as original Medicare, but may follow different guidelines and provide different benefits. Different from original Medicare, those who enroll in Medicare Advantage cannot be covered at any health care provider that accepts Medicare. Enrollees may also pay higher costs if they utilize and out-of-network provider.
Medicare supplement (Medigap) insurance – Private insurance policies that can be purchased to “fill in the gaps” and pay for certain out-of-pocket expenses not covered by original Medicare.
Non-preferred provider – A provider who doesn’t have a contract with your health insurer or plan to provide services to you. You’ll pay more to see a non-preferred provider. Check your policy to see if you can go to all providers who have contracted with your health insurance or plan, or if your health insurance or plan has a “tiered” network and you must pay extra to see some providers.
Network – The facilities, providers and suppliers your health insurer or plan has contracted with to provide health care services.
Open enrollment period – A specified period during which individuals may enroll in a health insurance plan each year. In certain situations, such as if one has had a birth, death or divorce in their family, individuals may be allowed to enroll in a plan outside of the open enrollment period.
Out-of-network co-insurance – The percentage paid of the allowed amount for covered health care services to providers who do not contract with your health insurance or plan.
Out-of-network co-payment – A fixed amount paid for covered health care services from providers who do not contract with your health insurance or plan.
Out-of-pocket limit – An annual limitation on all cost sharing for which patients are responsible under a health insurance plan. This limit does not apply to premiums, balance billed charges from out of network health care providers or services that are not covered by the plan. ACA requires out-of-pocket limits of $5,950 per individual and $11,900 per family, beginning in 2014. These amounts will be adjusted annually to account for the growth of health insurance premiums.
Patient Protection and Affordable Care Act (PPACA) – Legislation (Public Law 111-148) signed by President Obama on March 23, 2010. Commonly referred to as the health reform law.
Plan – A benefit your employer, union or other group sponsor provides to you to pay for your health care services.
Pre-existing condition exclusion – The period of time that an individual receives no benefits under a health benefit plan for an illness or medical condition for which an individual received medical advice, diagnosis, care or treatment within a specified period of time prior to the date of enrollment in the health benefit plan. ACA prohibits pre-existing condition exclusions for all plans beginning January 2014.
Preferred Provider Organization (PPO) – A type of managed care organization (health plan) that provides health care coverage through a network of providers. Typically the PPO requires the policyholder to pay higher costs when they seek care from an out-of-network provider. State and federal rules oversee disputes between plans and individuals based on the type of coverage the individual has.
Premium – The periodic payment required to keep a policy in force.
Prescription drug coverage – Health insurance coverage or plan benefit that pays for prescription drugs and medications in whole or in part.
Prescription drugs – Drugs and medications that by law require a prescription from a doctor.
Preventive benefits – Covered services that are intended to prevent disease or to identify disease while it is more easily treatable. ACA requires insurers to provide coverage for preventive benefits without deductibles, co-payments or coinsurance.
Primary care provider – A physician which can be an M.D. (Medical Doctor) or a D.O. (Doctor of Osteopathic Medicine) that helps patients access a range of health services. Primary care providers can also include a nurse practitioner or a P.A. (Physician’s Assistant) as allowed under state law.
Qualified health plan – A health insurance policy that is sold through an exchange. ACA requires exchanges to certify that qualified health plans meet minimum standards contained in the law.
Rehabilitation services – Health care services that help a person improve skills and functioning for daily living. These services may include physical and occupational therapy, speech-language pathology and psychiatric rehabilitation services in a variety of inpatient and/or outpatient settings.
Rescission – The process of voiding a health plan from its inception usually based on the grounds of material misrepresentation or omission on the application for insurance coverage that would have resulted in a different decision by the health insurer with respect to issuing coverage. ACA prohibits rescissions except in cases of fraud or intentional misrepresentation of a relevant fact.
Risk adjustment – Insurance plans that enroll a disproportionate number of sick individuals are reimbursed for that risk by other plans who enroll a disproportionate number of healthy individuals. ACA requires states to conduct risk adjustment for all non-grandfathered health insurance plans.
Risk corridor – A temporary provision in ACA that requires plans whose costs are lower than anticipated to make payments into a fund that reimburses plans whose costs are higher than expected.
Self-insured – Group health plans may be self-insured or fully insured. A plan is self-insured (or self-funded), when the employer assumes the financial risk for providing health care benefits to its employees. A plan is fully insured when all benefits are guaranteed under a contract of insurance that transfers that risk to an insurer.
Small group market – The market for health insurance coverage offered to small businesses – those with between two and 50 employees in most states. ACA will broaden the market to those with between one and 100 employees.
Solvency – The financial stability of a health insurance plan to meet its financial obligations. State insurance regulators require corrective action if a plan’s finances cannot be stable financially.
Specialist – A physician specialist focuses on a specific area of medicine or a group of patients to diagnose, manage, prevent or treat certain types of symptoms and conditions. A non-physician specialist is a provider who has more training in a specific area of health care.
UCR (Usual, Customary and Reasonable) – The amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service. The UCR amount sometimes is used to determine the allowed amount.
Waiting period – A period of time that an individual must wait either after becoming employed or submitting an application for a health insurance plan before coverage becomes effective and claims may be paid. Premiums are not collected during this period.
The information above was supplied and edited by John Presta via Examiner.com. John Presta is the author of an award-winning book titled, “Mr. & Mrs. Grassroots: How Barack Obama, two Bookstore Owners and 300 Volunteers did it,” released on January 20, 2010 by the Elevator Group. John is a writer, author, columnist, book reviewer, political analyst, political commentator, and a political pundit. John has been a frequent guests on a number of television and radio stations. John Presta, the son of Italian-born immigrants, was born and raised in Chicago, Illinois. He and his wife Michelle are community organizers and leaders. He is currently working on his next two books Mr. & Mrs. Grassroots series.
For more information about the Affordable Care Act from CBS New York, visit CBSNewYork.com/ACA.