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Health Insurance Terms Demystified

Does it sometimes seem like your insurance company or broker are using some sort of secret code when they are referring to your health insurance policy? If so, here are the health insurance terms demystified to help you understand your policy.

Does it sometimes seem like your insurance company or broker are using some sort of secret code when they are referring to your health insurance policy? If so, here are the health insurance terms demystified to help you understand your policy.

Bronze Health Plan

A Bronze Health Plan is one of the 4 categories or “Metal” health plans that were created by the Affordable Care Act (ACA). The four plan types; Bronze, Silver, Gold and Platinum – ranked from the lowest to highest coverage – require insurance companies to provide a minimum standard of essential benefits. The Bronze Plan is the lowest cost plan with the least amount of benefits.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

A Federal law that allows you to continue your health coverage if you are terminated, laid off or retire from your employer. Cobra is optional and you pay 100% of the premium if you elect to go on COBRA. You can stay on your previous employer’s health plan for a maximum of 18 months. Then you will need to find other health insurance options.

Community Rating

Only applicable to a few states – New York mostly – a community rated health plan means every employee pays the same premium rate regardless of their age, gender, geographic location, occupation or health status. New York is a pure community rated state and applies to all companies with 2 to 100 employees.

Coinsurance

Is the out of pocket percentage you will pay for covered health care services after you paid your deductible. Example: 80/20 coinsurance means the insurance company pays 80% of covered costs and you pay 20%.

Copayment

A fixed payment amount or your share ($50, for example) you must pay for a covered health care service after you’ve paid your deductible. Copayments (often referred to as “copays”) can apply to other benefits within your health plan such as prescriptions, lab tests, emergency room, doctor and specialists visits.

Deductible

The amount you are required to pay for covered health care services before your insurance company will pay or reimburse your out of pocket costs. For example, if you have a health plan with a $2,000 deductible, you will pay the first $2,000 of covered health services yourself. Then you will pay a co-payment or coinsurance for remaining health bills.

EPO Plan (Exclusive provider organization)

Similar to an HMO plan but generally referrals are not required to see a specialist. This of course depends on the insurance carrier’s terms or EPO plans that are offered. EPO Plans are generally in network plans only which means you cannot get reimbursed for medical expenses if you go outside the EPO network.

Essential Health Benefits

10 categories of health care services that health plans must cover to meet requirements of the Affordable Care Act or Obamacare.

Essential health benefits include:

  1. Ambulatory patient services (care you get without being admitted to a hospital)
  2. Emergency services
  3. Hospitalization
  4. Maternity and newborn care
  5. Mental health and substance use disorder services including behavioral health treatment
  6. Prescription drugs
  7. Rehabilitative services and medical devices to help people recover from injuries, disabilities, or chronic conditions
  8. Laboratory services
  9. Preventive services and chronic disease management
  10. Pediatric services, including oral and vision care

Flexible Spending Account (FSA)

An account set up through your employer to pay for out-of-pocket medical expenses with tax-free dollars. These expenses can include insurance copayments and deductibles or qualified prescriptions, insulin and medical devices.

You decide how much of your pre-tax wages you want taken out of your paycheck and put into an FSA. You don’t have to pay taxes on this money. Your employer’s plan sets a limit on the amount you can put into an FSA each year.

FSA funds do not carry over to the following year – it is a use it or lose it plan- which means that FSA funds you don’t spend by the end of the plan year can’t be used for expenses in the next year. An exception is if your employer’s FSA plan permits you to use unused FSA funds for expenses incurred during a grace period of up to 2.5 months after the end of the FSA plan year.

Gold Health Plan

The Gold Plan has the second lowest out-of-pocket costs of the 4 metal plan types created by the ACA. Gold Plans are required to cover 80% of the covered medical costs for a health insurance plan and the remaining 20% paid by the insured.

Grandfathered Health Plans

A group health plan or individual plan that was created or purchased on or before March 23, 2010. Grandfathered plans are exempt from health plan requirements under ACA. Plans or policies may lose their “grandfathered” status if they make certain significant changes to the plan that reduce benefits or increase costs to enrollees.
Grandfathered health plans are planned to sunset or terminated in 2020 which will affect millions of employees.

Group Health Plan

A health plan offered by an employer or business that provides health insurance coverage to its employees and families.

High Deductible Health Plan (HDHP)

A plan with a higher deductible than a traditional insurance plan. Usually the monthly premium is lower, but you have to pay more health care costs yourself (your deductible) before the insurance company starts to pay its share. A high deductible plan can be combined with a health savings account or a health reimbursement arrangement. This allows you to pay for certain medical expenses with untaxed dollars.

HMO (Health Maintenance Organization)

A type of health insurance plan that provides health care services for a fixed annual fee. HMO’s usually limits coverage from doctors or hospitals that work for or contract with the HMO provider. It generally does not cover out-of-network care except in the event of an emergency. HMOs often provide combined care and concentrate on prevention and wellness programs.

HRA (Health Reimbursement Account)

Health Reimbursement Accounts (HRAs) are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Usually associated with high deductible health plans (HDHP) where employees must satisfy their deductible or the employer agrees to pay a percentage of the deductible before health services are covered.

Unused dollars can be rolled over to be used each year. There is no use it or lose it rule as in an FSA Account. The employer funds and owns the account. Health Reimbursement Accounts are sometimes called Health Reimbursement Arrangements. Health Savings Account (HSA)

Minimum Value Health Plan

A health plan meets a MV standard if it pays at least 60% of the total cost of health care services for the insured. Benefits must include substantial coverage of inpatient hospital and physician services. Employees that are offered group health coverage which provides minimum value and is considered affordable are not eligible for a premium tax credit.

Out-of-Pocket Costs

Expenses for medical services or health care that are not reimbursed by your insurance company. These out-of-pocket costs are your financial responsibility and include your deductible, coinsurance, and copayments for covered services plus all costs for services that aren’t covered.

Platinum Health Plan

A Platinum Plan is designed to have the lowest out-of-pocket expenses for enrollees. The insurance company pays 90% of covered medical costs while the enrollee pays 10% of the costs. The Platinum plan provides the highest amount of coverage and is the most expensive of the 4 Metal Plans.

POS (Point of Service)

A health plan designed for you to pay less if you use doctors, hospitals, and other health care providers that belong to the plan’s network. POS plans also require you to get a referral from your primary care doctor in order to see a specialist.

PPO (Preferred Provider Organization)

A health plan that allows you to use doctors or hospitals outside of their network while still getting reimbursed for health care services. A PPO plan contracts with hospitals and doctors, to create a network of participating providers. You pay less if you use their network of providers but can still seek medical care for an additional cost outside their network.

Silver Health Plan

The Silver Plan has the third lowest out-of-pocket costs of the 4 metal plan types created by the ACA. The insurance company pays 70% of covered healthcare expenses and the remaining 30% of expenses are paid out-of-pocket by the policyholders.

Summary of Benefits and Coverage (SBC)

A required document issued to plan participants that provides an easy to read summary of your plan design. It allows you to compare cost and coverage options between health plans.
Plans can be compared based on price, benefits, and other options of coverage. A “Summary of Benefits and Coverage” (SBC) will be given to you by your employer who offers a group health plan or when you shop, renew or change coverage for yourself. You can request an SBC from the health insurance company by phone, mail or download a copy from their website.

UCR (Usual, Customary, and Reasonable Medical Expenses)

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 which will be reimbursed by the insurance company.

Waiting Period

The waiting period – maximum 180 days or 3 months – that must pass before an employee will be eligible to join a group health plan. The employer can choose a shorter waiting period but cannot delay a new employees enrollment for more than 180 days.