Healthcare Glossary

A

Affordable Care Act

The Affordable Care Act, also known as the ACA or “Obamacare,” is a comprehensive healthcare reform law passed in 2010. The law has three primary goals:

  • To make affordable health insurance available to more people and lower the uninsured rate. The law provides consumers with subsidies (premium tax credits) that lower costs for households with incomes between 100% and 400% of the federal poverty level.
  • Expanded the Medicaid program to cover adults with income below 138% of the federal poverty level. (Note: Not all states have expanded their Medicaid programs.)
  • Support innovative medical care delivery methods designed to lower the costs of healthcare generally.

The law has addressed some of small business owners’ top problems when it comes to health insurance, including soaring healthcare costs and limited choice among health plans. Since 2010 the increase in small business healthcare costs has been at the lowest level in years, following regular double-digit increases prior to the law’s enactment. Additionally, the health insurance marketplaces created under the ACA have been crucial to helping more small businesses, self-employed entrepreneurs and small business employees gain access to health coverage.

Association Health Plans (AHPs)

Association health plans (AHPs) allow self-employed and small business owners to band together to purchase health insurance. Unlike ACA-compliant plans, they may charge different rates based on age, gender or location and they are not required to offer the same comprehensive benefits as ACA-compliant plans.

B

Brokers and agents

Professional health insurance brokers provide expertise that can be helpful in finding a health insurance plan for your business and they can direct you to products offered by a range of companies. This is in contrast to a health insurance agent, who works with only one company and promotes that company’s products. If you do not use a broker, you will likely work with an agent at each company you contact.

C

COBRA

A federal law that may permit you to retain existing coverage if your employment ends, if you lose coverage through your spouse or other qualifying events. You are required to pay 100% of the premium for coverage as well as administrative fees. As an employer, you must comply with COBRA if you have more than 20 full- and part-time employees.

Coinsurance

In many health plans, patients must pay a portion of the services they receive. This payment is called “coinsurance” and is usually a small percentage of the service cost after the plan pays benefits. For example, if the plan pays 70% of the cost, the patient pays 30% of the cost. Coinsurance is common in PPO products and less common in HMOs.

Community rating

A provision of the Affordable Care Act that prevents insurers from charging more based on an individual’s demographic characteristics like gender, age, pre-existing conditions or more.

Consumer protections

The Affordable Care Act mandated certain requirements to extend protections to healthcare consumers. These protections include preventing insurers from denying coverage to patients with pre-existing conditions, phasing out lifetime caps on coverage, allowing children to stay on their parents plan up to the age of 26 and mandating coverage on 10 essential health benefits like maternity and mental health coverage. A plan must meet these requirements to be compliant with the ACA, but non-ACA compliant plans may not provide some or all of these protections.

Copayments or “copays”

A flat fee that the patient pays at the time of care. After the patient pays the fee, the plan usually pays 100% of the balance on eligible services. The fee usually ranges between $10 and $40. Copayments are common in HMO products and are often characteristic of PPO plans as well.

Cost sharing

This refers to how health plan costs are shared between employers and employees. Generally, costs are shared in two main ways: premium contributions, generally shared by the employer and employee, and cost sharing at the time of service, such as copayments, coinsurance and deductibles, generally paid by the employee.

Cost-sharing reduction

A discount that lowers the amount you have to pay for deductibles, copayments and coinsurance. If you qualify, you must enroll in a plan in the Silver category to get the extra savings. When you fill out an application through Healthcare.gov or your state’s marketplace, you’ll find out if you qualify for premium tax credits and extra cost-sharing reductions.

D

Deductible

The amount a patient pays out-of-pocket for health services before the health insurance plan pays the remaining costs. Deductibles generally apply per person per calendar year.

E

Employee census

Insurers use an “employee census” to obtain specific information to estimate the healthcare costs your group is likely to incur. A census does not include health status, race, religion, sexual orientation (even if applying for domestic partner benefits), Social Security number, or U.S. citizenship/immigration status.

Employee notifications / Fair Labor Standards Act

Many employers are required by the Fair Labor Standards Act (FLSA) to notify employees of coverage options available through the insurance marketplaces. These requirements generally apply to all employers with at least one employee. You can find sample disclosure notices, whether you offer insurance cover or not, on the Department of Labor’s website.

Employee Retirement Income Security Act (ERISA)

A federal law that governs many employee benefit plan aspects, including how employers must provide plan information to employees. ERISA also governs the claims and appeals procedures for qualified plans.

Employee waiting period

This is the amount of time an insured must wait before some or all of their coverage goes into effect. You may not receive benefits for claims filed during the waiting period. Waiting periods may also be known as elimination periods and qualifying periods.

Essential health benefits

The ACA requires that health insurance plans must cover at minimum the following categories of service: Ambulatory patient services, emergency services, hospitalization, pre and postnatal care, mental health, prescription drugs, rehabilitative and habilitative services and devices, laboratory services, preventive services and pediatric services.

F

Flexible Spending Accounts (FSAs)

A special account you put money into to use to pay for certain out-of-pocket healthcare costs. You don’t pay taxes on this money, which  means you’ll save an amount equal to the taxes you would have paid on the money you set aside.

G

Group coverage

Group medical coverage refers to a single policy issued to a group (typically a business with employees, although there are other kinds of groups that can get coverage) that covers all eligible employees and sometimes their dependents.

Guaranteed issue and renewal

Under the Affordable Care Act, individuals and small employers are guaranteed coverage should they choose to purchase it, regardless of an employee’s health status, age, gender or other factors. Guaranteed issue does not limit the amount an insurer can charge you for enrolling, but prevents an individual from being denied the right to purchase insurance.

H

Health insurance marketplaces

Under the ACA, states may set up online marketplaces (also called health insurance exchanges) that allow individuals and small businesses to pool their buying power and purchase health insurance. Some states have set up their own marketplaces, while other states operate under the federal marketplace at Healthcare.gov.

Health Insurance Portability and Accountability Act (HIPAA)

A federal law that allows employees to obtain health insurance when they lose their group health insurance or change their job, even if they have a preexisting health condition. If an employee qualifies, that person cannot be denied insurance because of their medical history.

Health maintenance organizations (HMOs)

A type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won't cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and focus on prevention and wellness. In addition to the monthly premium (which may be shared by the employer and employee), participants usually need to pay a small fee at the time of service called a copay (often in the range of $10 to $30), while the HMO covers 100% of the services provided.

Health Reimbursement Arrangements (HRAs)

Also known as health reimbursement accounts, HRAs permit businesses to offer pre-tax dollars to employees to help pay premiums and/or other out-of-pocket costs associated with medical care and services up to a maximum dollar amount for a coverage period. While an HRA may be offered with other employer-provided health plans, employees need not be covered under any other healthcare plan to participate. Employers own and fund the account for employees, and unused amounts may roll over to the next year.

Health Savings Accounts (HSAs)

These savings accounts are often combined with a high-deductible health plan that allows users to put aside pre-taxed money. Because high-deductible plans generally cost less than low-deductible plans, HSAs are a good option for employers who cannot afford a comprehensive (low-deductible) health plan.

High deductible health plan (HDHP)

The IRS defines a HDHP as any plan with a deductible of at least $1,350 for an individual or $2,700 for a family. An HDHP’s total yearly out-of-pocket expenses can’t be more than $6,650 for an individual or $13,300 for a family.

I

In-network / out-of-network

In-network providers contract with your health insurance company plan to negotiate set payment amounts. This means your copayments for in-network providers are typically lower than to out-of-network providers.

Individual coverage

Individual coverage refers to healthcare coverage that is not tied to employer-based coverage, whether purchased for an individual or a family. This can refer to coverage purchased through Healthcare.gov or an individual state marketplace.

L

Lifetime cap

Prior to the passage of the ACA, insurance providers could impose a limit on the total amount of benefits you could receive throughout your lifetime. For example, the lifetime cap could be set at $1 million, and if an insurer reached that amount of spending on your health coverage, they could stop paying for your coverage. ACA-compliant plans are prohibited from imposing lifetime caps, but non-ACA compliant plans may not provide this protection.

M

Managed care

Under managed care plans such as HMOs and PPOs, the insurer or health plan pays doctors or hospitals directly for some or all of the cost of the medical services its members receive. For example, physicians may be paid a fixed annual per-member (“capitation”) rate, regardless of how many times the covered individual visits the physician.

Medicaid

A government-sponsored, or public, health insurance program that provides comprehensive publicly funded health insurance coverage to low-income residents who meet specific eligibility criteria. This generally includes those falling below certain income guidelines, or those with disabilities, children, expectant mothers and other individuals with specific healthcare needs.

Medicaid Expansion

The Affordable Care Act provided federal funding to expand Medicaid eligibility to those with incomes up to 138% of the federal poverty level (FPL). While the Supreme Court ruled that states could opt out of this Medicaid expansion, as of May 2019, 37 states (including Washington, D.C.) have expanded Medicaid.

Medical loss ratio (MLR)

Refers to a provision of the ACA that requires insurers to spend a specific amount of premium dollars on actual care or activities that improve quality for consumers. For example, a MLR of 80% indicates that every 80 cents per premium $1 is spent on customers’ claims, while the remaining 20 cents can be used on administrative costs. The ACA-set MLRs vary by region, and some states have set additional limits.

Medicare

A government-sponsored/public health insurance program for adults who are 65 years or older.

O

Open enrollment

Every year, employees have the option to change their medical coverage during the annual “open enrollment” period. Open enrollment for small employers usually is the month prior to renewal date of the policy and lasts about one or two weeks. During this time employees receive plan materials, have a chance to ask questions about plan choices and enroll in a plan. They may add or drop dependents, choose a different medical plan or sign up for new plan offerings, such as an optional chiropractic plan or dental plan. For individuals interested in purchasing insurance through the individual marketplace, open enrollment is generally from November 1 through December 15 for coverage in the subsequent calendar year.

Out-of-pocket maximum

Your out-of-pocket maximum is a limit on the total amount you pay for healthcare in a given year. Once you have spent this amount on all coverage, including deductible, copayments and coinsurance but excluding your monthly premium, your health insurer will pay 100% of your remaining healthcare costs for the coverage year. For plans purchased through Healthcare.gov exchanges in 2019, the out-of-pocket maximum must be lower than $7,900 for an individual plan or $15,800 for a family plan, but could be lower based on the coverage you choose.

P

Point of Service (POS) Plan

A type of healthcare plan that offers cheaper service if you use doctors, hospitals and other providers in-network for your insurance plan. These plans typically require you to receive a referral from your primary care provider to see specialists, making them more flexible than an HMO plan but less flexible than a PPO.

Pre-existing conditions

A health problem, like asthma, diabetes, or cancer, you had before the date that new health coverage starts. Under the ACA, insurance companies can't refuse to cover treatment for your pre-existing condition or charge you more. Note: Plans that are not compliant with the ACA may still charge more for those with pre-existing conditions.

Preferred provider organizations (PPOs)

A type of health plan that contracts with medical providers to create a network of participating providers. You pay less if you use providers that belong to the plan’s network. Typically PPOs goffer a wider choice of providers than HMOs. Premiums may be similar to or slightly higher than HMOs, and out-of-pocket costs are generally higher and more complicated than those for HMOs. PPOs allow participants to venture out of the provider network at their discretion and do not require a referral from a primary care physician.

Premium

The total amount that must be paid in advance in order obtain coverage for a particular level of services. Usually health insurance premiums are billed and paid on a monthly basis.

Premium tax credits (also known as cost-sharing subsidies)

A tax credit you can use to lower your monthly insurance payment, or premium, when you enroll in a plan through the health insurance marketplaces. The tax credit is based on your income estimate and household information provided in your health insurance application. If your estimated income falls between 100% and 400% of the federal poverty level for your household size, you qualify for a premium tax credit.

S

Shared responsibility requirement

Businesses with 50 or more employees are required to offer their employees health insurance or pay a penalty.

Short-term limited duration plans

Also known as “junk insurance,” short-term plans are meant to fill a gap in an individual’s coverage due to an unexpected occurrence such as a gap in employment. Short-term plans typically have high deductibles, exclude coverage for people with pre-existing conditions and are not required to cover essential benefits like prescriptions or preventive services such as cancer screenings. Recent federal rule changes have extended the amount of time these plans can be offered, making them "appear" to be an annual medical plan.

Small Business Health Options Program (SHOP)

SHOP was a marketplace created under the ACA to serve as a place for small businesses with fewer than 50 to browse for health coverage and find a broker or agent to purchase insurance.

Small business tax credit

The ACA established a tax credit for small businesses to help offset the cost of offering health insurance. To qualify for a tax credit, small business owners must pay at least half of employees’ healthcare premiums and have 25 or fewer full-time equivalent employees who earn an average of $50,000 or less per year.

Small group market

Generally refers to the insurance marketplace for employers with fewer than 50 employees seeking group coverage. While employers with fewer than 50 full-time employees are not required to provide group insurance, group plans are offered in most states to businesses of this size. These employers can use the SHOP website to find a broker or agent in their area to help navigate their insurance options.

Special enrollment periods (SEP)

A special enrollment period (SEP) allows you to potentially enroll in coverage outside of the open enrollment window if you miss the general open enrollment period due to losing health coverage, moving, getting married, having a baby, adopting a child, etc. Visit Healthcare.gov to learn more about SEPs and check if you qualify.

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