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.


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.


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.

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.

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.

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.