Healthcare is becoming more and more complicated each year. Even if you work in the insurance industry, it’s a good idea to give yourself an occasional refresher course on healthcare terms. In the following, we outline some basic terms and their meaning.
Accountable Care Organization (ACO)
Accountable care organizations try to improve the quality of healthcare by coordinating patient care. Typically, the organization’s payments to medical providers are tied to specific healthcare quality metrics.
The maximum amount of benefits a health insurance company will pay for treatment within a year. Insurers might set annual limits on total care or certain services (such as prescriptions). When members reach their annual limit, they are financially responsible for any additional medical care they need during that year.
Physicians, hospitals, and other medical facilities communicate and work together on patient care. These providers share important information about their diagnoses, treatment plans, and clinical findings. They also typically set clearly defined roles concerning patient care. Coordinated care can also reduce costs by eliminating unnecessary or inefficient medical treatment.
Coordination of Benefits
When someone has two or more insurance plans, this system helps determine who is responsible for a specific medical bill. Coordination of benefits issues are common when an employee was injured in a motor vehicle or workplace accident.
If a plan requires coinsurance payments, the member will continue to pay a percentage of their medical bills after the deductible is met. For example, suppose a plan requires a 15% coinsurance payment for an office visit. If an office visit costs $150, the member will pay $22.50 ($150 x 0.15 = $22.50). The insurance company is responsible for the remainder of the cost.
A fixed amount that a member will pay for a healthcare service after the deductible is met. Copayments (or “copays”) vary depending on the service or type of medication.
The amount a member must spend on covered health care services before the insurer will start to contribute. If your health plan has a $1,500 deductible, the insurance company will not pay for most medical care until you spent $1,500 on covered services. However, most health plans will cover certain preventive care expenses even before the deductible is met. A plan can have both an individual and family deductible.
Additional insurance coverage a policyholder can purchase for a spouse, child, or partner.
Sometimes called a formulary, this is a list of medications covered by a prescription drug plan. If someone regularly takes medication for a chronic medical condition, they should confirm their prescriptions are listed on their health plan’s drug list.
Essential Health Benefits
Ten types of healthcare services that insurers must cover under the Affordable Care Act (ACA). They include:
- Outpatient services
- Emergency services
- Mental health and substance abuse treatment
- Prenatal, postpartum, and newborn care
- Prescription medications
- Rehabilitative and habilitative services and devices (services that help a patient improve their daily functioning)
- Laboratory testing
- Preventative and wellness care (including chronic disease management)
- Pediatric services (including oral and vision care)
Flexible Spending Account (FSA)
Employees place tax-free money into an FSA, which can be used for out-of-pocket medical expenses. Typically, employers limit the amount you can contribute to an FSA and might limit its use to certain expenses (such as deductibles, prescriptions, and copays).
A formal complaint that you can file with a health insurer or plan.
Health Reimbursement Account (HRA)
An employer-funded health plan where certain employee health expenses are reimbursed tax-free. Unlike an HSA, HRA funds typically will rollover from year-to-year.
Health Maintenance Organization (HMO)
A healthcare plan with a specific network of physicians, clinics, and hospitals. Typically, an HMO will not cover out-of-network treatment unless it is an emergency.
Health Savings Account (HSA)
Employees with a high deductible plan can open an HSA. Pre-tax money is deposited into the account and can be used for deductibles, copays, and other healthcare expenses. HSAs are popular due to their multiple tax benefits—you can earn tax-free interest in your HSA and medically-related withdrawals are not taxed.
High Deductible Health Plan
A health plan with at least a $1,350 deductible ($2,700 for a family). Typically, high deductible plans offer lower premiums than traditional plans, but the member must pay more out-of-pocket before the health plan begins to contribute toward his or her medical expenses. Frequently, people combine a high-deductible plan with an HSA.
Health plans sometimes cap the amount they will spend on an individual or limit the number of treatments a patient can receive. Under the current law, most plans cannot put a lifetime limit on essential health benefits.
Most health plans only cover treatment that is needed to diagnose or treat a medical condition. If treatment does not meet accepted standards of medicine, the health plan typically will deny coverage.
Before the ACA, employers could impose waiting periods before a health plan would cover certain pre-existing conditions. Employees had to wait up to one year before their new health plan would cover pre-existing conditions (other than pregnancy). Currently, employers cannot deny or delay coverage due to these conditions.
Preferred Provider Organization
A health plan that offers a network of physicians and hospitals. If you treat within this network, you typically pay a lower rate than for out-of-network care.
The monthly fee you pay for your health insurance. This charge is in addition to deductibles, copays, and coinsurance payments. While some people select low premium plans, these aren’t always the best long-term value, since low-cost plans typically have higher deductibles and copays.
Primary care focuses on wellness and prevention, rather than emergency medical care. In many health plans, members select a primary care physician or provider to oversee their healthcare and refer them to specialists. A long-term relationship with a skilled primary care provider can help a patient identify health concerns early on, improving outcomes and reducing healthcare expenses.
Health plans sometimes will not cover a prescription or medical service unless it approves it in advance. Typically, your physician will send information about the medication or treatment’s medical necessity for the insurance company to review.
Qualifying Life Event
An important change that lets someone enroll in a health plan outside of Open Enrollment. Typically, qualifying life events include losing your existing health insurance, getting married or divorced, having or adopting a child, and a death in the family.
When an insurance company retroactively cancels coverage due to fraud or intentional misrepresentation. This might occur if you intentionally included incorrect information on a health plan application.
Some health plans, especially HMOs, only accept members within a specific geographic service area. If you live outside this region, you are ineligible for the health plan. Typically, its network of providers is also focused within the same service area.
Special Enrollment Period
If you have a qualifying health event, you can enroll in a health plan outside of the normal Open Enrollment period. Typically, you have at least 30 days from the qualifying event to enroll. If you miss this deadline, you must wait until the next Open Enrollment period.
Summary of Benefits and Coverage
A comparison of available health plans that summarizes the costs and coverage associated with each plan. Typically, employers distribute summaries of benefits and coverage during Open Enrollment, to new hires, and to employees who qualify for a special enrollment period.
Health plans sometimes link provider payments to healthcare quality and performance metrics. Plans use value-based purchasing to limit unnecessary medical care, decrease costs, and reward high-performing physicians.