Health insurance is a complex business. Your clients could spend years trying to understand the fundamentals of the system, so here’s an overview of some of the essential terminology to help them understand the basics.
Types of Healthcare Plans and Organizations
- Catastrophic Coverage
Catastrophic plans generally have a low monthly premium, but they often require a relatively high deductible to be met before the plan pays for any services outside the minimum number of primary care physician visits required by the Affordable Care Act.
- Health Maintenance Organization (HMO)
Coverage in this type of plan is limited to only those doctors who contract with the plan. Generally, referrals are required for covered visits to doctors other than an individual’s primary care physician.
Federal and state-funded healthcare coverage is available for low-income individuals in the form of Medicaid. Some states’ programs were expanded to cover more individuals when the Affordable Care Act was enacted. In California, the overall Medicaid program is called Medi-Cal.
Medicare is a federal insurance program for those 65 and older and those who have certain disabilities. Part A involves hospital insurance, Part B includes medical insurance, and Part D covers prescription drugs. Medicare Advantage sometimes referred to as Medicare Part C, is a plan offered by private insurance companies to provide Medicare Part A and B coverage (and often prescription drug coverage as well).
- Preferred-Provider Organization (PPO)
A PPO health plan has a defined network of physicians and hospitals. Benefits are always richer for staying “in-network” but there is some level of coverage if care is provided by a provider who does not participate in the network.
Related Healthcare Terminology
- Affordable Care Act
Often referred to as “Obamacare,” the ACA was enacted in 2010 with the goal of widening access to healthcare for all Americans, as well as improving the quality and affordability of health care.
- Annual Limit
The yearly limit an insurer will pay in benefits is known as the annual limit. Sometimes there are categories that have different limits, such as prescriptions or hospital visits. The ACA has banned annual on most of the benefits (known as “essential health care benefits”) you receive through qualifying health care plans; however, some healthcare services and grandfathered individual health insurance policies may still have annual limits.
- Lifetime Limit
Prior to the ACA, many health plans set a lifetime limit on the amount that they would spend on covered benefits over the entire course of your enrollment in that plan and the individual would be responsible for any additional costs. Under the ACA, however, lifetime limits are prohibited, although some services and grandfathered policies may still have lifetime limits.
- Copay or Copayment
This is a fixed amount determined by the plan that an individual pays for services, such as a doctor’s visit or medical procedure. Copayments are often waived once an individual reaches their out-of-pocket maximum.
A deductible is an amount that an individual must pay for medical expenses before a plan begins providing coverage (or a specific amount of coverage). A plan with high monthly premiums will often have a lower deductible, while a plan with a high deductible will often have lower monthly premiums.
- Flexible Spending Account (FSA)
An FSA is an account set up with an employer to which the individual can contribute funds, tax-free, in order to pay for qualifying medical or health expenses.
- Health Reimbursement Account (HRA)
This is an account set up by an employer to pay for employees’ medical expenses. In contrast to an FSA, only the employer contributes to this account. Individuals are then reimbursed for their medical expenses up to a pre-specified limit each year.
- Health Savings Account (HSA)
Similar to an FSA, a health savings account allows individuals to contribute pre-tax wages to pay for medical expenses. These accounts can be set up with your employer or your bank. The major difference from an FSA is that funds remaining in an HSA at the end of the year can be rolled over to the next year.
- Open Enrollment
The annual period when people can enroll in or change health plans is known as Open Enrollment. Outside of this period, enrollment or a change of coverage is only allowed for certain life events such as a birth, marriage, moving to a new state, etc. Open enrollment for 2017 runs from November 1, 2016 to January 31, 2017. You may have different dates for enrolling in your employer-provided plan, however.
- Out-of-Pocket Costs and Maximum
Any medical expenses an individual pays that aren’t reimbursed by the plan, including deductibles and copayments, are known as out-of-pocket costs. The maximum allowed by law is set annually by the Centers for Medicare and Medicaid Services (CMS), and after this max is exceeded, the plan will cover 100% of the cost for covered services. Monthly premiums are not considered part of out-of-pocket costs.
- Pre-Existing Condition
A health problem that was present before beginning new coverage is called a pre-existing condition. Prior to the ACA, insurers could deny coverage for individuals with certain pre-existing conditions. In California, insurers cannot deny anyone enrollment due to pre-existing conditions, nor can they charge different rates to someone with pre-existing conditions. However, an individual must enroll during open enrollment or during a qualified period in order to gain access to guaranteed issued coverage.
An insurance plan’s premium is the amount an individual pays to belong to a health plan. Plans with a low premium will often have a high deductible, whereas plans with higher premiums often have lower deductibles.
- Primary-Care Physician
A primary care physician is one who is designated to be a patient’s primary source of routine care and is often a family practice, internal medicine, or pediatric physician. The primary care physician coordinates care with a patient’s specialists and other providers or care. Some obstetrician-gynecologists (OB/GYN) serve as primary care physicians as well.
- Reasonable and Customary Charge
This is the allowed amount of coverage for a medical service that is set by a health plan based on the common or expected cost of that service.
Glossary. (2016). U.S. Department of Health and Human Services. Retrieved from https://www.healthcare.gov/glossary/
Health care. (2016). U.S. Department of Health and Human Services. Retrieved from http://www.hhs.gov/healthcare/