Health Insurance & Healthcare Terminology 101 for Benefits Professionals

Glossary of Health Insurance & Healthcare Terminology

Health insurance and healthcare terms can be confusing. We compiled a list of common, need-to-know terms that benefits professionals can use and share with their prospects and clients to ensure everyone is on the same page.

We’ve broken this list down into three categories:

1. Types of Health Insurance Plans
2. Health Savings Options
3. Health Insurance / Healthcare Terms

Types of Health Insurance Plans

Fully-Insured: A fully-insured health plan is a common employer-sponsored health plan. With a fully-insured plan, the carrier takes on the risks involved with healthcare claims and charges employers an annual premium, which is partially paid for by employees. In addition to the premium, employees and dependents covered under a fully-insured plan are responsible for paying any deductible amounts or copayments required for covered services under the policy.

Grandfathered Status Plan: These plans include any group or individual health plan created on or before March 23, 2010, when the Affordable Care Act (ACA) was signed into law. These health plans are exempt from some of the provisions required under the ACA, such as requiring benefits deemed “essential,” but are required to meet new standards like extending dependent coverage to adult children until they turn 26. Plans or policies may lose their “grandfathered” status if significant changes that reduce benefits or increase the consumer’s costs are made.

Health Maintenance Organization (HMO): An HMO is group coverage where employees pay for specific health services through monthly premiums. Under these health plans, employees will have access to a network of healthcare providers, but the available services will be limited to those that fall under that network. This makes HMOs more affordable than other types of group health plans. However, seeing any physicians or facilities not included in your HMO network can result in an employee having to foot the entire bill.

High Deductible Health Plan (HDHP): As the name implies, an HDHP is based around higher deductibles, with the tradeoff of lower premiums. Because of the high deductible, members pay more out of pocket before the plan starts paying for its share. This type of health plan can be popular with young and healthy employees who don’t use many healthcare services. 

Individual Coverage HRA (ICHRA): Starting January 1, 2020, employers can offer their employees an individual coverage Health Reimbursement Arrangement (HRA) instead of a traditional group health plan. This type of account can reimburse qualifying healthcare expenses, such as copays and deductibles.

Preferred Provider Organization (PPO): PPO health plans are similar to HMO plans but provide greater flexibility. PPOs feature a network of healthcare providers, but employees have the option to go to out-of-network physicians and practices without being fully responsible for the entire bill. Instead, these visits will result in higher copays and additional service fees, giving employees greater freedom than HMO plans.

Self-Funded Plan: While the carriers cover the cost of healthcare expenses in a fully-insured plan, the employer bears that burden in a self-funded (or self-insured) health plan. Self-funded plans can be popular among large employers and can often lead to more affordable rates and control over a plan. The tradeoff, however, is that the employer, rather than the carrier, accepts the risk of paying for healthcare claims. Employers are also typically responsible for any administrative costs.

Qualified Small Employer Health Reimbursement Arrangement (QSEHRA): Small companies may offer their employees a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) if they don’t offer group health coverage. This kind of account may help pay for things like monthly premiums or other qualifying healthcare costs.

Health Savings Options

Flexible Spending Account (FSA): A flexible spending account (or flexible spending arrangement) is similar to an HSA in that it’s a type of health savings account where employees can make tax-free contributions. The funds in an FSA can be used to cover deductibles, copayments, and any other out-of-pocket healthcare expenses. However, the funds must be used by the end of the plan year, or they will be forfeited.

Health Reimbursement Account (HRA): An HRA is an employer-funded account that can be paired with another health plan to let employees pay for qualified medical expenses not covered by their health plans. The main difference between an HSA and an HRA is that the employer is the sole contributor to these accounts. As a result, HRAs also stay with the employer in the event an employee leaves or is terminated.

Health Savings Account (HSA): Health plans can be paired with savings options like a health savings account (HSA). HSAs are rising in popularity due to the ability for employees and employers to make tax-free contributions and earn tax-free interest. The funds roll over every year and stay with the employee, even if there is a change in their employment. These funds can also be available for use in retirement, making them a great supplement to retirement savings accounts.

Health Insurance / Healthcare Terms

Allowed Amount: The maximum amount a plan will pay for a covered health care service. You may also hear eligible expense, payment allowance, or negotiated rate. 

Balance Billing: When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.

Claim: An itemized bill from a healthcare provider for health services provided to a member.

COBRA: This stands for Consolidated Omnibus Budget Reconciliation Act of 1985. This federal act requires group health plans to allow employees and covered dependents to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. Qualifying events include reduced work hours, termination of employment, a child becoming an over-aged dependent, Medicare eligibility, death, or divorce of a covered employee, among others.

Coinsurance: Coinsurance is the percentage of costs for a covered service. It’s usually applied after the deductible has been met. For example, you might have a 10% coinsurance, meaning you would pay 20% of the medical bill and the carrier would cover the remaining 80%. 

Copayment: A copayment (or copay) is a flat fee that you pay out-of-pocket for a covered service. For example, you might have a $10 copay on any doctor’s visit. Some health plans don’t have copays or don’t require a copay until the deductible is met.

Cost-Sharing Reduction (CSR): A CSR is a discount that lowers the amount you have to pay out of pocket for deductibles, coinsurance, and copayments. You can get this discount if your income is below a certain level and you choose a health plan from the silver plan category. If you're a member of a federally recognized tribe, you may qualify for additional cost-sharing benefits.

Deductible: A deductible refers to the amount of money you need to spend (in addition to premium payments) before your insurance plan starts to pay. For example, if you have a $2,000 deductible, you’ll need to pay $2,000 for healthcare out of pocket (in addition to your monthly premiums) before you can receive money from your carrier. After you pay your deductible, you usually only pay a copayment or coinsurance for covered services. Deductibles reset every year.

Effective Date of Coverage: The date your coverage begins. Please note that the effective date can also represent the date a change in your coverage takes effect. If you have questions, call the number on the back of your ID card.

Explanation of Benefits (EOB): An EOB is created after a claim payment has been processed by your health plan. It explains the actions taken on a claim, such as the amount that will be paid, the benefits available, discounts, reasons for denying payment, and the claims appeal process.

In-Network: In-network includes services provided by a physician or other health care provider with a contractual agreement with the insurance company and covered at a higher benefit level.?

Lifetime Limit: A cap on the total benefits you may get from your insurance company over the life of your plan for certain conditions. A health plan may have a total lifetime dollar limit on benefits (like a $1 million lifetime cap) or limits on specific benefits (like one gastric bypass per lifetime), or a combination of the two. After a lifetime limit is reached, the health plan will no longer pay for covered services. There are no lifetime limits on essential health benefits, such as emergency services and hospital stays.

Out-of-Pocket Maximum: As the name implies, an out-of-pocket maximum refers to how much money you can expect to spend on deductibles, copayments, and coinsurance in one year. Once you reach this maximum, the carrier will cover 100% of the costs moving forward (except for your premium).

Participating Providers: Similar to preferred providers, participating providers also contract with your health insurer or plan, but the discount may not be as great, and you may have to pay more. 

Preferred Provider: A provider who has a contract with your health insurer or plan to provide services to you at a discount.

Premium: A healthcare premium is the amount of money you pay your insurance company each year. Premiums are deducted from the checks of employees who receive insurance through an employer-sponsored health plan.

Provider Network: Choosing between an in-network and out-of-network provider could make the difference between footing your entire medical bill or not paying a dime. A network refers to the doctors and other medical providers who agree to accept your health insurance. Carriers negotiate lower rates for healthcare with the doctors, hospitals, and clinics that are in their networks. So, in-network medical providers are covered by insurance, while out-of-network providers are not.

Summary of Benefits and Coverage (SBC): An SBC covers the basics of your health plan. It’s an easy-to-read summary that lets you compare the costs and coverage between health plans. You can compare options based on price, benefits, and other features that may be important to you.

Using the Health Insurance & Healthcare Terminology Glossary

Keeping up with today’s healthcare terminology might be second nature to you as an advisor, but it can be daunting for your clients. Keep a list like this handy to help your clients feel confident assessing their health insurance options. 

Want to take it a step further? Keep detailed notes of your clients’ health plan preferences year-to-year in your agency’s AMS. This way, you’ll come to each renewal with historical context to guide your conversation. 

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Posted by Allison Babberl on Tuesday, March 28, 2023 in Quote+

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