ACA (Affordable Care act):

Also known as Obamacare, the ACA is a comprehensive healthcare reform law that expanded access to health insurance, implemented consumer protections, and established health insurance marketplaces.

Actuarial Value

The estimated average share of expenses an insurance plan will cover. For example, a plan with 70% actuarial value would, on average, coverage 70% of the costs of covered claims.

Advanced Premium Tax Credit:

A subsidy provided under the ACA to help eligible individuals and families with low to moderate incomes afford health insurance premiums. Payment are made on your behalf directly to a participating carrier to help you cover the cost of insurance.

Adverse Selection

Adverse selection refers to the behavior of individuals who are healthy not enrolling in coverage. This results in only the most unhealthy individuals enrolling in coverage, an inability to spread out risk, and increases in cost for those within the pool. This is avoided through limited windows of enrollment (open enrollment and special enrollment periods), by having waiting periods, or by not covering pre-existing conditions depending on the plan type.

Affordable Coverage:

Refers to cover that is offered by an employer to their employees and dependents. Affordability is calculated by a specific percent of household income, including the employees and dependents income. The percent changes each year. For example, in 2023 an offer of coverage is considered affordable if it cost less than 9.12% of the household’s income. In 2024, the affordability threshold will be 8.39%.

Affordability is also determined based on the cheapest offered plan, and is calculated separately for employee only coverage and coverage for dependents.

Allowance:

This is the amount you can get for designated services at the specified interval. You will often find an Allowance on vision insurance for contacts OR glasses, and the policy will have a specified interval at which you can use the allowance. For example, the plan may allow the allowance to be used every year or every other year.

Ancillary Benefits:

additional benefits beyond primary (often referred to as major medical) health insurance, such as dental, vision, disability, and life insurance. These benefits enhance an employer’s overall insurance package. Manually ancillary benefits can be purchased directly by individuals as well.

Annual Maximum: 

This is the most a plan will pay in a plan year. You will find that dental plans have Annual Maximum’s. Think of this as the most benefit you can get from a plan.

Beneficiary:

A person or entity designated to receive benefits, such as insurance proceeds, in the event of the insured individual’s death.

Binder Payment:

A binder payment is your initial payment on an insurance policy that ‘binds’ the contract between you and the insurance company.

Captive Insurance Company:

A company created for the sole reason to insure it’s parent company or companies. This is a form of “self funding” some companies use.

CHIP (coverage):

CHIP stands for the Children’s Health Insurance Plan. CHIP is a government-funded program that provides health insurance coverage to eligible low-income children. To learn more, visit https://www.medicaid.gov/chip/index.html

COBRA (coverage):

COBRA stands for Consolidated Omnibus Budget Reconciliation Act of 1985. This law allows for individuals who are leaving their job at a covered employer to continue their coverage. Coverage under COBRA is the same coverage the employee had while employed, but the exiting employee usually pays for all of the premium plus administration costs. Therefore, COBRA can be an expensive but viable option.

Coinsurance:

The split of costs you and the insurance company share. Often, a deductible may need to be met before coinsurance “kicks in”.

Common Ownership:

Common ownership refers to a standard in the Affordable Care Act, under which multiple businesses that are owned or controlled by a common individual or group are treated as a single entity for purposes of determining applicability of the Employer Shared Responsibility provision.

Under common ownership, separate business entities may be ‘aggregated’ in their count of Full-Time Equivalent (FTE) employees. If the total number of FTE is 50 or more, the Employer Shared Responsibility may apply, requiring the aggregated businesses to offer health insurance to their employees and their dependents.

Contingent Beneficiary:

A contingent beneficiary is a a named person on an insurance policy or account who, in the unfortunate situation where both you and your primary beneficiary both pass away, they would become the beneficiary.

Contributory (Plan or Benefit):

When both the employer and the employee contribute to the cost of the plan or benefit.

Co-payment (Co-pay):

A fixed amount that an insured individual pays for a specific medical service or prescription, usually at the time of service.

Deductible:

The amount an insured individual must pay out of pocket for covered medical expenses before the insurance plan starts to pay.

Dependent:

An individual, such as a spouse or child, who is covered by a policyholder’s health insurance plan.

Dependent Care:

A benefit that helps employees cover the costs of childcare or eldercare services so that they can work or attend school. See also Dependent Care Flexible Spending Account (DCFSA).

Embedded Deductible:

An Embedded Deductible in a family health insurance plan means each member has an individual deductible, and once met, the insurance company starts paying for that member’s expenses, even if the family deductible hasn’t been reached. 

ERISA Health Plan:

Health plans governed by the Employee Retirement Income Security Act (ERISA), a federal law that sets standards for employer-sponsored benefits, including health plans.

Some important features of ERISA Health Plans are Fiduciary Responsibility, Reporting and Disclosure requirements, Standard Claims and Appeals, and Portability features.

Estimate of Benefits (EOB)

A summary document provided by an insurance company that outlines the coverage and payment for a specific medical service or procedure. It offers information on the insurance companies share of the cost, and the amount the insured may need to pay out of pocket. It may contains additional information such as “allowed amounts”, or amounts paid that a counted towards a deductible or max out of pocket.

Exclusive Provider Organization (EPO)

A more restrictive type of health insurance plan, in which services are only covered by in network providers or facilities. Emergencies are an exception on ACA qualified plans. Prior authorization may be needed on an EPO to see a specialist and for some services.

Fiduciary:

A person with a legal obligation (fiduciary duty) to act in the best interests of another party. In the context of group health insurance, employers and plan administrators have fiduciary duties to manage the plan in the best interest of plan participants.

Flexible Spending Account (FSA):

An account that allows employees to set aside pre-tax funds to cover eligible medical expenses. Flexible spending accounts can cover broad health expenses or be specific or limited in nature. For example, a Dependent Care Flexible Spending Account can only be used to pay for qualified dependent care.

Formulary:

The list of drugs an insurance plan covers. Drugs are often categorized by tier, which impacts at what amount the cost is shared between the insurer and the insured.

Fully Funded or Fully Insured:

An insurance policy that is fully funded or fully insured is purchased from an insurance company. That insurance company then full owns the risks as outlined in the policy. This is in contrast to a “Self Funded” or “Level Funded” policy.

Grievance:

A formal complaint or dispute filed by a participant or beneficiary of a health plan regarding any aspect of the plan’s administration, coverage, benefits, or services.

Guaranteed Issue:

A requirement that a health plan issue a policy without consideration of pre-existing conditions or other factors that may influence utilization of the plan. ACA qualified individual and fully insurance small group plans are guaranteed issue.

Grace Period:

A grace period is a specified timeframe, typically added to insurance policies, during which the policyholder can make a premium payment after the due date has passed without the policy lapsing or being canceled. It’s important to note that during the grace period, the insurance policy remains in effect, but if the premium is not paid by the end of this period, the policy may be terminated, and coverage can be forfeited. Often, the policy is cancelled back to the date at which the contract was paid up to. The length of the grace period and specific terms can vary depending on the insurance company and policy.

High Deductible Health Plan (HDHP):

A type of health insurance plan with higher deductibles and lower premiums, often used in conjunction with Health Savings Accounts (HSAs). Also called a Qualified High Deductible Health Plan (QHDHP).

Health Savings Account (HSA):

A tax-advantaged account that individuals with high-deductible health plans can use to save for medical expenses.

Health Reimbursement Account (HRA):

An employer-funded account that reimburses employees for qualified medical expenses. HRAs can be paired with high-deductible health plans (HDHPs) and are used to cover out-of-pocket costs. Different types of HRAs exist including Qualified Small Employer HRA (QSEHRA [Q-SARA]), Individual Coverage HRA (ICHRA [Ick-ra]), and Integrated HRAs also known as Group Coverage HRAs (GCHRA).

Indemnity:

A type of health insurance plan that allows the insured individual to choose any healthcare provider and the plan typically reimburses a portion of the covered medical expenses. Indemnity plans offer more flexibility but may have higher out-of-pocket costs.

Integrated Deductible

An Integrated Deductible means that both the individual’s medical expenses and prescription drug costs contribute towards meeting their overall deductible amount, allowing them to reach the point where their insurance starts paying for covered services faster. 

In-network:

Healthcare providers within the insurance company’s network. Insured individuals usually pay less when receiving services from in-network providers.

Joint Life Insurance:

A life insurance policy in which two people are covered, and a benefit is paid after the first person dies. After benefits are paid, generally, no coverage remains. Couples or business partners may decide this type of policy makes sense because it can be cheaper than buying two separate policies.

Keogh Plan (HR 10):

A type of retirement plan designed for self-employed individuals and small business owners, allowing them to contribute to tax-deferred savings for retirement.

Level Funded:

A level funded health insurance plan is a hybrid of a fully funded and a self funded policy. It is technically a self funded arrangement with a “Stop Loss” policy that sits on top of the plan to protect against large losses. In a Level Funded plan, the employer “owns” the risk up to the “Specific and Aggregate Attachment Points”. Claims above the attachment points would be covered by the Stop Loss policy.

Lifetime Limit:

The maximum amount that an insurance plan will pay for covered services over the course of an insured individual’s lifetime (The Affordable Care Act greatly reduced the use of lifetime limits in major medical policies, but they still exist in temporary or limited scope plans).

Long-Term Care Insurance:

A type of insurance that covers the costs of long-term care services, such as assistance with activities of daily living, in-home care, and nursing home care. It helps individuals plan for potential extended healthcare needs in the future.

Marketplace (Healthcare.gov):

Also known as the health insurance marketplace or exchange, it’s a platform established by the ACA where individuals and families can shop for and enroll in health insurance plans. Healthcare.gov is the federal marketplace used in states that did not establish their own state-based marketplaces.

Max out of Pocket

This is the most you are responsible in a given plan year for covered out of pocket expenses on an ACA qualified health insurance plan. Copayments and Coinsurance, as well as other costs for qualified care, add up to this amount. After that, the plan should cover 100% of your care.

Medicaid:

A joint federal and state program that provides health coverage to eligible low-income individuals and families and individual with special circumstances such as pregnancy and new refugees. Eligibility criteria and benefits can vary by state. A similar, but separate program specifically for children under 19 is CHIP.
For a list of states that have expanded Medicaid and more information, visit Medicaid.gov 

Medical Loss Ratio:

The Medical Loss Ratio is a percentage of insurance premiums that are spent on care. The ACA mandates certain minimum MLRs be met by insurers. For example, large group plans must adhere to an 85% MLR. In other words, they must spend 85% of premium dollars on clinical or qualify improvement activities. If these thresholds are not met, they must provide rebates to policyholders.

Metal Tiers

Metal tiers refer to how health insurance plans are categorized based on their actuarial value. On average, Platinum plans cover 90% of care, Gold 80%, Silver 70%, and Bronze 60%.

Minimum Essential Coverage

Minimum Essential Coverage, also commonly called qualifying coverage, is health insurance that covers the 10 categories of services deemed “essential” by the Affordable Care Act. These categories include prescription coverage, preventative services, ambulatory and emergency services, pregnancy, maternal, and newborn care, mental health services and more.

Named Insured

The person or entity covered by an insurance policy. This is often the policy owner (holder), but may also be others.

Network

A group of doctors, hospitals, clinics and other medical providers that have entered into an agreement with an insurance company to provide medical services to insured individuals. Choosing “in-network” providers may save an individual money when receiving care.

Open Enrollment

A specific period during which employees, or individuals on the marketplace, can enroll in or make changes to their health insurance plans.

Open enrollment happens in the fall each year. It can vary state by state, but on the federal marketplace, it generally starts on November 1st.

In 2023, Open Enrollment on the Federal Marketplace is from November 1st to January 15th. However, in order to get coverage starting January 1st, 2024, a plan must be picked by end of day on December 15th, 2023.

Out of Pocket:

The expenses that individuals are responsible for paying directly for their healthcare services, including deductibles, co-payments, and coinsurance.

Preferred Provider Organization (PPO)

A health insurance plan that has a network of contracted providers. Plan participants can go to providers outside the network, but would have lower rates of coverage under the plan.

Premium:

The amount an employee or individual pays for their health insurance coverage. On an employer provided plan, it is often deducted from the employee’s paycheck. The Premium is the cost of buying insurance and does not count towards your Deductible or Out of Pocket Max.

Premium Subsidies:

Financial assistance provided to eligible individuals to help them pay for their health insurance premiums. See also Advanced Premium Tax Credit.

Preventive Care:

Preventive Care generally refers to preventive healthcare services as defined by ACA guidelines and includes preventive exams, screenings based on age, gender and health history, vaccinations and more. Preventive care is covered without cost sharing on all ACA qualified plans when you see an in-network provider.

QSEHRA (Qualified Small Employer Health Reimbursement Account) [Q-SARA]: 

A QSEHRA is a formal benefit offered by small employers (as defined by the ACA) to employees to help pay for the cost of healthcare. Employers set a limit on funds that can be used, and employees can use those funds for a variety of healthcare costs, including purchasing health insurance on the marketplace. 

Qualifying Life Event

A qualifying life event is when a change in your circumstances that allows for enrollment in ACA qualified health insurance. Common QLEs include job loss, divorce, moving and having a baby (including adoption). Qualifying events create Special Enrollment Periods during which you have either 30 or 60 days to enroll in, or add family members to your coverage. 

Qualified Medical Expenses. 

Qualified Medical Expenses are costs that are eligible for tax-advantaged treatment under IRS guidelines.

Reinsurance:

An arrangement where an insurance company transfers a portion of its risk to another insurer, known as the reinsurer. Reinsurance helps insurance companies manage their exposure to large claims.

Rebating:

Offering something of value as an incentive to purchase insurance, which is generally prohibited by insurance regulations.

Refund:

The return of a portion of the premium to the policyholder if certain conditions are met.

Reinstatement:

Restoring a lapsed insurance policy to active status after a period of non-payment. Reinstatement may require paying any outstanding premiums and meeting certain conditions.

Reinsurer:

An insurance company that provides reinsurance to another insurance company, helping the latter manage its risk exposure and financial stability.

Renewal:

The process of extending an insurance policy’s coverage beyond its original term. Renewals may involve adjustments to premiums or terms.

Rider:

An additional provision added to an insurance policy that modifies or expands its coverage. Riders can customize policies to suit the policyholder’s needs.

Risk Retention Groups:

Organizations formed by members of the same industry to collectively self-insure their liability risks. Risk retention groups are regulated by the federal Liability Risk Retention Act.

Rx Deductible

An Rx Deductible refers to the amount an individual must pay out-of-pocket for covered prescription drugs before their health insurance plan starts contributing to the cost. 

Small Employer:

Under the ACA, a small employer is defined as having an average of 1 to 50 full-time equivalent employees during the previous calendar year. The definition may vary based on state regulations.

Special Enrollment Period:

A time outside the standard open enrollment period during which individuals can enroll in, or make changes, to a health insurance plan due to certain life events, such as marriage, birth of a child, or loss of other coverage.

Specific and Aggregate Attachment Points:

Stop-Loss Insurance:

Coverage that protects self-funded employers or health plans from large and unexpected claims by limiting their financial liability. Two main types of stop loss include Aggregate and Specific.

Term Life Insurance:

Provides coverage for a specific term or period (e.g., 10, 20, or 30 years). If the insured person dies during the term, the policy pays a death benefit to the beneficiaries. Term life insurance is often more affordable but does not build cash value.

Trust: 

A legal arrangement in which one party holds property or assets for the benefit of another party. Trusts can be used in estate planning to manage assets and provide for beneficiaries’ financial needs.

Underwriting:

Underwriting is the process through which an insurance company assesses and evaluates the risks associated with insuring an individual, property, or entity. The goal of underwriting is to determine the appropriate premium amount, coverage terms, and conditions that balance the insurer’s financial stability with the insured’s needs.

Universal Life Insurance:

Provides flexible premiums and death benefits, along with a cash value component that earns interest at a specified rate. Policyholders can adjust their premiums and death benefits within certain limits.

Voluntary (plan or benefit): 

A plan offered by an employer, where only the employee contributes to the cost of the plan.

Vision Plan:

Insurance coverage for eye care services, including routine eye exams, prescription glasses, and contact lenses.

Waiting Period:

A waiting period is the time frame specified in an insurance policy during which coverage for certain benefits or services is not provided. It serves as a delay before the policyholder can access specific benefits after the policy becomes effective.

Wellness Program:

Initiatives offered by employers or insurance plans to promote healthy behaviors and lifestyle choices among individuals, often with incentives or rewards.

Whole Life Insurance:

Provides lifelong coverage with a fixed premium and a cash value component that grows over time. Whole life insurance also offers a death benefit to beneficiaries upon the insured person’s passing.

X-ray coverage:

The benefits offered under an insurance plan for X-ray images. Benefits may not begin until after the deductible has been met.

Yearly Renewable:

A plan that is renewed annually, or each year. Most health insurance plans, group and individual, are renewed annually, and Group Life plans are often renewed annually as well.

Zero Deductible (plans):

A health insurance plan without a Deductible. Sometimes a plan will be referred to as a Zero Deductible plan, meaning it does not have a deductible for medical expenses, but it may have a separate deductible for prescription costs.