When it comes to healthcare jargon, everyone should be well-versed in the basics — the essential terms to know to navigate your insurance coverage or choose a new plan. (Here’s a primer if you need to brush up.) But the basics only scratch the surface of healthcare wonk lingo. Interested in expanding your vocabulary? With help from experts, we put together a list of 12 insider-y healthcare phrases that are worth taking the time to learn.
Cafeteria plan
If your current or potential employer’s HR department mentions their cafeteria plan, they’re not talking about lunch arrangements. Also known as a Section 125 plan, a cafeteria plan is an employee benefit plan that allows you to choose from a variety of pre-tax benefits. Your employer’s cafeteria plan is likely to include options for group health insurance or a health savings account, as well as a medical flexible spending account (FSA). A less common cafeteria plan offering is a limited purpose FSA (see Limited purpose flexible spending account).
Embedded deductible
When you’re deciding on an insurance plan, it’s important to know whether there’s an embedded or non-embedded deductible. Having an embedded deductible means that once you’ve reached your individual deductible, your medical services will be paid by your insurance — and once your family has reached the family deductible, all individual medical services will be paid too. Say your family of three is on a plan with an individual deductible of $250 and a family deductible of $500. If you are charged $350 for a medical service, $250 applies to your deductible and $100 is covered by the insurance. That same year, your partner meets their individual deductible of $250, meaning your family has met its $500 deductible. When your child needs medical attention, insurance covers all but the co-pay.
A non-embedded deductible, or aggregate deductible, applies when you and your family are required to reach the overall family deductible for insurance to pay for any individual expenses. Using a similar example, imagine your family of three has a plan with a deductible of $500. When you are charged $350 for a medical service, that entire cost is applied toward the family deductible. Your partner’s $250 service puts you over the deductible amount by $100, so that will be covered by insurance. Any additional services, such as those for your child, will be covered as well.
Genetic Information Nondiscrimination Act (GINA)
If you’ve considered getting genetic testing to determine whether you are at risk for an inherited condition, you should know that neither your employer nor your insurance company can discriminate against you. Signed into law in 2008, the Genetic Information Nondiscrimination Act protects Americans against discrimination based on their genetic information when it comes to health insurance and employment. The law effectively prohibits association health plans (group health plans) and health insurers from denying you coverage or charging you higher premiums based on a genetic predisposition to developing a disease in the future.
Infertility coverage mandates
Nineteen states have passed infertility insurance coverage laws as of August 2020. The laws include in vitro fertilization (IVF) coverage in 13 states and fertility preservation laws for iatrogenic (medically induced) infertility in 10. If you live in a state that mandates infertility insurance coverage or has fertility preservation laws, you could get help paying for fertility treatments.
Limited purpose flexible spending account (LPFSA)
If you’re considering or already enrolled in a high-deductible health plan (HDHP), check whether you have access to a limited purpose flexible spending account to save yourself some money. An LPFSA can only be used for eligible vision and dental expenses like eye exams, new glasses and dental checkups. To establish an LPFSA, you must enroll in a high-deductible health plan and a health savings account (HSA). Unlike a typical medical FSA, an LPFSA can be held at the same time as an HSA.
Medical underwriting
A process used by insurance companies to understand your health status when you’re applying for insurance, in order to determine whether to offer you coverage, at what price and with what exclusions or limits. Insurance companies could examine your medical history, demographic profile, lifestyle and other factors related to your current and future medical needs.
Medical underwriting for health insurance is much less prevalent than it used to be as a result of the Affordable Care Act (ACA) and its protections for people with preexisting conditions. However, there are exceptions. Short-term plans, for example, are not regulated by the ACA and can use medical underwriting to determine eligibility for coverage. Before you enroll in such a plan, make sure you understand how medical underwriting might be used to determine your eligibility and premiums.
Prescription tier
Drugs on a formulary (an insurer’s drug list) are typically grouped into tiers, which determine your portion of the cost (your co-pay). A typical drug benefit for prescription medication coverage includes three or four tiers that usually break down like this:
Tier 1: generic medications (lowest co-pay)
Tier 2: preferred brand-name medications (medium co-pay)
Tier 3: non-preferred brand-name medications (highest co-pay)
Tier 4: specialty and biosimilar (highly similar to an approved biological medicine) medications, typically prescribed to cover serious illness
An insurer might classify a medication as tier 3 or 4 if it’s new or untested, or if there’s a similar drug in a lower tier that could be just as effective.
If you’re evaluating an insurance plan, check the formulary. You should make sure it covers brand-name prescriptions so that you won’t have to foot the whole bill if you need a medication and there’s no generic version available. Also, check to see if there’s a co-pay percentage for expensive drugs, as these may be unaffordable if you have to pay a lot out of pocket.
Orphan Drug Act
A law passed in 1983 to facilitate the development of drugs for rare “orphan” diseases, such as Huntington’s disease, myoclonus, ALS, Tourette syndrome and muscular dystrophy. The act provides drug makers with tax breaks, research subsidies and extended market exclusivity as incentives to develop drugs to treat orphan diseases.
Right to try
Based on the 2018 act of the same name, Right to Try is a law permitting access to experimental treatments for patients who’ve been diagnosed with life-threatening diseases or conditions, have exhausted all approved treatment options and are ineligible or too sick to participate in clinical trials.
Usual, customary and reasonable charges (UCR)
The amount you pay for a medical service based on what area healthcare providers usually charge for the same or similar service. Health insurance companies use UCR amounts to determine the allowed amount, meaning what a provider should be paid for a given service. If a provider’s charge is at or below the plan’s UCR charge, the allowed amount is the provider’s charge. If the provider’s charge is above the plan’s UCR amount, the UCR amount will be the allowed amount — and you may need to pay the difference.
Here’s an example of how UCR charges work: Say your insurer pays 80 percent of your medical service costs. A doctor charges you $100 for a procedure — the same UCR amount your insurer uses. Your insurer would pay $80 and you would pay $20. But if the doctor charges $140 for the same procedure, your insurer will still pay only $80 — 80 percent of the $100 UCR. That leaves you to pay the remaining $60 — 20 percent of the UCR plus the $40 beyond the UCR.
Insurance documents
When you start a new job that offers health insurance, you’re likely going to receive a stack of reading material, either real (paper) or downloadable (PDFs). Reading through all of them to understand your health insurance options is wise, if time-consuming. Here’s the gist of what your employer should be providing you:
- Summary of benefits and coverage (SBC), an easy-to-read chart with detailed information about plans including what and how much is covered by insurance; all insurance companies must include the same information, so you can compare and choose the plan best for you
- Summary plan description (SPD), AKA certificate of coverage, the document that tells you what benefits your plan provides and how it operates
- Plan document, a comprehensive written instrument describing your employer’s plan’s operation and administration — a document HR is required to provide but isn’t particularly useful to you
- Policy, a binding contract issued by an insurance company to your employer, the group policyholder
- Certificate of insurance (COI), an official document issued by your insurance company proving your insurance coverage is in effect
- Benefit booklet, a complete and comprehensive explanation of your benefits, limitations and other plan provisions that apply to you
Value-based care
Also known as pay for performance (P4P) or value-based purchasing, a model of healthcare insurance reimbursement that ties provider payments to quality of care. Providers are rewarded for both efficiency and effectiveness. This model also penalizes healthcare providers for poor outcomes, medical errors and increased costs. This form of reimbursement is an alternative to the fee-for-service reimbursement model which pays providers retrospectively for services delivered based on bill charges and fee schedules.