aidarrowcaretcheckclipboardcommenterrorexperienceeyegooglegownmicroscopenavigatepillTimer IconSearchshare-emailFacebookLinkedInTwitterx

Health Insurance 101

Kelsey Tyler

There’s no escaping jargon when it comes to health insurance. Whether you’re trying to choose a new health plan or get a handle on the coverage you have, it helps to be well-versed in healthcare lingo. The list of need-to-know terms, and their precise meaning, changes whenever healthcare policies do. For instance, recent efforts by the government to weaken the Affordable Care Act — largely by bolstering cheaper, less comprehensive health plans — have altered coverage guidelines and the language used to communicate them.

With help from Gerald Kominski, a professor of health policy and management at the UCLA Center for Health Policy Research, and Mark Pauly, a professor of healthcare management at the Wharton School of the University of Pennsylvania, we’ve compiled the essential health insurance terms that anyone, with any type of plan, should know.


Accountable care organization (ACO)

A group of healthcare providers, doctors and hospitals whose payments are based on performance; the healthier its patients (enrolled in Medicare), the more the group is paid. ACOs use a coordinated care model: Providers work as a team to avoid duplication of services, prevent medical errors and, ideally, save money. Savings are shared by the group as bonuses. 

Allowable charge

The maximum dollar amount that your insurance company will pay for a medical expense. If the total charge for a procedure exceeds the allowable charge, you may have to pay the difference.

  • Example: An acupuncturist charges you $95 for one session, but your insurance company’s allowable charge for an acupuncture session is $45, so you owe $50 out of pocket.

Appeal

A request to your insurer to reconsider its decision to deny coverage for a procedure or service. Your insurer must explain why it denied any service or coverage claim, and notify you of your right to contest its decision. You can appeal an insurance denial through an internal review (conducted by the insurer). If the denial stands, you can take your appeal to an independent third party for an external review. [Read more about appealing a claim denial.]

Association health plan (AHP)

Also known as group membership sponsored health plans, these allow individuals to band together based on profession or affiliation and obtain group rates on health insurance. Association health plans provide discounted coverage for people whose employers don’t offer group health insurance, as well as self-employed people and freelance workers. Groups that offer their members health insurance include the Writers Guild of America and the Freelancers Union.

In 2018, the Trump administration introduced new rules expanding AHP availability to people connected by geography alone or business interests, ostensibly to allow small businesses to participate more easily. However, AHP insurers don’t have to include the 10 essential health benefits required by the ACA. That means small-business employees could end up with plans that are skimpier and higher-priced than an ACA plan.

Balance billing

When a provider bills you for the amount left over after your insurance company has paid the allowable charge for a service or procedure. You will be billed for the difference. (See allowable charge.)

Carrier

Another term for a health insurance provider, the company that supplies your healthcare.

Catastrophic plan

A health plan that offers essential coverage as outlined in the ACA, but typically limited to three visits with a primary care provider each year. While the monthly premiums for these plans are low, they come with high deductibles, high copayments and high coinsurance for most routine medical services. Under a catastrophic plan, you pay for most if not all of your medical expenses, except preventive care, until you reach your deductible, which will most likely be a few thousand dollars.

Coinsurance

The percentage of the cost of covered healthcare services you pay. The rest is paid by your insurer. Coinsurance is lower for services from an in-network provider (in-network coinsurance) than for services from an out-of-network provider (out-of-network coinsurance).

  • Example: If your coinsurance for a therapy session is 30 percent and the session normally costs $150, you pay $45 out of pocket (provided you’ve met any deductible).

Concierge medicine

Also known as retainer medicine, boutique medicine or direct care, this is an arrangement between a patient and a doctor in which the patient pays an annual fee in exchange for some amount of personalized care and better physician access. A concierge practice typically limits the size of its patient pool in order to spend more time with patients and focus on preventive care. Retainer fees aren’t covered by insurance, so you’d pay them out of pocket. 

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Legislation that lets you keep your insurance if you lose your job or lose coverage as a dependent under your parents’ insurance. To remain covered, you’ll need to pay the premium in full. In the case of job loss, that includes paying your previous employer’s share.

Copayment

What you pay for a covered service or procedure; your insurer covers the rest. Copayments (or “copays”) are lower for services from an in-network provider (in-network copayment) than an out-of-network provider (out-of-network copayment).

  • Example: If your copayment for a doctor’s office visit is $20, you pay $20 out of pocket for the appointment (provided you’ve met any deductible) regardless of what the doctor charges for the service.

Deductible

The total amount you must pay out of pocket for covered medical services before your insurance coverage kicks in. Generally, plans with lower monthly premiums have higher deductibles and vice versa.

  • Example 1: Your plan has a $500 deductible and your doctor charges you $350 for a procedure. You pay the whole $350 yourself. Then you receive a second procedure that costs $700. You pay $150 out of pocket, plus any copay or coinsurance stipulated in your plan. Now you’ve met your deductible, and your insurance will cover the remaining cost.
  • Example 2: Your plan has a $1,000 deductible and your doctor charges you $3,000 for a procedure. You pay $1,000 (plus any copay or coinsurance) and your insurance covers the rest.

Many plans cover services such as checkups and disease management programs for chronic conditions regardless of whether deductibles are met.

Durable medical equipment (DME)

Equipment or supplies that your doctor prescribes for regular use.

  • Examples: blood pressure monitors, blood sugar monitors, oxygen tanks or air filters, wheelchairs or other mobility devices

Exclusive provider organization (EPO) plan

A health plan that only covers services provided by doctors and hospitals within the plan’s network. These plans do not provide out-of-network benefits and often fall somewhere between HMOs and PPOs, both in terms of cost and access to specialists without a referral.  

Essential health benefits

Medical services that all health plans must cover to comply with the ACA. Essential health benefits are outlined in federal law, but some states impose higher minimum requirements for coverage.

Essential services include hospital care, emergency care, ambulatory patient care (aka outpatient doctor’s appointments), mental health and substance abuse care, prescription drugs, pregnancy and childbirth, birth control and kids’ dental care. [Read more about the essential benefits and preventive care guidelines]

Health Insurance Marketplace (aka the Exchange or HealthCare.gov)

An online, phone and in-person service to help you choose and enroll in a health insurance plan.  Healthcare.gov is the federal Marketplace. Residents of the 12 states with their own Marketplaces must enroll through them (instead of healthcare.gov).

Fee-for-service

A payment model in which healthcare providers are paid for each treatment or service, as opposed to the performance-based payment model used by ACOs.

Flexible spending account (FSA)

A pre-tax account to use for out-of-pocket healthcare expenses, such as deductibles, copayments, coinsurance and prescription drug costs. FSA money — capped at $2,700 for 2019 — expires at the end of the calendar year (it’s use it or lose it) and won’t roll over if you switch jobs. As with an HSA, you save money by decreasing your taxable income.

Guaranteed issue

A federal rule guaranteeing your ability to enroll in any health plan regardless of health status, age or gender, among other individual factors. In most states, however, this rule doesn’t say anything about how much insurance carriers can charge you to enroll, unlike the ACA rule about preexisting conditions.  

Grace period

The amount of time until your coverage lapses after you’ve missed a monthly payment. If you pay your premium before the grace period ends, your coverage won’t be affected. If you don’t pay by that point, your coverage will be canceled retroactively — you’ll only be covered through the end of the last month you paid, and you’ll owe money for any medical services you received since that cut-off date.

Health maintenance organization (HMO) plan

A relatively low-cost plan that offers coverage for services from doctors in-network, but does not include out-of-network benefits and requires referrals to see specialists. Because HMO networks may be limited, you sacrifice some convenience in return for a lower monthly cost.

Health savings account (HSA)

Money set aside on a pre-tax basis to be used for medical expenses, lowering overall healthcare costs by decreasing your taxable income. An HSA can only be used if you have a high-deductible health plan. Unlike FSA money, HSA contributions — capped at $3,500 for 2019 —  don’t expire at the end of the year. They’re also yours to keep if you change jobs.

High-deductible health plan (HDHP)

A plan with low premiums and a high yearly deductible of at least $1,350. An HDHP can be combined with an HSA to pay for medical expenses.

Lifetime limit

A limit on the benefits your insurer will pay over your lifetime. As with an annual limit, a lifetime limit might be defined as a maximum total amount, a maximum amount per condition or a maximum number of procedures. Once you’ve reached your lifetime limit, you’ll have to pay for additional health services out of pocket.

Medicaid

A government-run health insurance program that offers fully or partially subsidized coverage to low-income families. Medicaid eligibility is based on household income and factors such as pregnancy, disability, parental status and number of children. Medicaid is distributed by the states, so eligibility also partially depends on where you live. 

Medicare

A government-run health insurance program for those age 65 and older.

Network

The doctors, hospitals and medical suppliers in contract with your insurer. Health insurance plans typically offer better coverage with lower coinsurance and copayments for services from in-network providers.

Nonqualified short-term plans

Health insurance plans that provide medical coverage for a defined period, up to 36 months in some states. These plans are not required to cover the ACA’s essential health benefits and can deny coverage based on preexisting conditions.

Prior to 2019, if you bought a short-term health plan that fell short of ACA requirements, you’d have to pay the Shared Responsibility Payment (aka the “individual mandate”). However, there is no longer a tax penalty for enrolling in a short-term health plan, even if it’s not ACA-compliant.

Out-of-pocket maximum/limit 

The most you will be required to pay for covered medical services in a plan year. Once you’ve reached the limit on deductibles, copayments and coinsurance (but not premiums), your insurance pays 100 percent of any other covered costs. The limit is set by the federal government and changes annually.

For 2019, the out-of-pocket limit for a Marketplace plan is $7,900 for an individual.

Preferred provider organization (PPO) plan

A type of plan that provides in-network coverage — including in-network specialist services without needing a referral — as well as some out-of-network coverage. PPO plans are typically more convenient than EPO and HMO plans, but also more expensive.

Point-of-service (POS) plan

A hybrid of PPO and HMO plans. As with an HMO plan, your primary care provider must be in your insurance network. But similarly to a PPO plan, you get some out-of-network benefits, though you’ll have to pay higher fees for out-of-network services than you would in-network.

Preexisting condition

A disease, condition or other health issue that you had before you applied for insurance. Under the ACA, an insurer can’t deny you coverage, charge you higher premiums or refuse to cover specific treatments on account of a preexisting condition.

Prior authorization (also known as preauthorization)

The determination that a healthcare service, procedure or medication is medically necessary and warrants coverage. In some cases, your insurance provider may need to authorize your service or medication before they’ll be covered.

Preferred provider

A healthcare provider or practitioner who is part of your insurance’s network and will provide services for either a copayment or coinsurance. (Your insurer pays the rest.) Some healthcare plans have tiered networks, meaning some in-network providers have steeper discounts than others.

Qualified health plan

A health plan that meets the federal criteria for health coverage and limits on out-of-pocket expenses as outlined by the ACA.

Surprise billing

A term for charges incurred by an insured individual who inadvertently receives care from an out-of-network provider, typically as part of an emergency procedure. (See: balance billing.)

Vertically integrated system

A healthcare model that combines insurance with care providers, meaning hospitals and doctors are essentially employed by the insurance company.

  • Examples: Kaiser Permanente, HIP Health Plan of New York
No comments. Share your thoughts!

Leave a Comment

About us

The Paper Gown, powered by Zocdoc, covers health and healthcare with a focus on patient experiences — inside and outside the exam room, before check-ups and after surgery, across all states of health. We strive to tell stories that help patients feel informed, empowered and understood.