Health Care Glossary

Transcription

1 Health Care Glossary Understanding health insurance isn t always easy, especially when you add industry jargon and acronyms on top of it. And with the additional terms that come with the Affordable Care Act, it can seem even more confusing. To help you navigate through this new health care environment, we ve put together a glossary of the most important, need-to-know terms.

2 Terminology Affordable Care Act Employer size definition as of January 1, 2017: Small-group employer: Generally defined in most states as businesses having up to 50 employees. Large-group employer: Generally defined in most states as businesses having 51 or more employees. Some states, such as California, Colorado and New York define a small group as up to 100 employees, and a large group as 101 or more employees. Be sure to consult a broker or tax advisor for your state laws on employer size. Full-time vs. part-time employees: For the ACA, a full-time employee works on average 30 or more hours per week or 130 hours per month while a part-time employee works on average fewer than 30 hours per week. Full-time-equivalent employee: Either a full-time employee or a combination of part-time employees whose hours add up to one full-time employee. For example, two part-time employees working 15 hours a week would equal one full-time-equivalent employee. 15 hours per week 15 hours per week 30 hours per week Minimum essential coverage (MEC): This is the type of coverage an individual must have to meet the individual mandate under the ACA. Types of insurance that count as MEC are employer-offered plans, COBRA coverage, retiree coverage, Medicare, Medicaid and Children s Health Insurance Program (CHIP). MEC also includes health insurance a person buys from an insurance company, whether directly, through the government s health insurance marketplace or through a student health plan. In 2015, employers with 50 or more employees will be required to offer MEC to 70 percent of full-time employees and their dependents. In 2016, employers will need to offer coverage to 95 percent of their full-time employees. MEC must cover at least 60 percent of the cost of covered services and be affordable, not costing more than 9.5 percent of the employee s adjusted gross income. 1 Subsidy: Financial assistance from the government to help a qualifying person pay their health insurance premiums when they buy a plan from the health insurance marketplace. Employer mandate: An ACA requirement that applicable large employers with 50 or more full-time and fulltime-equivalent employees must offer health insurance to their full-time employees. If a large employer does not offer minimum-value affordable coverage, it must pay a tax penalty to the IRS. Individual mandate: An ACA requirement that individuals meet basic standards of health insurance coverage (see above definition for MEC). For any month individuals do not have coverage, they must either qualify for an exemption or pay a tax penalty to the IRS. 2

3 Essential health benefits: Insurance policies must cover essential health benefits, a comprehensive package of items and services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care. Cadillac tax: A 40 percent tax on fully insured and self-funded high-cost health insurance plans. Plans with an annual limit, also known as a threshold, starting at over $10,200 for individuals and $27,500 for families are taxed. Government Health Insurance Programs Medicare: A program that provides health insurance coverage for Americans aged 65 and older and for some younger, disabled Americans. Group Medicare plans: Employer-sponsored private health insurance plans that help pay for Medicare's out-of-pocket costs in exchange for a monthly insurance premium. Medicaid: A program that provides health insurance coverage for low-income Americans who do not have the resources to pay for health insurance on their own. COBRA: A program to help former employees and their families maintain health insurance coverage. Under COBRA, an employee is allowed to stay on his or her former employer's health insurance plan for up to 18 months. If the employee died, their surviving spouse and dependents can stay on the old plan for up to 36 months. While the employer needs to make the health insurance coverage available to former employees, it no longer has to help former employees pay the premiums. 3

4 Health Insurance Payments Fully insured plan: When an employer pays an insurance company to provide health insurance coverage for its employees. The insurance company manages the premium contribution on its own. Self-funded plan: An employer-sponsored health insurance plan where the employer covers employee medical expenses out of its own funds while the insurance company manages the plan's administrative aspects. The employer provides the insurance themselves rather than using an outside health insurance company. The employer typically puts in place stop-loss coverage in case it runs into exceptionally high medical expenses. Balanced or level funding: A hybrid of self-funded and fully insured plans. An employer pays a set amount each month into a fund for employee medical expenses. If employee expenses are lower than the monthly payment, the extra money is carried forward for future expenses. If employee medical expenses drain the employer's entire account, its stop-loss plan covers the excess expenses. Unspent money at the end of the year is often refunded to the employer. Stop-loss: Health insurance policies that provide catastrophic coverage for employers funding their own health insurance plans. If the employer's annual expenses go past a certain limit, the stop-loss policy will pay the remaining medical expenses for the year. 4

5 Community rating: A rating that requires health insurance providers to offer health insurance policies within a given territory at the same price to all persons without medical underwriting, regardless of their health status. For example, all 40-year-old, nonsmoking males in an area would pay the same monthly premium. This system does not look at the individual health of applicants, also called risk rating Premium: A regular payment that a member makes to his insurance company to stay enrolled in his health insurance plan. Premiums are usually paid monthly, though some plans offer a different schedule (weekly, semiannually, etc.). Deductible: The cost of medical expenses a member needs to pay every year before her health insurance starts paying. For example, if a plan has an annual $2,000 deductible, the member must cover the first $2,000 of her medical expenses that year before her insurance would pay. 5

6 Co-payment: The fee a member must pay each time he uses a service. If a health insurance plan has a $100 co-payment for seeing medical providers, for example, a member would have to pay $100 each time he sees his doctor. Allowable amount: The most a health insurance plan will pay for a medical service. If a medical provider charges more, the insured may need to pay any costs higher than the allowable amount themselves. Co-insurance: A split of medical expenses between the member and her insurance company. For example, if a plan has 20 percent co-insurance, the member would cover 20 percent of her medical bills while the insurance would cover the remaining 80 percent. Important Policy Terms Provider network: A list of all the approved doctors and other medical providers that policy holders can see at a discounted rate under their health insurance plan. Prescription formulary: A list of all the prescription drugs covered under a health insurance plan. The formulary also lists how much a prescription for each drug costs policy holders out of pocket. Exclusions: Health care services that are not covered by a health insurance plan. For example, many plans will not cover elective cosmetic surgery. Underwriting: A process when a health insurance company reviews an applicant's risk for coverage to set the premium. For example, a company might ask an applicant if they smoke and charge smokers a higher rate. Other Health Care Benefit Plans Wellness program: A program that teaches employees to live healthier lives and includes preventive services, such as vaccines and a routine checkup, at no additional charge. Incentives are often included to encourage employees to take part in biometric screenings and health risk assessments to get a baseline reading of their health. Employees may also take part in fitness and health activities (e.g., stepping challenges through the use of pedometers, weight-loss programs, tobacco cessation, etc.) to earn rewards. 6

7 Flexible spending account (FSA): An account that lets employees set aside part of their earnings for medical expenses, such as deductibles, and dependent care expenses. Contributions to an FSA avoid payroll taxes, so employees have more tax-free money left over for these expenses. FSAs often require that employees spend all the money in their FSA by the end of the year, though employers can choose to allow employees to roll over their account balances to the next year. Health spending account (HSA): A financial savings account for Americans who are enrolled in a high-deductible health insurance plan. Contributions to an HSA are tax-free. In addition, account holders don't have to spend down their entire balance by the end of the year and can keep their balance for future expenses. The account can only be used for health-care-related expenses, or the account holder is charged an additional fee. Health reimbursement account (HRA): A benefits plan that an employer uses to reimburse employees for their out-of-pocket medical expenses. After an employee incurs a medical expense, they show their employer the bill and are paid back through the HRA. The employer funds the HRA, not the employees. High-deductible plan: A health insurance plan that charges a larger deductible than traditional health insurance plans (see above deductible definition). In exchange, these plans have a lower monthly premium. As of January 1, 2015, the IRS defines a high-deductible plan as a plan with a minimum annual deductible of $1,300 for a single-person plan and $2,600 for a family plan. Consumer-driven health plan: An employer-sponsored health care plan that combines a high-deductible health insurance plan with a medical savings account, such as an HSA or HRA. Employees save up through their medical savings account to pay for routine medical expenses and only use the highdeductible plan for catastrophic medical expenses. Long-term care plan: A plan that pays for the caretaking expenses of someone with a long-term disability. Caretaking expenses, such as paying to feed and dress a disabled person, are generally not covered by a regular health insurance plan. Sources: 1. Final Regulations Implementing Employer Shared Responsibility Under the Affordable Care Act (ACA) for (n.d.). Retrieved August 7, 2015, from Sheet pdf 2. Dual Eligible Beneficiaries Under the Medicare and Medicaid Programs. (2014, November 1). Retrieved August 7, 2015, from 3. Centers for Medicare & Medicaid Services. (n.d.). Eligibility. Retrieved August 7, 2015, from by-topics/eligibility/eligibility.html 7