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Learning the Health Insurance Lingo

Updated: Feb 9



Are you finding it hard to navigate through the complicated world of health insurance terminology? You're not alone.


The lingo can be overwhelming and confusing. Terms like premium, deductible, copayment, coinsurance, out-of-pocket maximum, network, and formulary can be baffling.  Understanding these terms can help you make well-informed decisions about your healthcare coverage and understand how they work.


So, take the time to learn what each term means and how it applies to your specific health insurance plan.



 

HEALTH INSURANCE LINGO

Affordable Care Act (ACA):  Sometimes referred to as Obamacare, this is a federal statute signed into law in 2010 and is designed to help provide healthcare coverage for Americans by expanding Medicaid services and creating federal and state-based marketplaces for people to enroll in coverage.  It also mandates that insurance companies offer coverage to people with preexisting conditions and covers 10 specific essential health benefits.  


Cost Sharing or Subsidy: The ACA also provides for a cost-sharing subsidy in the form and a premium tax credit which is designed to lower the cost of health coverage.  Subsidies are based on income, and you must earn at least 100% of the federal poverty level, but not more than 400% of the poverty level to qualify.  The subsidy is applied to your premium during the year and is reconciled on your tax return the following year.   


Premium: The amount you pay each month for your health insurance plan.


Deductible: The amount you pay out of pocket for medical expenses before your health insurance coverage begins.


Copay: The fixed amount you pay for a covered medical service, usually when you receive the service.


Coinsurance: The percentage of the cost of a covered medical service that you pay after you have paid your deductible.


Out-of-pocket maximum: The maximum amount you will pay for covered medical expenses in a plan year, including deductibles, copays, and coinsurance.


Provider Network: The group of doctors, hospitals, and other medical providers that your health insurance plan contracts with to provide care to its members at a discounted rate. They are known as “network Providers” or “in-network providers”.   A provider who isn’t contracted with a plan is called an “out-of-network provider”. 

 

Primary Provider: Primary Care Provider (PCP).  Doctors who provide and coordinate healthcare services for patients. A primary care doctor can be a Pediatrician, Family Practice Physician, OB/GYN, or Internal Medicine Physician. In an HMO or EPO plan, you are required to have a primary provider and in a PPO plan, you aren’t.  


Pre-existing condition: A health condition that existed before you enrolled in your health insurance plan.  Does not apply to Affordable Care Act (ACA) plans, small groups, or some Medicare plans.


ACA Open Enrollment: A period when you can enroll in a health insurance plan or make changes to your existing plan. For people under 65, this period runs from November 1 – January 15 with an effective date of January 1 or February 1.  Some states have extended OE to later in January. 


Special Enrollment Periods (SEP): Allows individuals to enroll in health insurance plans outside of the open enrollment period for 60 days after a qualifying event.  Note that people who qualify for Medicaid or the Children’s Health Insurance program (CHIP) qualify for a SEP at any time of year.  


HMO Network: Health Maintenance Organization. A type of health insurance plan that typically requires you to choose a primary care physician and get referrals to see specialists. 


EPO Network:  Exclusive Provider Organization. A managed care plan where services are covered only if you go to a doctor, specialists and hospitals in the plan’s network.  EPO plans offer a larger network than an HMO but don’t have the out-of-network benefits of a PPO Plan. They also don’t require you to select a primary care physician. 


PPO Network: Preferred Provider Organization. A type of health insurance plan that offers more flexibility in choosing doctors and hospitals but may have higher out-of-pocket costs.


Formulary:  The list of prescription drugs that are covered by a health insurance plan. It usually includes generic and brand-name drugs that have been approved by the plan for use by its members. The formulary may also specify which drugs require prior authorization or have quantity limits.


Guaranteed Issue: This refers to the right of a consumer to apply for insurance without being subjected to underwriting.  Some insurance, like ACA (Marketplace) plans either forbid the use of underwriting or are designed for enrollment during enrollment periods, like Medicare Advantage plans and Prescription drug plans.  

 

MEDICARE-SPECIFIC LINGO

Beneficiary: A person who is eligible for health insurance through Medicare or Medicaid programs.   


Medicare Part A: Covers inpatient hospital care, skilled nursing facility care, hospice care, some home health care, and medications delivered in Part A facilities.


Medicare Part B: Covers doctor services, outpatient care, preventive services, medical equipment, and medications delivered in a doctor's office or facility.


Medicare Part C: Also known as Medicare Advantage, these are Medicare-approved private health insurance plans that provide all of your Part A and Part B coverage and often include additional benefits like dental and vision. Part C does not replace Medicare but becomes your primary provider with Medicare secondary.


Medicare Part D: Covers prescription drugs that are picked up at a pharmacy and used at home.  Does not cover over-the-counter medications.  


Drug Payment Phases:  The Medicare standard that prescription drug plans and Advantage plans that include drug coverage must follow.  


Deductible:  This is the first phase of coverage in Medicare drug plans which is the amount you must pay before benefits begin paying each year.  This phase is not required, so not all plans have this phase and the deductible amount may be different from plan to plan.  


Initial Coverage Limit:  This is the second phase of coverage in Medicare drug plans where you pay a specific copay or coinsurance until the retail cost of your medications reaches a specified amount each year.  


Coverage Gap or Donut Hole: This is the third Medicare drug phase where you pay a higher cost for your prescription medications after the retail cost of your drugs reaches a specified amount each year. 


Catastrophic Coverage:  This was the fourth Medicare drug phase where you paid coinsurance or a specified copay for your medications each year.  Beginning in 2024 people will have no copays or coinsurance after reaching the specified amount each year.  


Credible Prescription Drug Coverage:  This is drug coverage that is as good or better than what Medicare considers its standard from another source before enrolling in a Medicare Part D plan. 


Enrollment Periods: This refers to the time in which you are eligible to enroll in Medicare or Medicare supplemental plans.  There are six key enrollment periods. 


Initial Enrollment Period: The 7-month window to enroll in Medicare, a Part D drug plan or a Part C Advantage plan.  If you don’t enroll when first eligible, you could face penalties in the form of higher premiums.  


Medicare Supplement Open Enrollment Period:  The 6-month window that starts the first day of the month you turn 65 or enroll in Part B after age 65. During this period insurance companies can’t deny a policy based on your health status or medical condition. 


General Enrollment Period:  You can sign up for Medicare Part A and/or Part B between January 1 and March 31 each year if you didn’t sign up when first eligible and you are not eligible for a Special Enrollment Period.  


Annual Enrollment Period (AEP):  Anyone can make changes to their Medicare plans from October 15 – December 7 each year and your new coverage will start on January 1st. You can change your Part D or Advantage plan with no restriction or underwriting. 


Medicare Advantage Open Enrollment Period (MA-OE):    This enrollment period runs from January 1 – March 31 each year and is an opportunity for people who have a Medicare Advantage plan to change their plan or  disenroll and go back to Original Medicare. 


Special Enrollment Period (SEP):  There are many special enrollment periods in which you can or must change one of your Medicare plans.  These include moving out of a plan’s service area, moving into or out of a skilled nursing facility, psychiatric facility, rehab hospital, long-term care facility, or your employer-provided plan ends.  


Annual Notice of Change (ANOC):  If you are enrolled in a Medicare Advantage or Part D plan you will receive a document from your plan by September 30th each year.  This document will outline any changes the plan will make for the upcoming year and will help you determine if the plan will still meet your needs.  


Medicaid:   Medicaid is a joint federal and state program that gives health coverage to some people with limited income and resources.  


Extra Help:  This Medicare program helps people with limited income and resources to pay for prescription drug costs, like premiums, deductibles, and coinsurance. 


Dual Eligible:  People who qualify for both Medicare and Medicaid benefits.  If you qualify for both, most healthcare costs will be covered by the programs. 


Medigap or Medicare Supplement:  Medicare-approved private health insurance plans that provide standardized coverage designated by a letter for each plan type. They cover the things that Medicare doesn't cover such as Medicare Part A and B copays and coinsurance and all plans are not available in all states. 


Medigap Guaranteed Issue Right: Rights you have in certain situations when insurance companies are required by law to sell or offer you a Medigap policy. In these situations, an insurance company can’t deny you a Medigap policy, or place conditions on a Medigap policy, like exclusions for pre-existing conditions, and can’t charge you more for a Medigap policy because of a past or present health problem. 


Medigap Birthday Rule:  Because people who are enrolled in a Medigap plan don’t have an annual opportunity to review and change their coverage each year and federal rules only give people one guaranteed issue period in their lifetime, seven states have a rule that allows Medigap enrollees to switch plans without medical underwriting around the time of their birthday.  Another seven states allow other windows, either year-round or a specific event such as the anniversary of their enrollment. The birthday rule states are California, Idaho, Illinois, Oregon, Nevada, Louisiana, and Kentucky.  


Underwriting:  This refers to the process for an insurance company to require qualifying for their plan by answering medical questions and in some types of insurance like Life insurance,  having a medical exam.   

 


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