20 Health Insurance Terms You Need to Know
Terms you need to know
Annual limit – The ACA currently prohibits health insurance plans from putting an annual dollar limit on the benefits individuals receive. However, plans can put a limit on spending if the service provided doesn’t fall within the essential health benefits.
Appeal – Individuals may request that their health insurance company review a decision that denies benefit or payment. Every individual has the right to appeal a decision.
Claim – Refers to a request for payment the individual’s health care provider submits to the insurance company when the individual receives items or services they believe should be covered
Co-payment/Co-pay – A fixed amount the individual pays for covered health care services after the deductible has been met.
Deductible –The dollar amount you must pay each year for medical expenses before your insurance plan will start paying. Depending on the individual’s plan, some services may be covered even before the deductible is met.
Essential health benefits – The 10 categories of benefits that your insurance plan must cover without a dollar limit. These categories are: outpatient care, inpatient care, emergency services, maternity/newborn care, mental health services, prescription drugs, rehabilitation services, laboratory services, preventive services, and pediatric services.
Excluded services – Services your health insurance plan doesn’t cover or pay for.
Exemption – Most individuals pay a penalty for not having the minimum essential coverage, but others may qualify for a hardship, health-coverage related, or group membership exemption. These exemptions are claimed on the individual’s federal tax return.
Flexible Spending Account (FSA) – Refers to an arrangement made through an employer that allows the individual to pay for out-of-pocket medical expenses such as co-pays, deductibles, prescriptions, etc. with tax-free dollars. The amount contributed is deducted from the employee’s account. This account can also be used for a spouse or any dependents the individual claims. Up to $500 may be carried over to the next year.
Health Savings Account (HSA) – Offered by an individual’s health insurance provider if they have a high-deductible insurance plan (HDHP), this account enables the individual to put in a set amount (not to exceed government-mandated maximums) to be used for eligible medical expenses, tax-free, before their deductible is met. An HSA can also be set up with the individual’s employer. The balance rolls over each year.
Health Reimbursement Account (HRA) – This employer-funded health plan enables the employee to get reimbursed tax-free each year for certain medical expenses up to a dollar amount set by the employer. With this type of account, the employer funds and owns the account, so it will be lost if the individual changes jobs.
Minimum Essential Coverage (MEC) – Refers to the coverage an individual must have in order to avoid a fee for not having insurance. Qualified plans include Marketplace plans, Medicare, Medicaid, CHIP, and job-based plans.
Open Enrollment Period – The period of time during which individuals can enroll in a health insurance plan. For health insurance plans for 2018, open enrollment runs from November 1, 2017 to December 15, 2017.
Pre-existing condition – A health condition that an individual had before their insurance coverage went into effect such as depression, asthma, diabetes, etc. The insurance company is required to cover treatment, and may not raise rates.
Pre-existing condition exclusion period – Refers to the length of time during which an insurance policy won’t cover a pre-existing condition. After the implementation of the ACA, most individuals aren’t subject to the exclusionary period unless they have a “grandmothered” or “grandfathered” plan.
Premium – The premium is the amount the individual must pay for health insurance each month. Premium amounts vary by plan, with some having higher premiums with a low deductible and vice versa.
Premium tax credit – A refundable tax credit that enables low-income individuals to afford health insurance. An individual may use the credit to lower their monthly premium, and anything leftover will be refunded as a credit when taxes are filed.
Qualifying life event – Some individuals may enroll in a health insurance plan after the Open Enrollment Period ends, meaning they qualify for a Special Enrollment Period. Qualifying events include loss of health coverage, changes in household (marriage, divorce, children, death of family member), changes in residence, and other miscellaneous events such as becoming a U.S. citizen.
Short-term health insurance – Also known as term health insurance, this insurance is meant to help individuals who need temporary health care insurance due to coverage gaps such as being in-between jobs, waiting for job benefits to kick in, or waiting on Medicare. This insurance doesn’t meet ACA requirements, and may result in a tax penalty.
Subsidized coverage – The government offers low or no cost health insurance coverage to individuals whose income falls below a certain level. Examples of subsidized coverage are Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).