The health care system in the United States can be confusing. In order to get the most out of your health care benefits, you need to understand the terms used by insurance companies, the government, health plans and health care providers. This way, you can make better decisions and ultimately receive better care.
Managed Care – A system of health care delivery that is characterized by arrangements with selected providers, ongoing quality control and utilization review programs, and financial incentives for members to use providers and procedures covered by the plan.
Maximum Benefit – The maximum dollar amount that an insurance company will pay for claims, either for a specific procedure or service or during a specified period of time.
Medicaid – A state-administered health insurance program for low-income families and children, pregnant women, the elderly, people with disabilities, and, in some states, other adults. The federal government provides a portion of the funding for Medicaid and sets guidelines for the program. States also have choices in how they design their programs, so Medicaid varies state by state and may have a different name in your state.
Medical Loss Ratio (MLR) – A basic financial measurement used in the ACA to encourage health plans to provide value to enrollees. If an insurer uses 80 cents out of every premium dollar to pay its customers’ medical claims and activities that improve the quality of care, the company has an MLR of 80 percent. With an 80 percent MLR, the insurer is using the remaining 20 cents of each premium dollar to pay overhead expenses, such as marketing, profits, salaries, administrative costs and agent commissions. The ACA sets minimum MLRs for different markets, as do some state laws.
Medically Necessary – A term used to describe the supplies and services needed to diagnose and treat a medical condition in accordance with the standards of good medical practice. Many health plans will only pay for treatment deemed medically necessary. For example, most plans will not cover elective cosmetic surgery.
Medicare – A federal health insurance program for people who are age 65 or older and for certain younger people with disabilities. It also covers people with End-stage Renal Disease (ERSD)—permanent kidney failure requiring dialysis or a transplant.
Medicare Part D – A program that helps pay for prescription drugs for people with Medicare who join a plan that includes Medicare prescription drug coverage. There are two ways to get Medicare prescription drug coverage: through a Medicare Prescription Drug Plan or a Medicare Advantage Plan that includes drug coverage. These plans are offered by insurance companies and other private companies approved by Medicare.
Minimum Essential Coverage – The type of coverage an individual needs to have to meet the individual responsibility requirement under the ACA. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE and certain other coverage.
Open Enrollment Period – A period of time, usually but not always occurring once per year, when employees of companies and organizations may make changes to their health insurance and other benefit options. The term also applies to the annual period in which individuals may buy health insurance plans through the Marketplace.
Out-of-network – Typically refers to physicians, hospitals or other health care providers who do not contract with an insurance plan to provide services to its members. Depending on the insurance plan, expenses incurred for services provided by out-of-network providers might not be covered, or coverage may be less than for in-network providers.
Out-of-pocket Maximum (OOPM) – The total amount paid each year by the member for the deductible, coinsurance, copayments and other health care expenses, excluding the premium. After reaching the out-of-pocket maximum, the plan pays 100 percent of the allowable charges for covered services the rest of that calendar year.
Point-of-service Plan (POS) – A type of HMO that allows the patient to see either in-network or out-of-network providers. However, the patient pays more out of pocket when using an out-of-network provider.
Pre-admission Certification –Approval granted by a case manager or insurance company representative (usually a nurse) for a person to be admitted to a hospital or inpatient facility before admittance. The goal is to ensure that individuals are not exposed to inappropriate health care services, or services that are not medically necessary. Also called “precertification” or “pre-admission review.”
Pre-existing Condition – Any medical condition that was diagnosed or treated within a specified period immediately before a health insurance policy became effective. These conditions may not be covered for a specified period of time under the new policy.
Preferred Provider Organization (PPO) – A type of managed care plan in which health care providers and insurers agree to offer substantially discounted fees for covered health care services and to lower copays and deductibles for in-network services. The plan’s payment ratio (what your insurance company pays compared to what you pay) may be high—for example, it could be 90/10, with the insurance company paying 90 percent of medical costs and you paying 10 percent after the copay and deductible.
Premium – The amount of money charged by an insurance company for coverage.
Prescription Insurance – Insurance that helps pay for prescription drugs and medications. Prescription insurance is often offered as part a larger health insurance plan, though this is not always the case. Stand-alone individual prescription insurance may be available for people who are not offered prescription drug coverage or who have no health insurance. Eligibility for specific medications and the cost of insurance varies among health plans. Also known as drug coverage.
Preventive Care – Any medical checkup, test, immunization, or counseling service used to prevent chronic illnesses from occurring.
Primary Care Physician (PCP) – A health care professional who is responsible for monitoring an individual’s overall health care needs. Typically, a PCP serves as a gatekeeper for an individual’s medical care, referring him or her to specialists and admitting him or her to hospitals when needed.
Qualified Health Plan – An insurance plan that is certified by the Health Insurance Marketplace, provides essential health benefits, follows established limits on cost-sharing (like deductibles, copayments and out-of-pocket maximum amounts), and meets other requirements. A qualified health plan will have a certification by each Marketplace in which it is sold.
Qualified Medical Expense – The costs attached to the diagnosis, cure, mitigation, treatment or prevention of disease, or for the purpose of affecting any structure or function of the body.
Reasonable and Customary Charges – The commonly charged or prevailing fees for health services within a geographic area. If charges are higher than what an insurance carrier considers reasonable and customary, the carrier will not pay the full amount and instead will pay what is deemed appropriate for the particular service. The remaining charges are the responsibility of the patient.
Self-insured – A health benefits plan in which the employer is responsible for the cost of its employees’ health care. Typically, a third party provides administrative services for the plan to the employer group.
Summary of Benefits and Coverage (SBC) – An outline of a health insurance plan that allows somebody to evaluate costs and coverage and compare against other health plans.
TRICARE – A health care program for active-duty and retired uniformed services members and their families.
Vision Insurance – Insurance that covers specific eye care benefits defined in the policy. Vision insurance policies typically cover routine eye exams and other procedures, and provide specified dollar amounts or discounts for the purchase of eyeglasses and contact lenses. Some vision insurance policies also offer discounts on refractive surgery.
Waiting Period – A period of time in which your health plan does not provide coverage for a particular pre-existing condition.
Waiver – A rider or amendment to a policy that restricts benefits by excluding certain medical conditions from coverage.
Wellness Program – A program intended to improve and promote health and fitness, usually offered through the workplace, although insurance plans can offer them directly to their enrollees. The program allows your employer or plan to offer you premium discounts, cash rewards, gym memberships and other incentives to participate. Some examples of wellness programs include programs to help you stop smoking, diabetes management programs, weight loss programs and preventive health screenings.