UNDERSTANDING HEALTH INSURANCE TERMINOLOGY

Transcription

1 UNDERSTANDING HEALTH INSURANCE TERMINOLOGY The information in this brochure is a guide to the terminology used in health insurance today. We hope this allows you to better understand these terms and your obligations in the cost of your healthcare. Please refer to the policy you will have received from your health insurance company, for detailed information on your benefits. Allowable Amount / Contracted Allowable: The dollar amount eligible for reimbursement to the physician or health care professional on the claim based on the lower of either the provider s charge or the reasonable and customary amount, as explained in your health plan information. This dollar amount may not be the amount ultimately paid to the member or provider as it may be reduced by any co-insurance or deductible that is owed by the member. Balance Billing: Balance billing is a type of health care billing that occurs when a provider bills a member for the difference between an out-of-network provider's charges and the amount paid by a member's benefit plan. This situation happens when a provider is neither contracted nor a participant in a member's provider network. Billed Charge: The amount billed by your physician or other health care provider for services you have received. If you use a provider in your plan s network, the billed charge should be the same as the allowed amount, or contracted rate, negotiated by your insurer. But, if you use providers outside your network, you will generally have to pay the full difference between your insurer s allowed amount and the amount that your provider charges. Consolidated Omnibus Budget Reconciliation Act (COBRA): A federal act which requires each group health plan to allow employees and certain dependents to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. Qualifying events include reduced work hours, death or divorce of a covered employee, and termination of employment. Co-insurance: This is the amount that would need to be paid by the insured before the insurance pays and in addition to the deductible. Some health insurance plans will let the insured use some services with just the coinsurance payment, like visiting the doctor, even before the deductible is met. The amount you are required to pay for medical care in a fee-for-service plan after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if the insurance company pays 80 percent of the claim, you pay 20 percent. Consumer-directed health plans (CDHPs): Originating in the late 1990s primarily from health e-commerce ventures, were designed to engage consumers more directly in their health care purchases. The primary conceptual model made cost and quality information evident to the consumer, usually through the Internet, thus creating a more efficient health care market. Since that time, the CDHP design has dropped Internet capabilities as a primary distinction and focused on the use of a health benefit that couples a high deductible health plan (HDHP) with an account to pay for first dollar medical care expenses. Typically, there is a gap between the account contribution and deductible threshold, with unused portions of the account accruing without tax penalty into the subsequent benefit year. The most common models of these plans today are Health Reimbursement Accounts (HRAs) and Health Savings Accounts (HSA's). Page 1 of 8

2 Co-payments: Another way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, $5 for every visit to the doctor). The health insurance company pays the rest. Another way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, $5 for every visit to the doctor). The insurance company pays the rest. Coordination of Benefits: If the insured has available two or more sources that would cover payment for certain conditions, such being under a spouse's insurance plan along with their own, the insurance company would not pay double benefits. In this case the health insurance company would coordinate benefits to make sure each plan pays a portion of the service. A system to eliminate duplication of benefits when you are covered under more than one group plan. Benefits under the two plans usually are limited to no more than 100 percent of the claim. A system to eliminate duplication of benefits when you are covered under more than one group plan. Benefits under the two plans usually are limited to no more than 100 percent of the claim. Covered Expenses: Most insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the policy. Customary Fee: Most health insurance plans will pay only what they call a reasonable and customary fee for a particular service. If your doctor charges $1,000 for a hernia repair while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your health insurance company's payment as full payment. Or shop around to find a doctor who will. Otherwise you will have to pay the rest yourself. Deductible: The amount of money you must pay each year to cover your medical care expenses before your health insurance policy starts paying. The deductible refers to the amount of money that the insured would need to pay before any benefits from the health insurance policy can be used. This is usually a yearly amount so when the policy starts again, usually after a year, the deductible would be in effect again. Some services, like doctor visits, may be available without meeting the deductible first. Usually there are separate individual deductible amounts and total family deductible amounts. Employee Retirement Income Security Act (ERISA): A broad-reaching law that establishes the rights of pension plan participants, standards for the investment of pension plan assets, and requirements for the disclosure of plan provisions and funding. Exchanges: State health insurance marketplaces whose establishment was mandated by the Patient Protection and Affordable Care Act. Exchanges are to be established by 2014 for individuals and small employer groups (exchanges for small employers are known as SHOP exchanges). Exchanges are responsible for calculating premium subsidies, enrollment, quality oversight, certification of qualified health plans that can be sold in the exchange, and other matters. By standardizing health insurance products, enrollment, operations, and oversight, exchanges are also meant to make the process of selecting insurance easier and transparent. Page 2 of 8

3 Exclusive Provider Organization (EPO): A managed care organization that exhibits characteristics of both health maintenance organizations (HMOs) and preferred provider organizations (PPOs). Like an HMO, an EPO plan requires that members visit innetwork providers only; care from out-of-network providers is not covered. Like a PPO, an EPO plan often allows members to see specialists without first obtaining a referral from a primary care doctor; these specialist visits are covered as long as the providers are in the network. Explanation of Benefits (EOB): Your insurer will provide you with an EOB after you have submitted a medical claim to your insurer or after a provider has submitted a claim to your insurer on your behalf. The EOB will include a detailed explanation of how your insurer determined the amount of reimbursement it made to your provider or to you for a particular medical service. The EOB will also include information on how to appeal or challenge your insurer s reimbursement decision. Note that you may not receive an EOB for care that you have received from a provider or facility that is in your insurer s network. Exclusions: Specific conditions or circumstances for which the policy will not provide benefits. Fee-for-service (FFS) payment system: A system in which the insurer will either reimburse the group member or pay the provider directly for each covered medical expense after the expense has been incurred. Fee schedule: Fee determined by an MCO to be acceptable for a procedure or service, which the physician agrees to accept as payment in full. Also known as a fee allowance, fee maximum, or capped fee. Formulary: A listing of drugs, classified by therapeutic category or disease class, that are considered preferred therapy for a given managed population and that are to be used by an MCO's providers in prescribing medications. FSA Flexible Spending Account: FSAs are very similar to HSAs in that they are contributions accounted that are funded to pay for healthcare expenses. The FSA is tied to a health insurance plan like a PPO. Contributions are tax deductible just like HSAs. Flexible Spending Accounts are a use it or lose it account. That means you have to use the funds inside the FSA before the end of the plan coverage period (usually the end of the year). Generic substitution: The dispensing of a drug that is the generic equivalent of a drug listed on a pharmacy benefit management plan's formulary. In most cases, generic substitution can be performed without physician approval. Grace Period: This is the amount of time one has to pay their health insurance premium after the original due date and before insurance coverage would be canceled. HMO (Health Maintenance Organization): Prepaid health plans. You pay a monthly premium and the HMO covers your doctors' visits, hospital stays, emergency care, surgery, checkups, lab tests, x-rays, and therapy. You must use the doctors and hospitals designated by the HMO. A healthcare system that assumes or shares both the financial risks and the delivery risks associated with providing comprehensive medical Page 3 of 8

4 services to a voluntarily enrolled population in a particular geographic area, usually in return for a fixed, prepaid fee. Health Insurance Portability and Accountability Act (HIPAA): A federal act that protects people who change jobs, are self-employed, or who have pre-existing medical conditions. HIPAA standardizes an approach to the continuation of healthcare benefits for individuals and members of small group health plans and establishes parity between the benefits extended to these individuals and those benefits offered to employees in large group plans. The act also contains provisions designed to ensure that prospective or current enrollees in a group health plan are not discriminated against based on health status. Health Plan Costs: With any type of health plan, you ll have out-of-pocket costs. The costs will vary by the type of plan you have. The following are some of the costs you may have to pay: Premiums. A premium is a fee you pay to participate in a health plan. Employers who offer health plans usually contribute some or all of the employee's premium costs, but they aren t required to do so. Deductibles. A deductible is an amount that you must pay for covered medical service or medication before your plan will begin to pay your costs. You ll usually have to meet a deductible each year. Copayments. Copayments are amounts you pay each time you go to the doctor, fill a prescription, or receive a covered health service. Some managed care plans cap the amount of your out-of-pocket costs for copays and deductibles over a certain period, usually a year. When you reach this amount, your plan will pay 100 percent of the costs for the remainder of the period. Coinsurance. Coinsurance is the amount you pay once you have met the deductible. The coinsurance will vary by plan. In Texas, health plans generally must pay at least 50 percent of the cost of covered services after the deductible has been met. As with deductibles, the higher the amount you pay in coinsurance, the lower your premium will be. Health reimbursement accounts or health reimbursement arrangements (HRA): are internal revenue service (IRS) sanctioned programs that reimburse employees for qualified medical expenses including health insurance premiums. HRA is an employer sponsored and funded health insurance plan in which, an employer reimburses a participating employee with the amount that s/he had paid as medical expenses, thus earning tax advantages to offset health care costs. An employer can limit their HRA by establishing a limit on the contributions they will make for employees. HRA are initiated by an employer and serviced by a third-party administrator or plan service provider. Funds contributed to an HRA by an employer are property of an employer and unused contributions cannot be taken by an employee when s/he leaves an employer. Health Savings Accounts (HSAs): were created by Public Law , the "MedicarePrescription Drug, Improvement and Modernization Act of 2003." Any adult who is covered by a high-deductible health plan (and has no other first-dollar coverage) may establish an HSA. Tax-advantaged contributions can be made in three ways: Page 4 of 8

5 the individual or family can make tax deductible contributions to the HSA even if they do not itemize deductions; the individual s employer can make contributions that are not taxed to either the employer or the employee; and, employers sponsoring cafeteria plans can allow employees to contribute untaxed salary through salary reduction. Individuals age 55 and older are allowed to make additional catch-up contributions to their HSAs. Once an individual enrolls in Medicare they are no longer eligible to contribute to their HSA. Amounts contributed to an HSA belong to the account holder and are completely portable. Funds in the account can grow tax-free through investment earnings, just like an IRA. Funds distributed from the HSA are not taxed if they are used to pay qualified medical expenses. Unlike amounts in Flexible Spending Arrangements that are forfeited if not used by the end of the year, unused funds remain available for use in later years. Savings-Accounts.aspx Independent practice association (IPA): An organization comprised of individual physicians or physicians in small group practices that contracts with MCOs on behalf of its member physicians to provide healthcare services. Lifetime Maximum: This is the most amount of money the health insurance policy will pay for the entire life. Pay attention to individual lifetime maximums and family lifetime maximums as they can be different. Managed Care: Ways to manage costs, use, and quality of the health care system. All HMOs and PPOs, and many fee-for-service plans, have managed care.the integration of both the financing and delivery of healthcare within a system that seeks to manage the accessibility, cost, and quality of that care. Managed care organization (MCO): Any entity that utilizes certain concepts or techniques to manage the accessibility, cost, and quality of healthcare. Also known as a managed care plan. Medicaid: Is the USA program for people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens only, including low-income adults, their children, and people with certain disabilities. Poverty alone does not necessarily qualify someone for Medicaid. Medicaid is the largest source of funding for medical and health-related services for people with limited income in the United States. Medicare: A federal government hospital expense and medical expense insurance plan primarily for elderly and disabled persons. See also Medicare Part A, Medicare Part B, and Medicare Part C. Medicare Part A. The part of Medicare that provides basic hospital insurance coverage automatically for most eligible persons. See also Medicare. Medicare Part B. A voluntary program that is part of Medicare and provides benefits to cover the costs of physicians' services. See also Medicare. Page 5 of 8

6 Medicare Part C. The part of Medicare that expands the list of different types of entities allowed to offer health plans to Medicare beneficiaries. Also known as Medicare+Choice. See also Medicare. Medicare supplement: A private medical expense insurance plan that supplements Medicare coverage. Also known as a Medigap policy. Non-cancellable Policy: A policy that guarantees you can receive insurance, as long as you pay the premium. It is also called a guaranteed renewable policy. Out-of-Pocket: The most money you will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the insurance company, in addition to regular premiums. This is the cost one would pay out of their own pocket. An out of pocket expense can refer to how much the co-payment, coinsurance, or deductible is. Also, when the term annual out-of-pocket maximum is used, that is referring to how much the insured would have to pay for the whole year out of their pocket, excluding premiums. Dollar amounts set by MCOs that limit the amount a member has to pay out of his or her own pocket for particular healthcare services during a particular time period. Patient Protection and Affordable Care Act (PPACA): Is a federal statute that was signed into United States law by President Barack Obama on March 23, This act and the Health Care and Education Reconciliation Act of 2010 (signed into law on March 30, 2010) made up the health care reform of The laws focus on reform of the private health insurance market, providing better coverage for those with preexisting conditions, improving prescription drug coverage in Medicare and extending the life of the Medicare trust fund by at least 12 years. Point-of-service (POS) plans are a combination of HMOs and PPPs. You will be required to choose a primary care physician, but you may visit out-of-network doctors without a referral. If you use providers outside the network, you ll have to pay more for your health care. A POS plan may exclude the option for out-of-network care for certain medical conditions. POS coverage is usually offered as an add-on to the plan called a rider for an additional fee. PPO (Preferred Provider Organization): A combination of traditional fee-for-service and an HMO. When you use the doctors and hospitals that are part of the PPO, you can have a larger part of your medical bills covered. You can use other doctors, but at a higher cost. A healthcare benefit arrangement designed to supply services at a discounted cost by providing incentives for members to use designated healthcare providers (who contract with the PPO at a discount), but which also provides coverage for services rendered by healthcare providers who are not part of the PPO network. Pre-existing Conditions: This is a health condition that an individual had before applying a health insurance policy. Some plans will cover pre-existing conditions while others may completely exclude them and, in addition, some health insurance plans will cover pre-existing conditions after a certain time period. Pre-existing Condition Insurance Plan (PCIP): The Pre-existing Condition Insurance Plan (PCIP) (also called the federal high-risk pool) is another option for Texans who are unable to obtain health insurance. To qualify, an individual must have been without Page 6 of 8

7 coverage for at least six months and must have a preexisting condition. PCIP is a temporary federal program that runs until exchanges become effective in Premium costs for participants will be comparable to what an individual without preexisting conditions would pay to purchase insurance. Premium: The amount you or your employer pays in exchange for insurance coverage. Primary Care Doctor: Usually your first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors your health and diagnoses and treats minor health problems, and refers you to specialists if another level of care is needed. Usually your first contact for health care. This is often a family physician or internist, but some women use their gynecologist. A primary care doctor monitors your health and diagnoses and treats minor health problems, and refers you to specialists if another level of care is needed. In many health insurance plans, care by specialists is only paid for if your are referred by your primary care doctor. An HMO or a POS plan will provide you with a list of doctors from which you will choose your primary care doctor (usually a family physician, internists, obstetrician-gynecologist, or pediatrician). This could mean you might have to choose a new primary care doctor if your current one does not belong to the plan. PPOs allow members to use primary care doctors outside the PPO network (at a higher cost). Indemnity plans allow any doctor to be used. Prior authorization: In the context of a pharmacy benefit management (PBM) plan, a program that requires physicians to obtain certification of medical necessity prior to drug dispensing. Also known as a medical-necessity review. Provider: Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care. Texas Health Insurance Pool (Health Pool): The Health Pool offers health insurance to Texans who can t find coverage because of their preexisting medical conditions and to certain individuals who have recently lost their employer-sponsored health coverage. The Health Pool is generally the most comprehensive option you will find if you can t get traditional coverage. The policy offers major medical coverage similar to coverage offered in the commercial individual market. Premium rates vary based on the member s age, gender, tobacco use, and residential ZIP code, without regard to health status. Premium rates may be up to twice the standard rate in the individual health insurance market. Third party administrator (TPA). A company that provides administrative services to MCOs or self-funded health plans but that does not have the financial responsibility for paying benefits. Third-Party Payer: Any payer for health care services other than you. This can be an insurance company, an HMO, a PPO, or the Federal Government. Verification of Benefits: Physicians offices will contact your health insurance plan to verify what benefits, exclusions, limitations, financial responsibility you have toward your planned office visit, surgery etc. The physicians office will notify you of your responsibility before you arrive in the office for your visit. The insurance companies will always state verification of benefits is not a guarantee of payment. Page 7 of 8

8 Waiting Period: This is the time one would have to wait until certain health insurance coverage is available. Page 8 of 8