Association-sponsored plans: Professional or trade
association-sponsored plans allow small business owners to purchase
health insurance for their employees through membership in business,
trade or
professional organizations. COBRA: The Consolidated Omnibus Budget Reconciliation
Act of 1986 (COBRA) is a federal law allowing employees and their dependents
to continue
participation in an employer-sponsored
group health plan for a limited period (generally 18 months) after employment
ends. Participants pay the full premiums associated with the plan, plus
2 percent to cover administrative costs. Coinsurance:
Coinsurance is the percentage of a medical
bill that an insured person must pay, after deductibles and/or co-pays
are met. While coinsurance is commonly 20 percent, it can be as little
as zero or as much as 50 percent (for out-of-network services,
for
example).
Continuous coverage: Coverage that is not interrupted by a lapse of 63 or more days in a row.
Co-payment:
A co-payment, or co-pay, is a fixed-dollar
amount insured persons pay each time they seek care or purchase covered
items, such as office
visits or
prescription
drugs. Co-pays sometimes apply to inpatient hospital stays. Health
plans usually have separate co-pay requirements for prescription
drugs. Deductible:
A deductible is the amount that insured
persons must pay for covered services before medical expenses are paid
by the health plan. Some
plans have separate
deductibles for pharmacy benefits. Employee
cost sharing:
Employee cost sharing refers
to the portion of health insurance costs—above
and beyond the premium contribution—that employees are expected to
pay out-of-pocket. Employee cost sharing expenses include deductibles, co-payments
and coinsurance.
FSA:
A flexible spending account (FSA) is funded by
the employee from pre-tax income and is used to pay for medical expenses.
The entire annual amount
of an FSA
must be made available to the employee at the beginning of the year. However,
unspent balances must be forfeited to the employer at the end of the year.
Guaranteed
issue:
Federal law prohibits insurance companies from denying
health coverage to small businesses (usually defined as 2 to 50 employees)
on the basis
of health
status
or other factors related to the use of health care. Guaranteed renewability:
Federal law prohibits insurance
companies from canceling a business’ insurance
because someone in the firm becomes sick. HMO:
A health maintenance organization (HMO) is an insurance plan that requires a person to get care from providers who are part of the HMOs network. Usually, a primary care provider coordinates care and controls access to specialists. Most HMOs offer a point-of-service (POS) option for additional fees.
HSA:
A health savings account (HSA) is an alternative to traditional insurance coverage. HSAs must be paired with a high-deductible health insurance policy, the contribution to which is tax-deductible. HSA funds may be used to pay out-of-pocket costs (deductibles, coinsurance, co-pays). The employer, the employee or both may fund the plan. HSA accounts are owned by the employee, are fully portable and remaining balances roll over year to year.
HRA:
A health reimbursement arrangement (HRA) is an alternative to traditional insurance coverage. HRAs are usually paired with a high-deductible health insurance policy, the contribution to which is tax-deductible. HSA funds may be used to pay out-of-pocket costs, including deductibles, coinsurance and co-pays. The employer must fund the HRA, and consequently may decide if benefits are portable or if they roll over from year to year.
High-risk pools:
In some states, high-risk pools provide
a health insurance option for individuals whose poor health creates a
barrier to obtaining
employer-based
coverage.
Premiums in high-risk pools are relatively high, and there is often
a waiting period.
However, many states have non-discrimination laws that eliminate the
need for these pools.
HIPAA:
The Health Insurance Portability and Accountability
Act (HIPAA) of 1996 is a federal law that includes important health insurance
provisions, including non-discrimination, guaranteed renewability,
guaranteed
issue and limits
to
benefit exclusions due to pre-existing medical conditions.
Maximum out-of-pocket
expenditures:
This out-of-pocket limit is the maximum amount
of cost sharing an insured individual or family would have to pay
in a given year. Once a maximum out-of-pocket limit
is reached, the insurer pays all additional covered medical
expenses for the year, up to the plan’s limit. Medical
underwriting:
Medical underwriting is a pricing
practice used by insurance companies to adjust premiums
(usually upward) based
on
a group’s health status or medical
claims experience. Non-discrimination:
Neither insurers nor employers
are permitted to condition eligibility of employees and their dependents
on their
health status. Open access plan:
An open access (OA) plan is an HMO
or POS plan in which patients are allowed to self-refer to specialists
for
a higher co-pay.
Point-of-service:
A point-of-service (POS) plan is
an option added to many HMOs allowing enrollees to seek care outside
of the HMOs
network
for a higher
co-pay and, possibly,
a higher premium.
PPO:
A preferred provider organization (PPO) is an
insurance plan that encourages enrollees to get care from
providers within
the plan’s network, but allows
access to providers outside the network if one
is willing to pay more. Many PPOs do not require
the insured person to choose a primary care doctor
or get
a referral to see a specialist.
Pre-existing medical condition: A pre-existing medical condition is one for which an individual actually received care, treatment, or medical advice during the six-month period before coverage went into effect. Pre-existing medical conditions, such as asthma, diabetes, or cancer may increase the cost and in some cases availability of insurance, subject to federal and state laws and a carrier's policies.
Premiums: The premium is the amount an insurance plan
costs per month. Premiums may vary as a function of
market conditions,
plan
types, health
status of enrollees,
number of enrollees and degree of employee cost
sharing. Typically, the employer and employee each contribute
to the
premium payment.
Provider choice:
Different plan types (HMOs, PPOs,
POS plans and OA plans) vary with respect to the degree of
choice enrollees have
as to which
doctors
or other health
care providers they wish to see. HMOs have
the least
provider choice, as they require participants
to see professionals
only within the
plan’s relatively
narrow network, whereas PPOs tend to have
broader networks of preferred providers and
allow access
to non-network providers, but at a higher
cost. Rate-up:
A rate-up is the extent to which premiums are
increased, usually annually. Premium rate-ups
are typically
expressed as a percentage
increase.
For example, a premium that increases from
$1,000 per year to $1,100 per
year has a rate-up
of 10 percent.
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Part 1: Insurance Basics