What is Health Insurance?
Health insurance protects you or your family from the medical costs associated with illness or injury. Under the Affordable Care Act (commonly known as Obamacare) health insurance also covers essential health benefits, protects you from exorbitant medical costs, free preventative care, and exempts you from paying the penalty that those without coverage must pay.
There are several key terms to know about health insurance including premium, deductible, co-payment, and out-of-pocket maximum. Your premium is the amount you pay to the insurance company every month. The premium has to be paid every month, regardless of whether you use your health insurance or not.
Your deductible is how much you have to spend for covered medical services before the insurance company pays anything. A co-payment is a payment you make each time you get a medical service after reaching your deductible.
Your out-of-pocket maximum is the greatest amount of money you have to spend for covered health care services throughout the course of a year. After you reach this total, your insurance company pays 100 percent of covered services.
Each health insurance plan has a different premium, deductible, co-payment, and out-of-pocket maximum, so it is important to do your research and discover which plan works best for you.
How Can I Get Health Insurance?
Health insurance is typically obtained through your employer, or individually either through a private firm or government marketplace. For most states, the open enrollment period for health insurance ended January 31. You may still purchase a short-term health insurance plan, so you have some form of coverage until the next enrollment period begins.
These short-term plans; however, do not meet the ACA’s minimum essential coverage requirements. Minimum essential coverage requirements include: the health status of the customer cannot influence the price of the plan, insurers cannot discriminate against customers who have pre-existing conditions, and there has to be a set of minimum essential health benefits.
To find out more about minimum essential coverage, check out our resources below. If your short-term insurance doesn’t meet the minimum essential coverage requirements, this means that you will have to pay a tax penalty, for each month you or your dependents do not have coverage.
There are exceptions to having a gap in health insurance coverage, such as if the gap is under two months. These “short coverage gaps”, and other exceptions, are defined here and here.
What is Short-Term Health Insurance?
Short-term health insurance plans offer short-term coverage for you or your family for a period, generally ranging between, 30 and 360 days. These plans offer coverage as early as the next day after you apply and offer comprehensive medical insurance coverage.
Short-term plans can be beneficial if you missed the open enrollment period, and are not subject to any of the special enrollment periods. Though, as previously stated, these plans are not compliant with the ACA’s set of minimum essential health benefits, meaning you will still be subject to tax penalties.
Additionally, these plans are not required to include the ten essential health benefits required by the ACA, can decline you because of a preexisting condition, usually will not cover maternity care, have a dollar limit on coverage, and may not cover prescription drugs.
What is Open Enrollment?
Open enrollment is the period, during which you may sign up for an insurance plan outside of your employer-offered plan. The open enrollment period for 2016 ended January 31, 2016. Open enrollment for next year begins November 1, 2016, and ends January 31, 2017.
It is important to note that your coverage, unlike a short-term plan, will not begin immediately. If you sign up between Nov. 1, 2016, and Dec. 15, 2016, your coverage will start Jan. 1, 2017. If you sign up between Dec. 16, 2016, and Jan. 15, 2017, your coverage will begin Feb. 1, 2017. If you register between Jan. 16 and Jan. 31, 2017, your coverage will start March 1, 2017.
Open enrollment dates for employer-sponsored health coverage are usually different. Every employer with an average of 51 or more full-time equivalent employees is required to offer an open enrollment period.
Even if your employer is smaller than this many still hold an open enrollment period, during which you may change your coverage options. An employer’s open enrollment usually begins in October, but make sure to double-check the exact date with your HR representative.
What are the Different Categories of Health Insurance?
There are four main categories of health insurance plans: Bronze, Silver, Gold, and Platinum. There is also a Catastrophic plan, but only people under the age of 30, or those with a hardship exemption can purchase these.
Each of the categories is based on how you and the insurance company split the costs of your health care; they don’t pertain to the quality of care you receive.
Bronze plans have the lowest premiums but the highest deductibles and other out-of-pocket costs, while Platinum plans have the highest premiums but the lowest deductibles and other out-of-pocket costs.
Catastrophic plans have low monthly premiums but have an extremely high deductible. In 2019, the deductible for all Catastrophic plans is $7,900. These plans follow their name, they are there to protect you in the case of a catastrophe, such as a serious illness or injury, but you will pay most routine medical expenses yourself.
What are the Different Types of Plans?
The four main types of health insurance plans are Exclusive Provider Organization (EPO), Health Maintenance Organization (HMO), Point of Service (POS), and Preferred Provider Organization (PPO). The two most popular plans are HMOs and PPOs.
HMOs require you to have one primary care physician and then obtain referrals from this physician to see specialists. An HMO limits coverage to providers who work for or contract with the HMO, which means you will have a narrower network and will have limited or no coverage for out-of-network care except in an emergency. HMOs typically offer better pricing, because you are receiving the least flexibility.
PPOs allow you to visit any doctor without getting a referral. Similarly, they enable you to get care from either in-network or out-of-network providers. If you use an in-network provider or preferred provider, you will receive lower rates as negotiated by the insurance company.
Still, you can seek out-of-network treatment, but your deductible and co-pays will likely be higher. PPOs are more costly than HMOs, but afford you more flexibility in the search for treatment. The last two, uncommon, types of plans are POS and EPOs.
Under a POS you will choose a Primary Care Physician from a list of participating providers and will need a referral to see other network providers. You can visit an out-of-network provider, but you will again need a referral from your primary care physician.
With an EPO plan, you won’t need to choose a primary care physician, and you don’t need a referral to see a specialist. An EPO strictly limits you to in-network care providers, and you will pay all costs of an out-of-network provider, except in emergencies.
It is important to note that your health insurance plan should have both a plan category and a plan type. For example, you can have a Bronze HMO or a Gold EPO.
Individual vs. Group Plans
Group plans are health insurance plans purchased by your employer and offered to all eligible employees. The company selects which plan or plans they will offer to their employees, which gives you little say in what plan you have. The employer then pays all or some of the cost of the premium.
Each month the amount you have to pay is deducted from your paycheck. Group plans are helpful because the price you pay for your premium is less than it would be for an individual plan, but they often hold fewer benefits and have fewer protections. A 2018 Kaiser Family Foundation survey found that the average yearly amount an employee paid for their employer-based health insurance premium was $1,241 for single coverage and $5,689 for family coverage.
An individual plan is one you would purchase for yourself and your family. You can shop around for a plan from the different categories and types that fit your specific needs.
If you are unemployed, self-employed, your employer doesn’t offer healthcare, or you employers provided healthcare doesn’t meet federal guidelines (they are required to inform you if it doesn’t) then an individual plan is a necessity for you, as you may be forced to pay a penalty without it.
Under an individual health plan, you will be solely responsible for purchasing a plan and making all monthly premium payments. Individual plans can be selected from the various categories and types described above.
How Does a Subsidy Work?
A subsidy is financial assistance that helps you pay for something, in this case, health insurance. The ACA provides people with two kinds of subsidies a premium tax credit and a cost-sharing reduction. A premium tax credit lowers the amount you have to pay as your monthly premium.
A cost-sharing reduction reduces the out-of-pocket costs (deductible, coinsurance, co-pays) you pay during a policy period for health care services you use. Three factors determine whether you qualify for a subsidy: Your income compared to the Federal Poverty Level, your family size, and how much health insurance costs where you live.
You can find out if you qualify for any subsidies when applying for and purchasing your health insurance plan. To calculate your estimated eligibility for subsidies, click here.
What is a Health Savings Account?
A Health Savings Account (HSA) is a tax-favored savings account that you put money into to help pay your deductible. An HSA must be paired with a high-deductible insurance plan. For 2019, the minimum annual deductible for an individual was $1,3050 and $2,700 for a family. Also, maximum out-of-pocket limits in 2019 are $6,750 for an individual and $13,500 for a family.
To qualify for an HSA you also can have not other primary health coverage, be enrolled in Medicare, or be claimed as a dependent on another’s tax return. There are several benefits to having an HSA. The first is that all contributions to your HSA are 100 percent deductible, up to the legal limit.
For 2019 these annual limits are $3,500 for an individual, $7,000 for a family. Those who are 55 and older can contribute an extra $1,000. The second advantage is that all withdrawals for qualified medical expenses are not taxed (this includes dental and vision).
Other benefits are that your funds grow tax-free, and your balance can be carried over year to year. Finally, after you reach 65, you can make withdrawals from your HSA for any reason, without penalty. The biggest drawback to owning an HSA is that they are paired with high deductible plans, which means you will be subject much higher deductibles than most others.
Large vs. Small Employers
It is important when deciding whether you should offer your employees health benefits to determine whether you are a large or small business. This year the new rule goes into effect that any employer with greater than 50 full-time equivalent employees (FTEs) has to offer a package of essential health benefits.
An employee is considered full-time under the ACA if they work an average of 30 hours per week or at least 130 hours per month. To calculate your full-time equivalent employees, click here. If you employ greater than 50 full-time equivalents, and you do not offer affordable, essential health benefits; you will be subject to a penalty.
If you are an employer with 50 or less full-time equivalents, you can use the Small Business Health Options Program (SHOP) Marketplace to offer health insurance to your employees. Additionally, to participate in the SHOP Marketplace you must offer coverage to all full-time employees, and at least 70 percent of employees you offer insurance to must either enroll in it or receive coverage from another source.
What is Disability Insurance?
According to a 2012 survey by the Consumer Federation of America, more than half of workers say they know little or nothing about disability insurance. Disability insurance pays a percentage of your income if you become injured or ill, and are unable to work.
Determining the definition of disability is critical, as each policy and provider has a distinct interpretation. It is important to learn what this definition is because it tells you what your policy covers.
Why do I need it?
Money isn’t everything, but the ability to make a living is important to everyone. A 2015 study by The Pew Charitable Trusts discovered that 55% of U.S. households could replace less than a month of their income through liquid savings.
This statistic highlights why your ability to make a living is vital; most households simply do not have enough liquid savings, money that is readily available, to support themselves for an extended period.
Also, more than one in four 20-year-olds will experience a disability at some point before they retire, according to the Council for Disability Awareness. These two facts highlight the need for some sort disability coverage, to protect yourself and your family.
Doesn’t the government protect disabilities?
Yes, the government does protect those with disabilities, but not in the same way disability insurance does. The Americans with Disabilities Act (ADA) prohibits employers of 15 or more from discrimination in recruitment, hiring, promotions, training, pay, social activities, and other privileges of employment.
This act also requires employers to make reasonable accommodations for disabled individuals. It does not force an employer to grant any paid leave. The Family Medical Leave Act (FMLA) provides unpaid, job-protected leave for family and medical reasons, which can help if you suffer a disability; however, it must be emphasized that this is unpaid.
Social Security does offer some disability insurance (SSDI), but it only covers long-term disability (it excludes short-term and partial disability) and pays out less than private plans do. The average SSDI benefit amount in 2016 is only $1,166.
Short-term vs. Long-term Coverage
There are several fundamental differences between short and long-term disability insurance. The first difference being the length of time that the policies provide income. A short-term policy usually provides benefits for between nine and 52 weeks.
A long-term policy can provide benefits for a certain number of years (For example two or five years) until the disability ends, or until the policyholder reaches a certain age. The second difference is the difference in the length of the elimination period.
The elimination period is the number of days an insurer must wait after becoming eligible for disability before their coverage begins. In other words, this is the deductible period for your policy. For short-term plans, this time usually spans 1-14 days. For long-term plans, it usually takes 30 to 720 days (This is the extreme end of the spectrum), with 90 days being the standard.
Another important factor to consider, when determining what type of disability insurance to purchase, is whether or not your employer offers any form of coverage. Many employers provide some short-term disability insurance as a part of their benefits package, so it is important that you check with your benefits consultant or HR representative before purchasing any yourself.
Additionally, if your company doesn’t offer any paid coverage, it may offer disability insurance as a voluntary benefit, and allow you to purchase coverage through the employer’s insurance broker at a group rate. Finally, if your employer doesn’t offer any disability insurance, or you are self-employed, you may be able to purchase coverage at a group rate through the professional group that you belong.
What is Life Insurance?
Life insurance is like any other form of insurance. You enter into a contract with an insurance company who promises to pay a certain amount of money when needed, in exchange for you paying them a monthly premium.
The only difference is instead of medical or disability insurance, life insurance is paid only once, upon your death. This amount is a lump sum payment, known as a death benefit.
Life insurance also differs from other forms of insurance because it isn’t designed to help yourself; rather it is for your family. Your life insurance plan is an opportunity to protect your loved ones from financial risks after you have passed away.
This money can be used to: make up for your lost income, fund your children’s education, pay off any debt, and cover your funeral and other related expenses. Even if you are single or a stay-at-home parent, these costs could apply to your family too, making it necessary you have life insurance.
How much do I need?
There are many ways to calculate how much life insurance you need. The first and easiest way is to multiply your income by ten. This method is an easy way to get “in the ballpark” of how much your policy should be but is oversimplified. The second calculation is to use the ten times rule, plus $100,000 per child for college.
Again, this is a simplified calculation that doesn’t take a detailed look at your family’s needs. A third way to calculate your needs is called the DIME formula. DIME stands for Debt and final expenses, Income, Mortgage, and Education.
This method takes a more in-depth look at your family’s needs but doesn’t take into account savings you already have and the contributions of stay-at-home parents.
A more detailed calculation is to add together your financial obligations and subtract your liquid assets. To calculate your obligations you: Add your salary (times the number you years you want to replace) + your mortgage balance + other debts + future needs (like college and funeral expenses).
If you are a stay-at-home parent, this includes the cost to replace services you provide such as childcare, cooking, and home maintenance. From this total, you subtract your liquid assets, for example, your savings + existing college funds + current life insurance.
Another method of calculation is your replacement income need. This method, like the previous method, takes into account everything you provide for your family. This number should include salary, benefits, and services you provide. You then subtract your personal consumption from this figure (i.e. Personal spending needs such as food, clothing, entertainment).
A final method of calculation is called a survivor needs analysis. A survivor needs analysis is founded on ensuring that your family can maintain a particular level of income and lifestyle. You then compare these needs to your current assets (Such as existing life insurance and other income sources).
In addition to these calculations, there are multiple policy calculators for you to use. These calculators allow you to enter your information, and they generate how much insurance you should purchase. You can also always speak with an insurance agent to get a more accurate prediction of the amount of insurance you will need.
How Much Does It Cost?
Each premium is different, as it is based on how risky insurance companies believe it will be to insure you. Some factors used to determine this are age, gender, tobacco use, health status, personal medical history, family medical history, lifestyle (Is your occupation dangerous? Any risky hobbies?), and where you live.
As an example, compare two men, both healthy nonsmokers, ages 35 and 50. The 35-year-old will pay an average of an average of $430 a year for a 20-year term policy worth $500,000. The 50-year-old man will pay an average of $1,300 a year for the same policy.
What Are the Different Types of Life Policies?
There are two primary forms of insurance: term and permanent. Within permanent life insurance, there are three main subcategories: Whole, universal, and variable life insurance.
Term life insurance is the most straightforward type of life insurance. Under term life insurance you select a policy length, generally 10 or 20 years, and your premium stays the same for that period.
Insurance companies may offer continued coverage after your policy has expired but at a more substantial rate. Term life insurance is popular because it is usually less expensive than permanent life insurance.
Permanent life insurance differs from term life insurance because if offers a cash value component (in addition to the death benefit), and does not have a policy time limit. The simplest and most popular type of permanent life insurance is whole life. Policy premium payments for whole life insurance are fixed.
Having fixed payments means the amount you pay for your monthly premium will stay the same throughout the length of the policy, pending you not letting your coverage lapse. The insurance company then invests part of this premium, which is how the cash value of the policy is derived. These investments are allowed to grow tax-free.
Universal life insurance shares many of the same qualities as a whole life policy. It is a permanent policy and has a cash value element that can grow tax-deferred. The biggest difference between the two is that a universal life insurance plan offers a greater deal of flexibility than a whole life plan.
This flexibility is derived from the fact that universal plans allow individuals to raise or lower (within certain limits) their premium payments and coverage amount.
Variable life insurance, like universal and whole, is a policy that offers permanent life insurance, a death benefit, and cash value. Variable policies get their name because the cash-value component of the policy comes from investments in stocks, bonds, and equity funds. This form of investment results in your money being subject to the ups and downs of the market, or an increased variability.
Individual vs. Group
Group life insurance is a type of life insurance offered to a defined group of people through your employer, or a professional group. These group plans are provided as a portion of the employee benefits package, or as an elected benefit at a group rate. A group life insurance policy offers several potential benefits such as cost savings and a greater chance of acceptance.
The supplier of the group policy (employer, professional group, etc.) is usually able to negotiate lower premium rates than you would pay as an individual. Rates for group insurance are based on the volume and risk profile of the group, which means that there is no individual health assessment.
Having no individual health assessment gives you a greater chance of being accepted if you have a more serious medical condition.
There are a few disadvantages to group life insurance. The first is control over your coverage limits, and policy, in general, is in the hands of the group you purchased your life insurance through. Group policies also don’t allow for the freedom to choose among a variety of policy options, that shopping for individual coverage would.e
Your group policy also might not offer enough coverage for your needs, requiring you to purchase additional individual life insurance. Lastly, group life insurance typically means if you leave your employer, or professional group, you leave your life insurance plan too.
Depending on your policy and your insurer, you may be able to convert your group plan to an individual one, but the cost could increase considerably.
Dental and Vision
What is Dental and Vision Insurance?
Dental and vision insurance are plans that offer coverage for treatment and procedures related to your oral or visual health. Typically only routine procedures are fully covered. These procedures include vision tests, corrective lenses, checkups, cleanings, and x-rays. Most dental plans follow the “100-80-50” rule.
This rule means that the insurance company pays for 100 percent of checkups and cleanings, 80 percent of fillings and root canals, and 50 percent of crowns, bridges, and other major procedures. Similar to health insurance, the higher premiums you pay for dental/vision insurance, the lower your co-payments and deductibles will be; conversely the lower your monthly premiums are, the more you’ll pay in co-payments and deductibles.
As an adult, neither dental nor vision insurance is required. There is no penalty levied to qualified businesses that don’t offer employees dental or vision coverage. Similarly, there is no penalty for those individuals who don’t buy vision or dental coverage.
The ACA does require health insurance plans to extend vision and dental coverage to children who are 18 and under. This requirement, called pediatric services, is covered as one of the ten essential health benefits of the ACA. It is important to note that the insurer is required to offer pediatric dental and vision coverage, but the family is not required to purchase it.
How can you Purchase Dental or Vision Insurance?
There are two ways to buy either dental or vision insurance.
- Through your health insurance plan – Some health care policies include dental and vision insurance as part of the whole plan. If dental/vision coverage is included in your health care insurance, you will pay one monthly premium for everything.
If you purchase a dental/vision plan through your healthcare insurance, you must wait until the next open enrollment period to cancel or modify your plan. You may add or cancel your coverage, if offered through your health insurance, outside of the open enrollment period if you qualify for a special enrollment period.
- As a stand-alone plan – In many cases, an individual or family will purchase dental/vision coverage as a stand-alone plan, separately from their healthcare insurance. It has been estimated that 98 percent of dental benefits are provided through stand-alone policies.
Under a stand-alone plan, you will pay one monthly premium for your health insurance, and a separate one for your dental/vision plan. Stand-alone plans also offer you greater flexibility, as you can cancel your plan anytime during the year.
You may purchase a stand-alone dental plan through the Marketplace but will have to buy a stand-alone vision plan through an agent, broker, or online. Additionally, you cannot purchase a stand-alone dental plan through the Marketplace unless you’re enrolling in a health plan at the same time.
Group vs. Individual Coverage
If it is offered, you can find group coverage through your employer. Your respective employer chooses a plan and offers it to all eligible employees, who can purchase this coverage, if they want, at a discounted group rate.
Your monthly premium is then automatically deducted from your paycheck. Group coverage is accessible, as you don’t have to do any comparisons or shopping, and usually, gives you a much-discounted rate on your premium.
An individual plan is a dental/vision plan that you would purchase for yourself or your family. Buying an individual plan means you will be paying the entire premium by yourself and without any group discount.
Individual plans offer you a greater amount of freedom to choose from multiple different insurers and plan types. This freedom allows you to choose what benefits your dental/vision plan will cover.
What are the Main Types of Plans?
Insurance companies offer dental and vision plans through PPO and HMO plans, just like they would for health insurance. In addition to these, it is also common to have an indemnity dental/vision plan.
Indemnity plans allow you to choose which dental or vision provider you prefer. There are no networks you have to adhere to, the insurance company pays an agreed upon portion of any services you use with the provider you select.
Flexible Benefit Plans
Flexible benefits are plans that allow employees to choose the benefits they want to receive from several alternatives. These flexible benefit plans may include cash, health insurance, retirement benefits, daycare, elder care, vacations, and reimbursement accounts.
Employers can contribute to these plans or leave them for the employees to pay for in their entirety. In a flexible benefit plan employees contribute to the cost of their selected benefits tax-free. The main types of flexible benefit plan types are cafeteria plans, healthcare reimbursement accounts, and flexible spending accounts.
Cafeteria plans enable employees to choose between receiving nontaxable benefits offered by the company, or taxable benefits such as cash or stock. Funding of a cafeteria plan can come from the employer, employee, or both. Many companies use credits with which employees can “purchase” benefits from a list.
Healthcare Reimbursement Account (HRA)
A Healthcare Reimbursement Account helps you to pay for covered health care services and other eligible medical expenses. HRAs are generally linked to some health insurance. Your employer owns your account, which means they can control what and how you can spend the money.
Only your employer can put money into the account, and there is no limit to how much money they can deposit. Money used from your HRA is tax-free and can carry over at the end of the year, but your employer can limit the amount of carryover.
Flexible Spending Accounts (FSA)
Companies establish flexible spending accounts, but both employer and employee can contribute to them, and you decide what to eligible expenses you want to pay for with the account. These accounts offer tax-free savings that can be used to pay for premiums, medical expenses your insurance doesn’t cover, and dependent care.
In 2019 there is a contribution cap of $2,700 for your FSA. Your contribution amount can be adjusted only during an open enrollment period or if you qualify for a special enrollment period. Additionally, a maximum of $500 may carry over to the next year, and that is only if your company allows it.
Health Savings Account (HSA)
A health savings account is a tax-free, employee-owned account. Unlike an FSA, you must meet certain criteria to be eligible for one.
Voluntary benefits are benefits offered by an employer that employees can choose to partake in or not. Employees usually pay 100 percent of these benefits, but companies can opt to contribute if they want. There are two main advantages employees receive from voluntary benefits.
The first is that employees get to choose which benefits they want, and don’t have to deal with benefits that don’t matter to them. The second advantage is that employees receive these benefits at a discounted group rate they would be unable to obtain outside of the workplace. Other positives of voluntary benefits include:
— Employees can use pre-tax dollars to pay for the benefits
— They help with recruiting efforts
— Increased employee satisfaction
— Encourage preventative care
— Protect families in case of emergencies
There are many types of voluntary benefits that employers offer. The four most popular are disability, life, dental, and vision insurance. Still, there are many other voluntary benefits that employers can offer their workers.
Critical Illness Insurance
Critical illness insurance is a type of insurance that pays a lump-sum, tax-free benefit if the policyholder is diagnosed with a critical illness, such as a heart attack, stroke, or cancer. This money can be used to cover expenses that medical insurance doesn’t cover such as co-pays, transportation costs, and childcare.
No stipulations dictate where or how the benefit you receive must be spent; meaning the cash can also be used to pay bills, mortgages, and groceries. Over 2.7 million Americans will suffer from cancer, a first heart attack, or first stroke each year. Critical illness insurance covers you and your family if you suffer from these debilitating diseases.
Accident insurance offers the policyholder, financial protection in case of an accidental injury. Similar to critical illness insurance, accident insurance can be used to pay for out-of-pocket medical expenses for emergency treatment, hospital stays, and specialized exams.
It can also be used for lodging needs, transportation, and childcare. Accident insurance is another form of supplemental insurance that helps fill the gaps of your medical insurance in case of an accidental injury.
Some employers offer employees a group auto and home insurance plan. These plans cover employees’ cars and houses at a discounted group rate. Policies offered through an employer can save employees money and time, as they no longer have to shop around for their policies.
Many companies offer their employees group legal services. For a monthly fee employees receive access to legal help through the provider. Most plans provide a specified amount of free legal aid, and then charge the employee for anything that surpasses that amount.
Financial counseling provides employees who opt-in with one-on-one counseling with a financial professional, or group learning through seminars.
Identity Theft Protection
Identity theft is a growing problem in our technologically driven world. Over 16.7 million Americans experienced identity theft in 2017. Identity theft protection saves employees time, money, and energy from dealing with identity loss or theft.
Pet insurance offers protection for your employees’ pets. Approximately 68% of U.S. households own a pet. This number shows that it is likely a significant percentage of any company’s employees are pet owners. Pet insurance offers employees coverage for, what many people consider, another member of the family.
Glossary of Industry Terms
Association Health Plan (AHP): A kind of coverage that allows small businesses to band together to purchase insurance. You can create an AHP if you’re connected by geography, professional interest, or a common purpose.
Catastrophic Health Plan: a type of health plan that meets all the requirements applicable to other Qualified Health Plans, but not any other benefits. Except for three primary care visits per year before the plan’s deductible is met. Premiums tend to be lower, but deductibles, copayments, and coinsurance are all generally higher. To qualify for a Catastrophic plan, you must be under 30 years old or get a “hardship exemption” because you’re unable to afford health coverage from the Marketplace.
Coinsurance: the amount or percentage of a covered health care service you pay after you’ve met your deductible limit.
Co-payment: a fixed payment (usually around $20-$30) you pay for a covered health care service to offset some of its cost. Generally, plans that have lower monthly premiums have higher copayments.
Cost-Sharing Reduction: a type of subsidy. Reduces your out-of-pocket costs for deductibles, coinsurance, and copays.
Deductible: the number of money individuals pay for expenses before their insurance starts to pay. After you “meet” your deductible, or pay up to a certain amount of money, the insurance company pays all or a specific percent of all further health care.
Exclusive Provider Organization (EPO): a type of health insurance plan that strictly limits you to in-network care providers. Under this plan, you pay all the costs of an out-of-network provider, except in emergencies.
Flexible Spending Account (FSA): an account you set up through your employer to pay for out-of-pocket medical expenses with tax-free dollars. These expenses can include copayments, deductibles, qualified prescription drugs, insulin, and medical devices. Your employer sets the contribution limit for your FSA every year, up to that year’s declared maximum amount. There is no carry-over of FSA funds. No carry-over means that if you don’t spend the money by the end of the plan year, it can’t be used for eligible expenses, the next year. Though, your employer can give you 2.5 extra months to spend the money or can carry over up to $500 for next year.
Full-Time Equivalent Employee (FTE): the number of equivalent employees working full-time (at least 30 hours per week). One FTE is equal to one employee working full-time.
Health Maintenance Organization (HMO): a type of health insurance plan. HMOs, require you to have one primary care physician. You can then obtain referrals from this physician to see a specialist. An HMO limits coverage to providers who work for, or contract with, the HMO. This limitation means there is generally limited or no coverage for out-of-network care, except in an emergency.
Health Reimbursement Account (HRA): an employer-funded group health plan from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused money can be rolled over and used in a subsequent year. Employers fund and own the account.
Health Savings Account (HSA): tax-favored savings account that you can use to pay for any qualified medical expenses. You may only use an HSA if you have a High Deductible Health Plan (HDHP).
In-network: Providers or health care facilities that are part of a health plan’s network of providers with which it has negotiated a discount.
Minimum Essential Coverage: Any insurance plan that meets the ACA’s requirement for having health coverage.
Open Enrollment: the yearly window of time, during which individuals or employees may add or drop their health insurance or make changes to their coverage.
Out-of-network: physicians, providers, or facilities who are considered nonparticipants in an insurance plan. Depending on the insurance plan type, any services from these providers may only be partially covered. Or they’re not covered at all.
Out-of-pocket maximum: the most amount of money you would have to pay for covered services in any one plan year. You can reach the out-of-pocket maximum through spending on deductibles, copayments, and coinsurance. Your out-of-pocket maximum doesn’t include premiums. It also doesn’t include any money you spend for services your plan doesn’t cover. After you reach this limit, your plan covers 100 percent of covered benefits.
Point of Service (POS): a type of health insurance plan. Under this plan, you choose a primary care physician from a list of participating providers. You then need a referral from this in-network doctor to visit an out-of-network provider, or to see a specialist.
Premium: the amount of money an individual or business pays for an insurance policy. Generally, premiums are paid every month. Occasionally these premiums are paid on a biannual or annual pace.
Premium tax credit: A type of subsidy. Lowers the amount you have to pay for your monthly premium.
Preferred Provider Organization (PPO): A type of health insurance plan that allows you to visit any doctor without getting a referral. PPOs also will enable you to get care from in-network or out-of-network providers. But if you use an in-network provider or preferred provider, you will receive lower rates as negotiated by your insurance company. Whereas, if you use an out-of-network provider your deductible and copay will be higher.
Primary Care Physician: a physician who is the first point of contact for a person with an undiagnosed health concern. They directly provide or coordinate a range of services for a patient. Under certain types of health insurance, you need to see your primary care physician to receive a referral, if you want to go to a specialist.
PTO: Also known as paid time off. It is a paid leave plan that combines sick leave and vacation (it can include other types of paid leave if noted). PTO gives employees an account with a set number of hours, from which they can take paid leave.
Qualifying Life Event (QLE): A change in your situation in life that can make you eligible for a Special Enrollment Period. There are four basic types of qualifying life events: loss of coverage, changes in household, changes in residence, and other qualifying events.
Short-Term Health Plan: A type of health plan that offers limited coverage but less expensive premiums. Short-term plans can extend up to 12 months at a time. You can renew your short-term coverage for, up to, 36 months. But you can only extend your policy for the same amount of time as the original length of coverage.
Special Enrollment Period (SEP): A time outside the yearly Open Enrollment period, when you can sign up for health insurance. You qualify for a Special Enrollment Period if you’ve experienced a qualifying life event. If you qualify for a SEP, you typically have up to 60 days to enroll in a new plan.
Subsidy: financial assistance from the government to help individuals or families pay for health insurance. Typically, eligibility is determined by household income and/or family size
Life Insurance: A form of insurance that promises to pay a certain amount of money upon your death, in exchange for a monthly premium.
Permanent Life Insurance: life insurance that offers a cash value component (in addition to the death benefit) and doesn’t have a policy time limit.
Term Life Insurance: life insurance in which you select a policy length (generally 10 or 20 years) and your premium stays the same for that period.
Universal Life Insurance: permanent life insurance that allows policyholders to raise or lower (within certain limits) their premium payments and the coverage amount.
Variable Life Insurance: permanent life insurance that derives its cash-value component of the policy form investing in stocks, bonds, and equity funds. These investments meant that your life policy is subject to the increased variability of the market.
Whole Life Insurance: permanent life insurance that offers fixed premium payments. This coverage means your monthly premium will stay the same, as long as you don’t let your coverage lapse.