Key Concepts in Health Insurance and ACA Provisions

Actuarial Value

This represents the minimum projected percentage of medical costs that are likely to be covered by a medical expense policy.

Affordable Care Act (ACA)

This act was enacted to make health insurance more accessible and affordable. The ACA introduced mechanisms, including government mandates, subsidies, and insurance exchanges.

Archer Medical Savings Accounts (MSAs)

See Medical Savings Accounts.

Basic Hospital Expense Policies

These policies cover hospital room and board, miscellaneous hospital expenses (e.g., lab work, x-rays, medicines), the use of operating rooms, and supplies.

Basic Hospital Expense Indemnity Basis

This contract is a basic hospital policy that sets benefits on an indemnity basis (a fixed amount per day for room and board).

Basic Hospital Expense Reimbursement or "Expenses-Incurred" Basis

This contract is a basic hospital policy that reimburses the insured for hospital costs up to a stated maximum benefit.

Basic Medical Expense Insurance

This is a health insurance policy that provides "first dollar" benefits for specified (and limited) health care.

Basic Physician Expense Insurance

This policy provides coverage for non-surgical services that are provided by a physician.

Basic Surgical Expense Policies

These policies pay for the costs of surgeons' services, regardless of whether the surgery is performed in or out of the hospital. Coverage also includes anesthesiologist fees.

Benefit Period

This is either the length of time benefits are paid following a loss or the policy period during which claims are counted against benefit and cost-sharing limits.

Bronze Plan

As defined by the ACA, this is a metal tier plan that has an actuarial value that is projected to cover 60% of typical medical costs.

Cafeteria Plans

These are benefit arrangements that are developed for businesses in the United States so that they can offer a variety of employee benefits, including accident and health insurance, on a pretax basis. Employees can choose from a menu of benefits, thereby tailoring the benefits package to their specific needs.

Calendar Year Deductible

This deductible is also referred to as a cumulative or all-cause deductible. With this deductible, the insured must meet the deductible amount only once during the benefit period.

Carryover Provision

This provision applies when an insured has not yet met his deductible in the final three months of the policy year. The provision allows an insured to apply claims in the final three months to the following year's deductible.

Certificate of Creditable Coverage

Group plans must provide certificates of creditable coverage to affirm that coverage when participants change employers.

Co-Insurance

This is also referred to as a person's "percentage participation" in an insurance policy and is a characteristic of major medical insurance. In health insurance, co-insurance identifies the percentage of covered expenses that are shared by the insured and the amount paid by the insurer.

Common Accident or Sickness Deductible

Some major medical plans include provisions which state that only one deductible must be satisfied when two or more insureds from the same family are injured in the same accident or suffer concurrently from the same illness.

Comprehensive Major Medical Insurance

This insurance combines coverage for basic expenses and major medical insurance within one policy.

Consumer Driven Health Plan

This is a plan that has three elements—(1) It has a tax-advantaged (pre-tax) savings vehicle, (2) it has a corridor or integrated deductible, and (3) it has a qualifying high deductible insurance policy.

Conversion Factor (Relative Value Scale)

This is the stated unit valuation (dollars-per-unit) which is used to determine the benefit for each procedure that's covered by a basic surgical policy.

Corridor Deductible

Insurers use a corridor deductible when a major medical contract supplements a basic "first-dollar" coverage contract.

Corridor Deductible

The insurance carrier applies the corridor deductible once the basic coverage has been exhausted.

Cumulative or All-Cause Deductible

See Calendar Year Deductible.

Deductible

This is the amount of an expense or loss that's paid by the insured before a health insurance policy begins to pay benefits.

Essential Health Benefits (EHBs)

These are a list of 10 coverages that do not have a lifetime or annual cap. The ACA defined these as necessary benefits for all major medical insurance.

Family Deductible

This deductible limits the total amount that's due from the entire covered family, regardless of whether individual deductibles are met. In most cases, the family deductible equals two or three times the individual deductible.

Flat Deductible (Initial Deductible)

This is a stated dollar amount that applies to a covered loss (e.g., $500). This deductible can be applied per occurrence, per insured, or per year.

Flexible Spending Accounts (FSAs)

These are tax-advantaged accounts that are set up through an employer's cafeteria plan. FSAs allow employees to set aside a portion of their earnings for qualified medical expenses on a 'use it or lose it' basis.

Flexible Spending Arrangement

This is the official name for an FSA; however, 'flexible spending account' is more commonly used.

First Dollar Coverage

This refers to insurance policies that pay for claims without imposing a deductible.

Gold Plan

As defined by the ACA, this is a metal tier plan that has an actuarial value that is projected to cover 80% of typical medical costs.

Health Insurance Exchange

This is a federal website that allows consumers to check their eligibility for government assistance programs. The site allows consumers to compare health insurance plans and also purchase health insurance.

Health Insurance Portability and Accountability Act (HIPAA)

This is a federal statute that provides employees with the ability to change jobs while continuing health insurance coverage for themselves and their families. The legislation limits pre-existing condition exclusions by treating all group insurance as a single coverage pool for eligibility.

Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule

This rule provides federal protections for an individual's health information and gives patients various rights with respect to that information.

Health Reimbursement Accounts (HRAs)

These are employer-funded and employer-established, tax-advantaged health benefit plans that reimburse employees for out-of-pocket medical expenses and individual health insurance premiums. These plans are not portable.

Health Reimbursement Arrangements

See Health Reimbursement Accounts.

Health Savings Accounts (HSAs)

These are tax-advantaged medical savings accounts that are available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). The funds that are contributed to an account are not subject to federal income tax at the time of deposit or when used for qualified medical expenses.

High Deductible Health Plan (HDHP)

This is a major medical policy that makes the cost of basic expenses (other than preventative care that's mandated by the ACA) the insured's responsibility. At the same time, the policy also establishes an annual limit on out-of-pocket costs.

Impairment Rider

Insurers add an impairment rider to health insurance policies that permanently exclude claims related to a health-related condition that's disclosed by the insured during the application process.

Initial Deductible

See Flat Deductible.

Inside Limits

See Internal Limits.

Integrated Deductible

Insurers use this type of deductible when a major medical plan is packaged with basic coverages. Amounts that are paid by the basic policy apply to the major medical deductible.

Internal Limits (Inside Limits)

These are annual limits on coverage for specific, covered services.

Look-Back Period

This is the defined period immediately preceding the beginning of coverage during which an insurer can identify a health concern as a pre-existing condition that's subject to the terms of applicable policy provisions.

Major Medical (Expense) Insurance

These contracts offer high maximum benefits and broad coverage under one policy. The Affordable Care Act further defined major medical policies that provide a variety of benefits defined as Minimum Essential Coverage.

Major Medical Expense Policy

This is a health insurance policy that provides broad coverage and high benefits for hospitalization, surgery, and physician services. The policy is characterized by cost-sharing in the form of deductibles and co-insurance. Major medical plans meet the ACA's minimum essential coverage requirements.

Medical Savings Accounts (MSAs)

These accounts are created to help the employees of small employers (as well as self-employed individuals) pay for their medical care expenses. MSAs are tax-free accounts that are set up with financial institutions, such as banks and insurance companies. Qualified medical savings accounts are available for employers that have no more than 50 employees.

Metal Tiers for Major Medical Insurance

The ACA requires health insurers to offer plans within health insurance exchanges that conform to the distinct levels of coverage that have been created by the ACA. The four defined "metal tiers" are Bronze, Silver, Gold, and Platinum.

Non-Scheduled Plans

See Usual, Customary, and Reasonable.

Out-of-Pocket Maximum

This is the most that an insured must pay for covered services in a single plan year.

Patient Protection and Affordable Care Act (PPACA)

See the Affordable Care Act (ACA).

Per-Cause (or Occurrence) Deductible

With this deductible, the insured must satisfy a deductible for each accident or illness.

Platinum Plan

As defined by the ACA, this metal tier plan has an actuarial value that's projected to cover 90% of typical medical costs.

Portability

This describes the ability to retain a group benefit after a person leaves the original group for other employment.

Pre-Existing Condition

This is a health condition that exists prior to the inception of insurance coverage. Federal and state laws limit this definition to conditions that manifest within a limited period prior to the start of coverage.

Pre-Existing Condition Exclusion

The ACA disallows pre-existing condition exclusions in qualifying policies, but they still exist in other contracts. These exclusions tend to be temporary exclusions for undisclosed conditions that are treated during the look-back period.

Relative Value (Approach) Scale

This approach is used in basic surgical insurance to establish benefits for covered procedures. The scale establishes the value of a single unit and then assigns a number of units to each covered surgery.

Silver Plan

As defined by the ACA, this metal tier plan has an actuarial value that's projected to cover 70% of typical medical costs.

Stop-Loss

Traditionally, this is the maximum amount of co-insurance that's paid by an insured for one year. Today, the term "stop-loss" is often used interchangeably with the phrase "out-of-pocket maximum."

Supplemental Major Medical Policies

These policies are used to supplement the coverage that's payable under a basic medical expense policy. Typically, there's a deductible between the basic policy limit and the major medical benefits.

Tiered Plans

See Metal Tier Plans.

Usual, Customary, and Reasonable (UCR) (Non-Scheduled Plans)

Plans that use this approach compare expenses to what's deemed reasonable and customary for the geographical region of the country in which the service was performed.