Basic Health Insurance Terms to Know
Health insurance seems to have a language all its own. Learning the common terms and how they're applied – especially to your own policy or to a new policy that you're interested in – can help you make more informed choices about your health coverage.
ACA Minimum Essential Coverage
Affordable Care Act (ACA) Minimum Essential Coverage is the type of insurance you need to have to avoid a tax penalty under the Affordable Care Act (ACA). All health plans must cover what are known as “essential health benefits,” including:
- Ambulatory patient services
- Emergency services
- Laboratory services
- Maternity and newborn care
- Mental health and substance use disorder services including behavioral health treatment
- Pediatric services, including oral and vision care
- Prescription drugs
- Preventive and wellness services and chronic disease management
- Rehabilitative and habilitative services and devices
A benefit is a service or supply that is covered under a health insurance plan. This might include office visits, lab tests, and procedures during the course of treatment.
Coinsurance is the percentage of covered medical expenses that you are required to pay after the deductible. Let’s say your health insurance plan has a 20% coinsurance requirement (excluding additional copays). Once you have met your deductible for a $100 medical bill, you would pay $20 and the insurance company would pay $80. You might see this referred to as 80/20 coinsurance. Some plans offer 0% coinsurance, meaning you’d have no coinsurance to pay.
Often shortened to copay – it’s a set amount that you’ll pay for certain medical services or supplies at the time of service. Doctor visit copays commonly run from $35 to $50. Prescription copays often are $15 to $60 depending on the type of drug purchased.
A deductible is an amount your insurance plan will require you to pay out-of-pocket for covered expenses before the plan pays benefits. With ACA plans, a deductible will usually cover one calendar year. Short term plans have a per-term (number of coverage months you select) or per-cause (separate for each illness or injury) deductible. A higher deductible usually results in lower premiums.
An indemnity plan is a health insurance plan that reimburses the covered person for incurred medical expenses. Indemnity plans often include a deductible that must be satisfied before claims can be paid. Covered persons can usually see any qualified provider without a change in benefits. Indemnity plans are sometimes called fee-for-service plans.
Health insurance marketplaces, or "exchanges," are a way for people to shop for and buy health insurance, which may be referred to as a health plan. Each marketplace is divided between individual (for families and individuals) and SHOP (health plans for small employers) marketplaces.
A network is a group of physicians, hospitals, and other health care providers that have agreed to provide medical services at pre-negotiated rates.
Open Enrollment Period
The open enrollment period refers to the period of time (usually once per calendar year) when people can freely apply for a health care plan or change their benefit selections.
Premium is the amount paid for health insurance coverage for a specific period of time.
Special Enrollment Period
A special enrollment period refers to the period of time (usually 60 days) when people become eligible to apply for a health care plan or change their benefit selections due to experiencing a qualifying event, such as job loss, having a baby, or being disqualified from Medicaid.
Underwriting is the process the health insurance company uses to review an application to determine the insurability of the applicant(s). ACA plans are guarantee issue and do not require underwriting.
Waiting period is a time period after you start a health insurance plan when coverage may not be available for some medical conditions.