It's important for clients to understand these basic health insurance terms.
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Health Insurance Terms To Know

Actuarial value

The actuarial value of a plan is the overall average percentage of costs an insurance plan will pay for covered benefits.

Balance billing

Balance billing refers to the practice of billing a patient for the difference between the provider's charge for a medical service and the amount negotiated by the patient's insurer for that service.

Bundled payments
In healthcare, bundled payments are a reform of the traditional fee-for-service reimbursement model. When a third-party payer, such as an insurance company or Medicare, adopts a bundled payment model, a group of doctors and hospitals together receives a lump sum to cover all of the services associated with the treatment of a condition.

Catastrophic health plans
Catastrophic health plans offer the lowest level of insurance coverage and are intended to protect the insured from worst-case scenarios.

Coinsurance is the percentage of cost the insured must pay for a covered service after they have met their deductible.

Copayments are fixed amounts paid for a covered medical service once the insured has met their deductible.

Cost sharing
Cost sharing is an insured individual's costs for covered benefits during their policy period.

A deductible refers to the amount an insured person must pay for healthcare services before his or her insurance plan starts to pay.

Fee for service
In a fee-for-service health insurance system, healthcare providers are paid for each distinct service they perform.

Flexible spending account (FSA)
Flexible spending accounts are accounts used to pay for out-of-pocket health costs.

Group health plan
A group health plan is a policy purchased by an employer from an insurance company and offered to their employees.

Health maintenance organization (HMO)
Health maintenance organizations are groups of affiliated insurers and medical providers. Typically, an HMO insurance plan will limit coverage to providers that are members of or contract with the HMO, not covering out-of-network services.

​Health reimbursement account (HRA)
Health reimbursement accounts are accounts owned and funded by employers as part of their group health plans to reimburse employee medical expenses.

Health savings accounts (HSA)
Health savings accounts are financial accounts that allow for tax-free deposits and withdrawals for healthcare expenses. In order to open a health savings account (HSA), an individual must first be enrolled in a high-deductible health plan and have no other comprehensive health insurance plan.

High-deductible health plan (HDHP)
High-deductible health plans are health plans with higher-than-average deductibles. The amount a deductible must reach to qualify as an HDHP is set annually by the IRS. In 2016, the threshold for HDHPs was $1,300 for an individual or $2,600 for a family.

Individual health plan
Individual health plans are insurance plans purchased by individuals or families that are not plans offered to them through their employer.

Medical loss ratio
A medical loss ratio (MLR) is the portion of premium revenue a healthcare insurance company spends on claims, medical care, and healthcare quality for its customers.

Medical underwriting
Medical underwriting refers to the process by which a health insurer evaluates whether to accept an applicant for health coverage and what premium to charge the applicant.

Out-of-pocket costs
Out-of-pocket costs encompass all expenses one may pay for healthcare services that are not covered by insurance or reimbursed.

Pay-for-performance in healthcare is a third-party reimbursement model that uses incentives to encourage providers to improve the quality and cost of care.

Pre-existing condition
A health problem that existed in a time before new health coverage begins is referred to as a pre-existing condition.

Preferred provider organization (PPO)
PPO plans are health plans that contract with medical providers to form a network of providers for the insured. The insured pay less for using providers in the network and may use out-of-network providers for an extra cost.

A premium is the price that an insured person or sponsor (such as an employer) pays regularly for an insurance plan.

Rate review
Rate review refers to the process by which a state insurance department reviews an insurance company's planned premium increases before they are applied to health plans.

Special enrollment period
Special enrollment periods are periods of time outside the regular open enrollment periods in which one may sign up for health coverage.

Value-based purchasing
In value-based purchasing, payments to providers are linked to the quality of care they provide to patients.

Source: healthcare.gov