Curious about what some of these terms mean? Just ready to wonk out? We’ve put together a list of definitions for you here.
- Actuarial Value
Actuarial values are estimates of how much the insurance plan will pay of an “average” person’s medical expenses. For example, if an “average” person expects to have $10,000 in medical expenses, a plan that pays $7,500 of those expenses (after co-pays and deductibles) has an actuarial value of 75 percent. Note it is the average amount of coverage, not how much any given individual/family would pay. The plans that the health insurance exchanges will offer will be ranked by their actuarial value, as designated by the health care reform legislation signed in March 2010.
- Annual and Lifetime Limits and Caps
Many health insurance plans only cover costs up to a certain dollar amount, for a particular type of service, in a particular year, or over a beneficiary’s lifetime. For plan years beginning after September 2010, insurers will be prohibited from setting a maximum amount of money that the plan will pay over the beneficiary’s lifetime. This is a big change; currently 70 percent of large employers offer health plans with lifetime limits. Also for plan years beginning after September 2010, employers will no longer be allowed to implement “unreasonable” annual limits. The definition of “unreasonable” will be determined by the Secretary of Health and Human Services. In 2014, the annual limits will be completely prohibited. These “limits” are also commonly referred to as “caps.”
Plans that offer coverage for only high-cost expenses are called catastrophic plans, because they only provide benefits in the event of a medical catastrophe, or when medical costs exceed a very high deductible. Starting in 2014, Americans under age 30 – or those for whom premiums would exceed 8 percent of income – are the only ones who purchase special catastrophic-only coverage to comply with the individual mandate. Because of the limited benefits offered under catastrophic coverage, the premiums will cost slightly less each month; however, these premiums savings may be offset by up to $5,950 in potential pre-deductible out-of-pocket medical expenses.
The Congressional Budget Office is an independent agency of the federal government that provides Congress with economic data and cost estimates on proposed legislation. The CBO was important during the health care reform debate because its estimates are considered unbiased.
The Centers for Medicare and Medicaid Services is part of the US Department of Health and Human Services. It is responsible for the administration of Medicare and Medicaid programs, and will play an important role as Medicaid is expanded and Medicare payments are altered from 2010-2014.
A co-pay is a small, fixed amount of the bill that a patient with health insurance is responsible to pay at each doctor’s visit or when filling a prescription. On most health insurance plans, co-pays range from $10-$25. Co-pays, along with coinsurance, are considered part of a insurance consumer’s “out-of-pocket” expenses.
COBRA (Congressional Omnibus Budget Reconciliation Act), a law passed in 1985, requires employers to allow employees and their dependents who lose their health insurance coverage to buy an extension of coverage. These extended health benefits themselves are referred to as COBRA and are generally very expensive. In 2009, President Obama included a subsidy for COBRA premiums of up to 65 percent as part of the Stimulus bill. The original deadline for eligibility was December 31, 2009, but with unemployment still over 10 percent Congress extended AND expanded the subsidy before the year ended: the subsidy was expanded for an additional six months for a total of fifteen and would apply retroactively meaning those that already exhausted their nine months could receive a benefit or credit if they already began paying more or the premium or have the subsidy automatically increased if not; the extension of the subsidy pushed back the eligibility deadline to the end of February. It was extended again in March and in April meaning workers laid off between March 1 and May 31 would be eligible. Congress is currently working through whether to include a further extension as part of the upcoming jobs bill.
Coinsurance is a type of cost-sharing in which the insurance company pays for a percentage of the total cost of medical treatment, and the patient pays the rest. Often, an insurance plan will designate certain providers with a lower rate of co-insurance than others. When seeing a group of providers means that the patient pays less, then those providers are often referred to as “in-network.” The rate of coinsurance often varies within an insurance plan depending on the type of medical services in question. Under health reform legislation, coinsurance will be prohibited for recommended preventive benefits, such as immunizations, starting for new health plans after September 23, 2010.
- Community Health Centers
Community health centers are community-based organizations that provide comprehensive primary care and preventive care, including health, oral, and mental health/substance abuse services to persons of all ages, regardless of their ability to pay. Community health centers charge for services on a community board-approved sliding-fee scale that is based on patients’ family income and size. Most community health center patients are low incomes, and many, but not all, are uninsured. The Department of Health and Human Services provides support to some community health centers
The amount that someone who buys health insurance must pay for medical services before the insurance company will start picking up the costs. Generally, plans with higher deductibles have lower monthly premiums. Plans targeted at young people, such as the catastrophic coverage plans in the 2010 Health Reform legislation, often have very high deductibles.
Dependents are typically children or spouses of insured individuals. When individuals or employees buy health insurance, they often have the option to buy a plan that provides coverage for their spouse, children or other individuals under their care. Children and others under their care are generally called dependents, but the exact definition of who qualifies as a dependent varies in each state. Under the 2010 health reform legislation, the US Department of Health and Human Services issued regulations about who qualifies as a dependent for purposes of purchasing health insurance. In short, insurance companies that provide dependent coverage for children must provide that coverage until the children reach 26 years of age, and can no longer discriminate based on financial dependency, student status, or residency. To learn more about these regulations, visi our summary.
- Doughnut hole
The “doughnut hole” is a coverage gap in the Prescription Drug benefit of Medicare (Part D), the public insurance program for seniors. Before health reform, if a Medicare recipient’s drug costs were less than $2,700, then Medicare covered most of the costs, and if they were more than $6,134, then Medicare covered most of the cost. However, seniors with medication expenses somewhere in between $2,700 and $6,134 were responsible for those bills. Beginning this year, any Medicare beneficiary who crosses into the doughnut hole will receive a $250 refund check to help pay for their drugs. Then, starting in January, patients in the coverage gap will get a 50 percent discount on brand-name drugs. Beginning in 2013, the government will provide gradually increasing subsidies that fully close the doughnut hole over the next ten years to cover almost the full cost of prescription drugs for seniors.
- Employer-Sponsored Insurance
Most Americans currently purchase their health insurance coverage through their employer (ESI) –about 159 million non-elderly Americans were covered this way in 2009. Employer-sponsored health coverage is usually cheaper than buying non-group coverage because the employer pays for part of the premium, and because firms with many employees can negotiate with insurance companies. However, young adult workers were half as likely to be covered by their employer as older workers –35 percent versus 62 percent–in 2008. This difference occurs because young adults workers are more likely be unemployed, hold part-time jobs, or work for businesses with few employees that do not offer ESI.
- Enrollment Period
The Enrollment Period is the period of time during which a consumer is allowed to enroll in a group health insurance plan, and those times vary depending on the insurance plan. The new dependent coverage regulations clarify that insurance companies must provide at least a 30-day open enrollment period for eligible dependents to join. The regulations also require this opportunity to enroll must begin by the beginning in the first plan year after September 2010. It is important that young adults and their families pay attention to this open enrollment period because, if missed, they might have to wait until the next standard open enrollment period in order to get coverage.
Health insurance exchanges will be the new marketplaces that states will set up so that people can buy health insurance if they do not have health insurance through their employers. These exchanges are particularly important because they will offer a single place where consumers can learn about and compare health plans. They will also help ensure that insurance plans meet the new laws’ quality controls. The state-based exchanges will open in 2014. Americans with incomes between 100 percent and 400 percent of the Federal Poverty Line may be eligible for discounts on the insurance they buy through the exchanges.
- Exclusion from gross income
Currently, employers can provide health insurance benefits to their employees without having to pay any taxes on them. That means they are excluded from the total taxable income that is declared on our taxes. Before federal health reform, the portion of a health insurance premium that was used to pay for coverage for adult children was not allowed to be non-taxable. Beginning in September, both employers and employees can cover their adult children without paying taxes on their payments.
The Federal Medical Assistance Percentages (FMAPs) are used in determining the amount of Federal matching funds for State expenditures for assistance payments for certain social services, including Medicaid. The FMAP rates will increase (i.e., a larger percentage of federal dollars will be spent) to help states pay for the new expansions in Medicaid that begin in 2014. In the short term, President Obama has asked Congress for earlier FMAP aid for states. However, it is unclear whether Congress will appropriate those funds.
- Grandfathered Plans
Policies that were issued prior to March 23, 2010, are considered “grandfathered” plans. Some of the reforms below will not apply to grandfathered plans, such as preventive benefit coverage requirements. Beginning in September 2010, grandfathered plans will also be prohibited from kicking people off their plan due to sickness (rescissions) and be prohibited from having a maximum lifetime limit on the benefits they will pay for. Beginning in 2011, grandfathered plans will have to prove that they are spending a high percentage of their premium dollars on health care services (medical loss ratios). The legislation does not specify the amount of change a plan can undergo before it is no longer considered a grandfathered plan and is subjected to those provisions affecting new plans. The Secretary of HHS will have to address this in her regulations.
- Health Insurance Subsidy (tax credit)
Beginning in 2014, all Americans under 133 percent of the federal poverty line will be eligible for Medicaid. That year, Americans with incomes up to 400 percent of the federal poverty line – for an individual that is about $44,000 a year – will qualify for some level of subsidy. Subsidies would be provided on a sliding scale, with those who make less getting a bigger boost and those nearer the top getting a smaller one. These subsidies must be used to buy insurance plans in their state’s exchange. However, the subsidy will be based on the income reported on taxes for the prior year, which might be a problem for young adults with incomes that are less stable. For an estimate on whether you may qualify, check out this calculator.
HHS or Health and Human Services is one of the United States federal executive departments, the administrative arms of the President. The Secretary of HHS serves in the President’s cabinet. As their website states, the Department of HHS is “the principal agency for protecting the health of all Americans and providing essential human services, especially for those who are least able to help themselves”. Consequently, the health reform bills that passed the House and Senate in March of 2010 authorize the Secretary of HHS (currently, Kathleen Sebelius) to regulate many aspects of the implementation process.
- High Risk Pools
Originally designed, high risk pools were non-profit associations created by the states to provide insurance to residents considered medically uninsurable and who therefore struggled to buy coverage in the individual market. Operating in approximately 34 states, the high risk pools vary in eligibility, funding, cost-sharing, and more. Consequently, some do not provide adequate coverage for the persons they aimed to help. The health care reform law creates a temporary national high risk pool with $5 billion in federal money. It will also offer subsidized premiums to people who have been uninsured for at least six months and have yet-to-be-defined medical problems. It will be effective within 90 days of enactment until January 1, 2014, when discrimination against this segment of the population will be illegal
An HMO, or health maintenance organization, is a type of health insurance coverage that falls into the category of managed care (as do PPOs). In an HMO plan, the patient selects a Primary Care Physician from a network of doctors specified by the HMO. Thereafter, the Primary Care Physician provides referrals for the patient if he or she needs any specialty medical services. In most HMOs, all specialty services are covered if there is first a referral, and a provider who is part of the HMO’s network is used. Most HMOs do not require referrals or in-network providers in the case of medical emergency.
Medicaid is a federal entitlement program that was enacted in 1965 under Title XIX of the Social Security Act to provide health insurance coverage to certain low-income Americans. The program is operated on the state level, and allow for varying levels and categories of eligibility. However, the federal government provides guidelines and provides a portion of the funding based on the Federal Matching Assistance Percentages (FMAP). Before the new health care law, those federal guidelines covered pregnant women making less than 133 percent of the poverty level, their infant children, and some disabled individuals, among others. The health care reform legislation passed in March expands eligibility to everyone earning up to 133 percent of federal poverty level, beginning in 2014. The cost of this expansion will be covered almost exclusively by the federal government in the early years of expansion. The Center on Budget and Policy Priorities - wrote a policy brief here
- Medical Loss Ratio (MLR)
The percentage of premium dollars an insurance company spends on medical care, as opposed to administrative costs or profits. Beginning in January 2011, insurance plans in the large group market must have a minimum medical loss ratio of 85 percent, and those in the small group and individual market must have minimum medical loss ratios of 80 percent. If a plan does not meet the ratio, it must return the extra premium dollars to plan enrollees as a rebate. The definitions and breakdowns between medical costs and administrative costs will be determined by the Secretary of HHS.
Administered by the Centers for Medicare and Medicaid Services, Medicare is the nation’s largest health insurance program. It was created to cover people age 65 or older, some disabled under age 65, and people of all ages with End-Stage Renal Disease (permanent kidney failure treated with dialysis or a transplant). The two main parts, Part A and Part B, refer to hospital insurance and medical insurance respectively. Part C includes the Medicare Advantage Plans for people that wished to receive their coverage through private insurance companies. Part D is the prescription drug plan enacted fin 2006. The latter two parts were a major focus of the health reform that was enacted in March 2010; Medicare Advantage programs were the target of eliminating waste, fraud, and abuse because it was reported that many paid higher premiums for extra benefits and in Part D many wanted to close the “donut’ hole or gap in prescription drug coverage.
- Out-of-Pocket Expenses
These expenses include all health care costs besides premiums. This term encompasses payments such as deductibles, co-payments, and co-insurance that are not covered by insuranees.
- Out-of-Pocket Maximum
A yearly cap on the amount of money individuals are required to pay out-of-pocket for health care costs, excluding the premium cost. In the new high risk pool that begins in July 2010, the annual out-of-pocket medical costs will be capped at $5,950 for individuals and $11,900 for families.
- Pell Grants
Pell Grants, formerly called the Basic Educational Opportunity Grants (BEOGs), is a type of post-secondary, educational federal grant program sponsored by the U.S. Department of Education, named for U.S. Senator Claiborne Pell. They do not require repayment and are awarded based on “financial need” determined by the FAFSA (Free Application for Federal Student Aid). Specifically, the amount is based on four factors: the student’s expected family contribution (EFC); the cost of attendance (as determined by the institution); the student’s enrollment status (full-time or part-time); and whether the student attends for a full academic year or less. The reconciliation bill, the second piece of the health care reform legislation passed and signed by President Obama in March 2010, included a provision reforming the student loan industry that would result in an increase in the amount of Pell grants awarded. For more information see.
- Pre-Existing Conditions
A pre-existing condition refers to a medical condition for which a person received a diagnosis or treatment within a specified period of time prior to applying for insurance. Benefits for treating such illnesses or conditions can be excluded for a defined period of time by health care providers or require payment of higher premiums and out-of-pocket expenses. In 1996, Congress passed the Health Insurance Portability and Accountability Act (HIPAA) to protect individuals and families when transitioning between coverage, but pre-existing conditions remained a large focus of the recent health care debate. Under the law enacted by President Obama in March 2010, insurance carriers will no longer be able to discriminate based on pre-existing conditions starting January 1, 2014. For children, this prohibition on discrimination starts right away; temporary high-risk pool programs are intended to serve as a back stop for others before this time. Pre-existing conditions also cannot be excluded for young adults who rejoin their parent’s plan as dependents beginning in September 2010. This new pre-existing condition law is very popular, and it is one reason that a mandate was required. (If people were not mandated to buy insurance, but also couldn’t be denied for a pre existing condition, then they could wait to buy insurance until they got sick – driving everyone else’s premiums up starkly.)
The constant amount paid for health insurance on a periodic basis. The cost could be shared between employers or government and individuals. Unlike cost-sharing, premiums do not change from month-to-month based on how much a health plan is used. Due to the new health reform law, states must establish an enforcement mechanism for preventing unreasonable premium increases in 2011. Some states have already passed laws establishing that review process, and the Department of Health and Human Services is providing $250 million in grants to help states get started with the process. Beginning in 2014, premiums will no longer be allowed to vary based on gender or health status.
A rescission occurs when a person pays his or her health care premiums to a health insurance provider and then has the health insurance canceled upon getting sick. Beginning in all plan years after September 2010, insurance companies can no longer rescind policies except in cases of fraud and abuse. Unlike some reforms, this applies to both new plans and grandfathered plans.
- Reconciliation Bill
The Reconciliation bill, also referred to as the “fix-it” bill, was the piece of legislation passed by the House and the Senate after the primary health care reform bill was signed into law. The name derives from the method used to pass it. During the budget process, Congress is allowed to incorporate instructions to use reconciliation into the budget resolution. Reconciliation bills are filibuster proof, meaning 60 votes are not needed in the Senate to end debate and come to a vote (instead, debate is limited to twenty hours). To use the method, the legislation must only address budgetary affairs and according the Byrd rule, can not increase the deficit beyond ten years. With the loss of the supermajority in the Senate in January 2010 with the election of Scott Brown to Senator Ted Kennedy’s old seat, reconciliation became the tool of choice to address the differences in the Senate and House’s respective health care reform bills (passed in December and November 2009 respectively).
- Regulatory Process
After Congress passes legislation and the President signs it into law, different federal agencies are charged with the process of creating regulations that meet the criteria outlined by the newly enacted laws, overseeing the implementation process, and often enforcing those regulations. The U.S. Departments of Health and Human Services, Treasury, and Labor have been given the task of writing these regulations and ensuring a smooth transition from the previous structures and programs in place to those that should allow for more Americans to receive more adequate coverage.
Created in 1997 and administered by the U.S. Department of HHS, the State Children’s Health Insurance Plan (SCHIP) or more simply the Children’s Health Insurance Plan (CHIP), is a program that provides matching funds to states for health insurance to families with children. The states run the programs according the requirements set by CMS, but still vary widely in implementation and structure. The program has been reauthorized twice in its history, most recently in 2009 at the beginning of President Obama’s administration.
A self-insured group health plan (also called ‘self-funded’) is one in which the employer assumes the financial risk for providing health care benefits to its employees. In practical terms, self-insured employers pay for each medical cost as it is incurred instead of paying a fixed premium to an insurance carrier. In the past, self-insured plans have been exempt from state laws that expand dependent coverage. In plan years beginning after September 2010, self-insured plans must follow the federal expansion rule.
- Student Health Insurance Plans
In efforts to reduce the number of uninsured young adults, many schools are asking for proof of insurance for enrolled students and offering a coverage option for those that don’t or don’t meet certain requirements. Approximately 60 percent of all colleges currently offer student health plans. Eligibility requirements are typically less restrictive than on individual plans, but there are huge variations in the costs and benefits of these plans. The health reform law states that schools may continue to offer these plans, but does not specify if they will be categorized the same way as all other individual plans, or if insurance reforms may effect them uniquely.
- Tax Credit
See “Health Insurance Subsidy”
A plan is considered “underinsurance”, if it does not cover the medical needs of the person who buys it. Due to the large variety of health insurance plans in the market, there are some plans that leave its participants underinsured because they face out-of-pocket expenses or limits on benefits that may affect their ability to access or pay for health care services.
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- Ready to Wonk out? View our glossary to learn more.