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Glossary of Health Care Coverage Terms

A: Understanding and Getting Health Care Coverage

Affordable Care Act (ACA)  

The comprehensive health care reform law which was enacted in March 2010 (sometimes known as ACA or Patient Protection and Affordable Care Act).   

 

  • Ten Essential Health Benefits ACA-Compliant Plans Must Cover  

    • Ambulatory patient services (outpatient services)  

    • Emergency services  

    • Hospitalization  

    • Maternity and newborn care  

    • Mental health and substance use disorder services, including behavioral health treatment  

    • Prescription drugs  

    • Rehabilitative and habilitative services (those that help patients acquire, maintain, or improve skills necessary for daily functioning) and devices  

    • Laboratory services  

    • Preventive and wellness services and chronic disease management  

    • Pediatric services, including oral and vision care  

 

ACA vs Community Rated Plans  

ACA-compliant plans have premiums that vary mainly based on an enrollee's age. Other factors affecting the cost of the plan include location, tobacco use, tier category, and whether or not spouse and/or dependents are included in the coverage. In addition, ACA-compliant plans are only allowed to charge older enrollees up to three times what younger enrollees pay. 

 

Community Rating  

The premium rates are based on the health claims experienced by the “community” as a whole. This community might consist of those covered by an association, such as the members of a trade association.  

 

Health Maintenance Organization (HMO) 

A type of health insurance plan that usually limits coverage to care from providers who work for or contract with the HMO. It generally will not cover out-of-network care except in an emergency. An HMO may require members to live or work in its service area to be eligible for coverage. HMO networks tend to be much more restricted than Preferred Provider Organizations (PPOs).

 

In-Network   

Refers to use of a health care provider that has a contract with a particular health insurance plan to provide health care services to its plan members at pre-negotiated rates. 

Individual Plan  

Standalone health insurance policy that is not connected to job-based coverage. It is the only option if a person does not qualify for government sponsored health care coverage such as Medicare or Medicaid, and does not have access to affordable employer sponsored health insurance.  

 

Open Enrollment  

The annual period when individuals can obtain, renew, change, or cancel their health insurance. Missing an open enrollment period can put one at risk of losing health coverage for a full year until the next annual open enrollment period.  

 

Out-of-Network  

Refers to a health care provider who does not have a negotiated contract with the insured’s health insurance plan. If an out-of-network provider is used, health care services could cost more. 

 

Pre-Authorization or Prior Authorization  

This is also known as pre-certification. It refers to a process imposed by health insurance carriers whereby they must grant permission before the insured person receives health care services, treatments, medications, surgeries, or durable medical equipment. Failure to obtain required pre-authorization can result in the insurance company refusing to pay for these services. However, even with pre-authorization, the insurance carrier is not guaranteed to cover the cost.  

 

Pre-Existing Condition  

A health condition such as asthma, diabetes, or cancer, that was present before the date that new health coverage began. ACA-compliant plans cannot refuse to cover treatment for pre-existing condition(s) or charge more. However, individual insurance policies purchased before the ACA rules went into effect may still impose pre-existing condition exclusions.   

 

Preferred Provider Organization (PPO)  

A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. Out-of-pocket costs are lower if providers that belong to the plan’s network are used. PPO networks tend to be more extensive both geographically and within communities compared to HMOs.   

 

Referral  

A formal order from a primary care provider needed in order to see a specialist or to get certain medical services. If a referral is required by the insurance plan and the patient does not obtain one before receiving services, the plan may not pay for the services. Emergency services do not require a referral, regardless of plan type or network.    

  

Short Term Health Insurance Plans

These plans are not ACA-compliant and can exclude people with pre-existing conditions. They are offered for up to 364 days and can be renewed for up to three years. They tend to be cheaper than ACA-compliant plans.

 

Special Enrollment Period   

A time outside the yearly Open Enrollment Period when one can sign up for health insurance. Qualifications for signing up for health insurance during the Special Enrollment Period include experiencing certain life events such as losing health coverage, moving, getting married, having a baby, or adopting a child, or having a household income below a certain amount. Qualified individuals/families may enroll in Medicaid or the Children’s Health Insurance Program (CHIP) at any time.

Summary of Benefits and Coverage   

A snapshot of a health plan's costs, benefits, covered health care services, and other important details about the plan. 

ACA
HMO
Pre-Auth
ACA-Compliant
Community Rating
Open Enrollment
PPO
Pre-Existing Condition
Referral
Individual Plan

B: Employer-Provided Coverage

 

Cafeteria Plan (Section 125 Plan)  

Cafeteria plans allow employers to offer various benefits, such as health insurance, on a pre-tax basis to their employees.  

 

Consolidated Omnibus Budget Reconciliation Act (COBRA)  

COBRA gives some workers who lose employment the option to continue health insurance coverage for limited periods of time (usually 18 months). The full cost of COBRA premiums is the responsibility of the employee.   

 

Flexible Spending Account (FSA)  

A special account that the employer and employee can put money into that is used to pay for certain out-of-pocket health care costs. FSA contributions are tax-free, allowing a savings of the amount of taxes that would have been paid on this money.  There is an annual cap on the amount that can be contributed by an individual or on one’s behalf.  FSAs are considered “use it or lose it funds,” although a certain amount can be rolled over from one year to the next. Unused FSA funds are returned to the employer.

 

Group Health Plan

General term for type of health insurance offered by an employer, union, or association to its members. Opposite of individual coverage and usually requires enrollment of a certain number and/or percentage of employees of a given employer.  

 

Health Reimbursement Arrangement (HRA)  

Employer-funded spending accounts from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. The employer funds and owns the arrangement. Health Reimbursement Arrangements are sometimes called Health Reimbursement Accounts.  

 

Health Savings Account (HSA)  

A type of savings account offered by an employer or with Marketplace plans that lets the insured set aside money on a pre-tax basis to pay for qualified medical expenses. HSA funds lower a person’s overall health care costs by using untaxed HSA dollars to pay for deductibles, copayments, co-insurance, medications, and other qualified health care expenses. HSA funds generally may not be used to pay premiums. HSA accounts can be rolled over year to year and remain with the employee upon termination of employment.

HSA
Group Health Plan

C: Marketplace/kynect Plans

 

Cost Sharing Reductions (CSR)

A discount for Marketplace plans that lowers the amount of deductibles, copayments, co-insurance, and out-of-pocket maximums. CSRs are only available with Silver tier plans.

 

Household  

For Marketplace plans, the household consists of the individual, their spouse if they are married, and their tax dependents. Eligibility for savings is generally based on the income of all household members, even those who do not need insurance. 

 

kynect  

Formerly called the Kentucky Health Benefit Exchange, kynect is the online Marketplace through which one can purchase individual/family health insurance in the Commonwealth of Kentucky. Qualified households are able to receive income-based subsidies with or without cost sharing reductions to make coverage and care more affordable.    

 

kynectors 

Authorized health insurance navigators who assist consumers and small businesses with eligibility, enrollment forms, and applying for Medicaid and Qualified Health Plans.   

 

Marketplace  

Known as a health insurance exchange, and as kynect in Kentucky, the health insurance Marketplace is where non-incarcerated U.S. citizens living in the U.S., or legal residents of the U.S., can purchase ACA-compliant individual/family health insurance plans. Qualified households can receive income-based subsidies with or without cost sharing reductions to make coverage and care more affordable.     

 

Qualified Health Plans (QHPs)  

Insurance plans that are certified by the Health Insurance Marketplace, and therefore provide essential health benefits, follow established limits on cost-sharing (for deductibles, copayment, and out-of-pocket maximum amounts), and meet other requirements under the Affordable Care Act

kynect
Marketplace
QHP

D: Military/Department of Defense Coverage

 

TRICARE 

The uniformed services health care program for active-duty service members, active-duty family members, National Guard and Reserve members and their family members, retirees and retiree family members, survivors, and certain former spouses.

E: Veterans’ Health Care Coverage

 

Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA)

CHAMPVA coverage is for spouses, surviving spouses, or children of Veterans who have died in the line of duty, survived or died with service-related disabilities. 

 

VA Health Care

Available for eligible veterans who have served in the active military, naval, or air service.

F: Medicaid

Kentucky Children’s Health Insurance Program (KCHIP)

Free health insurance for children younger than 19 without health insurance. Children in families with incomes less than 213% of the federal poverty level are eligible. 

 

Medicaid  

Insurance program that provides free or low-cost health coverage to qualified individuals and families with low incomes, including children, pregnant women, older people, and people with disabilities. Many states have expanded their Medicaid programs to cover all people below certain income levels. Whether one qualifies for Medicaid coverage depends partly on whether their state has expanded its program. Medicaid benefits and program names vary somewhat between states.   

 

Medicaid Unwind  

At the start of the pandemic, Congress enacted the Families First Coronavirus Response Act, which included a requirement that Medicaid programs keep people continuously enrolled through the end of the COVID-19 public health emergency, in exchange for enhanced federal funding. As part of the Consolidated Appropriations Act, 2023, Congress ended continuous enrollment on March 31, 2023.

Medicaid

G: Medicare

Donut Hole  

The coverage gap in Medicare prescription drug coverage (Part D). This means that after a patient and their drug plan have spent a certain amount of money for covered drugs, the patient must pay all costs out-of-pocket for their prescriptions up to a yearly limit, after which their coverage resumes.    

 

Dual Eligibility 

People who are dually enrolled in both Medicare and Medicaid, also known as dually eligible individuals, fall into several eligibility categories. These individuals may either be enrolled first in Medicare and then qualify for Medicaid, or vice versa. 

 

Medicare  

Medicare is the federal health insurance program for:  

  • People who are 65 or older  

  • Certain younger people with disabilities  

  • People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)  

 

Parts of Medicare 

  • Part A  

Covers hospitals, hospice, and skilled nursing care; no charge to Medicare beneficiaries for premium, but deductibles, and co-insurance apply.  

  

  • Part B  

Covers doctors’ services, outpatient care, and preventive services; income-based premiums apply, along with an annual deductible and 20% co-insurance. 

 

  • Part C  

Also known as Medicare Advantage. Coverage is the same as Part B, and may also include dental, vision, fitness, and meals. It is provided by private insurance carriers and requires payment of Medicare Part B premium; some plans have additional premium costs. These plans are subject to restricted networks, pre-authorization requirements, and referrals for specialist care. Usually covers medications.  

  • Part D  

This is for medications only; it is administered by a private company. Subject to donut hole. Costs vary according to the plan.  

 

  • Medigap Policy

Health insurance sold by private insurance companies to fill the “gaps” in Traditional Medicare Plan coverage. Medigap policies help pay some of the health care costs that the Traditional Medicare Plan does not cover.  Eligibility requirements are the same as for Medicare Part A. Medigap covers doctors’ services and hospitalization. Medigap providers are any providers that accept Medicare. 

Medicare
Part D
Part A

H: Paying for Health Care with Insurance

 

Allowed Amount  

The negotiated amount that a health care plan has agreed that providers will be paid for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.”    

 

Co-Insurance  

A percentage amount of the allowed cost of a patient’s medical care that the patient is required to pay. For example, with an 80/20 plan, if the charge for medical services was $100, and a patient had met their deductible, of the $100 charge they would pay 20%, or $20, and their insurance would pay the remaining 80%, or $80.  

 

Co-payment  

A fixed amount that the patient may pay for office visits, pharmacy, emergency room, outpatient, or surgery visits prior to or after meeting their deductible

 

Deductible  

The annual amount that the insured pays for medical services before the insurance company will start to pay for the care that they receive. Except for certain preventive services, and those for which there is only a co-payment, commercial carriers typically will not pay for any health care services until a patient has met their deductible. Once the deductible has been met, the patient most likely will still be required to pay something for the health care services they receive until they have met their out-of-pocket maximum.   

 

Experience Rating 

This can be used to vary the cost of insurance premiums according to the age, gender, medical history, and claims experience of an individual applying for health insurance. If an individual is applying for insurance with a community rated plan, the amount that they will pay for their premiums is influenced both by the general health/claims history of the community covered by the plan, as well as the health and claims history of the individual.   

  

Explanation of Benefits (EOB) 

A statement that tells a patient and their provider what the allowable amount is for the patient’s claim. Of the allowable amount, the EOB explains what the patient owes and what the insurance company will pay, if anything. It tells the patient if what they owe is a co-payment, co-insurance, or if they are paying the entire allowable amount and how much of what they owe is applied to their deductible and out-of-pocket maximum

 

High-Deductible Health Plan (HDHP)    

A plan with a higher deductible (as defined by the IRS) than a traditional insurance plan. The monthly premium is usually lower, but the deductible and out-of-pocket maximum are typically higher compared to a non-HDHP. An HDHP can be combined with a Health Savings Account, allowing certain medical expenses to be paid with tax-free money.  

 

Out-of-Pocket Maximum (Individual and Family)  

The most that a patient can be required to pay for covered medical costs within a given plan benefit year, not including their monthly premium. This typically consists of the amount that they pay for deductibles, co-payments, and co-insurance.   

 

Premium  

The amount paid per month for an insurance policy.  

 

Premium Tax Credit  

A tax credit, or subsidy, used to lower the monthly insurance payment premium. The amount of tax credit is based on household income and is only available on insurance plans purchased on the Marketplace. As a rule, the lower one’s household income, the greater the subsidy. Subsidies do not apply to group or employer sponsored health care coverage. 

 

Universal Health Care Coverage

Also known as universal coverage. Describes a system where all persons receive health care coverage from birth to death, without respect to age, gender, employment, economic status, or other demographic variables. Exists in other high-income countries, but not in the U.S.

Coinsurance
Copay
Deductible
Out of Pocket
Premium

These and associated educational materials have been developed using our available resources. They are not intended to serve as advice or recommendations on selecting a specific type of coverage or plan. Any errors or omissions are unintentional.

 

These materials were supported by funds made available by the Kentucky Department for Public Health’s Office of Health Equity from the Centers for Disease Control and Prevention, National Center for STLT Public Health Infrastructure and Workforce, under RFA-OT21-2103.

 

The contents of these materials are those of the authors and do not necessarily represent the official position of or endorsement by the Kentucky Department for Public Health or the Centers for Disease Control and Prevention.

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