Actuarial value (AV) is the percentage of the average health care costs covered by a health insurance plan. For example, a plan with an AV of 70 percent will cover an average of 70 percent of all covered health care benefits, while patients will pay, on average, the remaining 30 percent out of pocket.
Appeal:
A request for a patient’s health plan to review or reconsider a coverage determination that results in denial of payment or of a benefit. Also see Coverage Determination.
B
Benefits:
Health care items or services covered by health plans. Examples include emergency services, hospitalization, prescription drugs, laboratory services and wellness visits.
C
Chronic Disease:
A long-lasting health condition that requires ongoing medical attention. Common chronic diseases include asthma, diabetes and HIV/AIDS.
Claim:
A request for payment for items or services submitted by a patient or provider to a health insurance plan. Also see Provider.
Coinsurance:
Coinsurance is a percentage of costs a patient is responsible for paying with his or her own money (out of pocket). Health insurance plans specify what this percentage will be for a variety of health-related services, such as a specialist visit, emergency room visit or prescription medications. Because coinsurance is a percentage of total costs, it can be difficult to estimate and plan for in advance.
Combination Therapy:
A treatment plan that includes multiple medications in a single dose to reduce the number of separate medications needed.
Combined Deductible:
A deductible – the total amount a patient must pay out of pocket annually before the health plan begins to pay – that includes both medical care and prescription medicines. This amount does not include premiums. For example, if a deductible is $1,000, the health plan won’t pay anything for most non-preventive health care until a patient pays $1,000 out of pocket. Also see Deductible.
Co-Pay:
A co-pay is a fixed dollar amount – or flat fee – a patient is responsible for paying with his or her own money (out of pocket) for certain services or medicines. Health insurance plans specify what this amount will be for a variety of health-related services, such as a doctor or specialist visit, emergency room visit or prescription medications. Co-pays are determined by health insurance plans and are often printed on health insurance cards.
Cost Sharing:
The amount insurance plans require patients to pay out of their own pockets. For example, cost sharing includes co-pays, coinsurance and deductibles. Cost sharing does not include premiums.
Cost-Sharing Reduction:
A discount that reduces the out-of-pocket costs an individual or family must pay for certain health plans purchased in the Health Insurance Marketplace, if that individual or family qualifies based on income level. Also see Cost Sharing and Health Insurance Marketplace.
Coverage Determination:
A health insurer’s decision to cover or deny, in whole or part, a service or an item (such as a prescription drug).
D
Deductible:
The amount patients must pay annually with their own money (out of pocket) before a health plan will pay for most non-preventive health care expenses. This amount does not include premiums. For example, if a deductible is $1,000, the health plan won’t pay for most items or services until a patient pays $1,000 out of pocket. Sometimes plans exempt certain costs, such as some or all prescription drugs, from the deductible. In most cases, preventive services are covered with no cost sharing, even if you have not reached your deductible. The deductible typically resets annually.
Drug Class:
Medicines are grouped together into classes based on their chemical structure. For example, antineoplastics, or anticancer drugs, make up one class. A drug class is commonly referred to as a therapeutic class.
Drug List:
The list of prescription medicines covered by a health insurance plan. A non-covered medicine is not included in the list of prescriptions covered by an insurer. For non-covered drugs, patients must pay for the cost of the medicine or go through an exceptions process to get it covered. Also see Formulary or Tiers.
E
Essential Health Benefits (EHBs):
Benefits that most individual market and small group market health insurance issuers are required to cover. EHBs include items and services within the following 10 categories: outpatient physician (ambulatory) services, emergency services, hospitalization, maternity and newborn care, mental health, prescription drugs, rehabilitative services, laboratory services, preventive care and pediatric services.
Excluded Service:
A health care service that a patient’s health insurance does not pay for or cover.
Exclusive Provider Organizations (EPOs):
A type of insurance plan that only provides coverage for in-network providers, but does not require patients to get a referral for specialist visits. Coverage for care outside of the network is typically only in emergencies.
External Review:
An independent, third-party review of a health plan’s decision to deny coverage for or payment of a service. The review will either uphold the decision or reverse it, and the insurer is required to accept the reviewer’s decision. Also see Appeal.
F
Fail First:
Health insurers or plans may require patients to try certain medicines before allowing a patient to get the medicine his or her doctor originally prescribed. This is sometimes called step therapy. Also see Prior Authorization and Step Therapy.
Fee-for-Service:
A payment method where providers are paid separately for each service performed. Also see Provider.
Formulary:
The list of prescription medicines covered by a health insurance plan. A non-covered medicine is not included in the list of prescription drugs covered by an insurer. For non-covered medicines, patients must pay for the cost of the medicine or go through an exceptions process to get it covered. Also see Drug List or Tiers.
Formulary Exceptions Process:
This process allows a patient or provider to submit a formal request to the health plan for coverage of a prescription drug not otherwise covered under the health plan formulary. Also see Formulary.
G
Grievance:
A complaint that an individual communicates to his or her health insurance plan. Also see Appeal.
Group Market Insurance:
Insurance plans that are provided by a group, most commonly an employer. Enrollees are typically given an option of plans to choose from, which are offered through the employer.
Guaranteed Issue (also known as Guaranteed Availability):
A requirement that health plans must permit individuals to enroll in their health plans regardless of their health status, age, gender or other factors that might predict use of health services.
H
Health Insurance Marketplace (also known as Health Insurance Exchange):
Created by the Affordable Care Act, the Marketplace is a service run by the federal government or a state where consumers can shop for and enroll in health insurance coverage. Consumers in Marketplace plans may also qualify for help paying premiums and, in some cases, cost-sharing reductions. Also see Cost-Sharing Reduction.
Health Maintenance Organizations (HMOs):
A type of health insurance plan that typically only provides coverage for in-network providers, and generally does not cover out-of-network care except in an emergency. Patients typically need to go through a primary care physician to get a referral for specialist visits.
High-Deductible Health Plan (HDHP):
A health insurance plan with higher deductibles and typically lower premiums than traditional health insurance plans. HDHPs that meet certain tax rules may be combined with a health savings account where medical expenses can be paid for with pre-tax dollars.
I
Individual Market Insurance:
Also known as the non-group market. Health plans purchased directly by individuals or families and not connected to a job. Individual market health insurance may be purchased either inside or outside of a Health Insurance Marketplace. Also see Health Insurance Marketplace.
M
Managed Care:
A payment method where a health plan pays providers a capitated (set payment) rate per patient covered by the plan.
Maximum Out of Pocket:
The maximum amount an individual or family must pay out of pocket before the health plan covers all costs. Under current requirements, most group health plans and health insurance issuers must count all out-of-pocket costs for essential health benefits toward the annual maximum out-of-pocket limit. The maximum out-of-pocket limit is set on an annual basis for individuals and families and includes deductibles, coinsurance, and co-payments, but excludes spending on premiums, out-of-network cost sharing, or spending for non-essential health benefits. Also see Essential Health Benefits and Cost Sharing.
Medicaid:
An insurance program for low-income individuals and individuals meeting certain disability or medical condition requirements funded through a federal-state partnership. Medicaid covers many benefits including inpatient care, professional services, medicines, and long-term care. Medicaid is provided through a state-administered model and a privately managed model (known as Medicaid Managed Care).
Medicare:
A federally funded insurance program for individuals aged 65 and older or with certain disabilities and medical conditions. Medicare can cover many benefits, including inpatient care (Medicare Part A), outpatient services (Part B) and medicines (Part D). Medicare is provided through a federally administered model (known as Traditional Medicare) and a privately managed model (known at Part C, or Medicare Advantage).
N
Network:
A network includes the facilities, providers and suppliers that a health insurer or plan has contracted with to provide health care services to patients enrolled in their plans.
Non-Medical Switching:
A health insurer may require patients to switch to another medicine, even if their current medicine is working. Insurers do this by changing the medicines covered on their formulary or by making it difficult for a patient to continue taking his or her medicine. Also see Formulary.
O
Open Enrollment Period:
Every year, health plans have a designated amount of time when consumers can make changes to their coverage for the following year. Employers set open enrollment periods for their employees, and the federal government or states set open enrollment periods for non-group health insurance coverage (such as individual market or Medicare coverage). Remember that the open enrollment period is the time to make changes to and reenroll in coverage.
Out-of-Pocket Cost:
An expense for medical care that a patient is responsible for paying with his or her own money and is not reimbursed by insurance. Out-of-pocket costs can include deductibles, coinsurance and co-payments for services.
P
Preauthorization:
For some health care services, treatment plans or prescriptions, a health care plan may require that the services or treatments be deemed medically necessary. In this instance, a health insurer would grant preauthorization before a patient receives services, but this isn’t a guarantee the costs will be covered. Also see Prior Authorization.
Pre-Existing Condition:
A health condition a patient had before the date their health coverage started.
Preferred Provider Organizations (PPOs):
A type of health insurance plan that offers lower cost sharing for in-network providers and higher out-of-pocket costs for doctors and hospitals outside of the network. In addition to cost sharing, when patients receive care from an out-of-network provider they may be subject to additional medical bills by those providers.
Premium:
The amount paid for health insurance coverage, usually paid monthly, quarterly or yearly. Premium payments vary based on the type of coverage and cost sharing a plan requires. Premiums do not count toward a deductible or toward the maximum out-of-pocket limit.
Prescription Drug Coverage:
Coverage under a health plan of medicines that require a prescription (coverage may include restrictions on access to specific medications). See Step Therapy and Prior Authorization.
Prior Authorization (sometimes called preauthorization):
An extra step that some health plans may require before a service or prescription is covered. This step requires getting permission from your plan before a service or a prescription drug is covered. Also see Preauthorization, Step Therapy and Fail First.
Provider:
A person or entity that provides health care services. This could be a doctor, nurse, physician’s assistant or other health care service provider. Also see Network.
S
Special Enrollment Period:
A time outside of the open enrollment period when an individual can enroll in health insurance coverage or make changes to existing coverage due to a qualifying life event (for example, losing health insurance coverage, getting married or having a baby). An individual covered under an employer-sponsored plan must provide at least a 30-day special enrollment period after a qualifying event.
Step Therapy:
Health insurers may require patients to try certain medicines before allowing a patient to get the medicine his or her doctor originally prescribed. This is sometimes called fail first. Also see Preauthorization, Prior Authorization and Fail First.
Summary of Benefits and Coverage (SBC):
Detailed information on the covered benefits, cost sharing associated with the benefits, coverage limitations and exceptions provided by health insurance issuers and group health plans to enrollees or potential enrollees.
Surprise Medical Bill:
An unexpected charge for a service provided by an out-of-network provider. Most health plans pay less to out-of-network providers than in-network providers, leading to higher-than-expected out-of-pocket costs for patients.
T
Tiers:
The list of medicines covered by a health insurance plan is often broken down into tiers – usually three or four. Lower tiers (Tier 1 or Tier 2) typically require co-payments, which are fixed dollar amounts, typically ranging from $10 to $50. Higher tiers (Tier 3 or Tier 4) are more likely to require coinsurance, which is a percentage of the cost of a medicine. This amount varies based on the cost of the medicine and, as a result, is harder to predict. Which tier a medicine falls under is included on a plan formulary. Also see Formulary or Drug List.
