Affordable Care Act (ACA)
The comprehensive health care reform law enacted in March 2010 (also known as the Patient Protection and Affordable Care Act or “Obamacare”). The law provides consumers with subsidies, or “premium tax credits," that lower costs for households with incomes between 100% and 400% of the federal poverty level.
The maximum amount a plan will pay for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.” If your provider charges more than the plan’s allowed amount, you may have to pay the difference.
Beyond health insurance benefits, many employers offer ancillary benefits in order to deliver a more robust benefits package. Employers either pay for or contribute to the cost of ancillary benefits. Common examples of ancillary benefits include dental and vision insurance.
Annual Deductible Combined
Usually in Health Savings Account (HSA) eligible plans, the total amount that family members on a plan must pay out-of-pocket for health care or prescription drugs before the health plan begins to pay.
A cap on the benefits your insurance company will pay in a year while you're enrolled in a particular health insurance plan. After an annual limit is reached, you must pay all associated health care costs for the rest of the year. Annual limits are sometimes placed on particular services such as prescriptions or hospitalizations.
A request for your health insurance company to review a decision that denies a benefit or payment. If your health plan refuses to pay a claim, you have the right to appeal the decision.
When a provider bills you for the difference between their charge and the allowed amount by your insurance. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.
Basic AD&D Insurance
Employers often provide an amount of accidental death and dismemberment insurance coverage for free as part of the benefits package. The policy pays benefits to the beneficiary if the cause of death is an accident, or pays benefits to you if you suffer a severe injury. This is a limited form of life insurance.
Basic Life Insurance
Employers typically provide a limited amount of life insurance coverage to employees at no cost. The insurance policy pays benefits to the beneficiary when the insured person dies from accidental or natural causes.
Designated by the insured individual, a beneficiary is the person, institution, or charity entitled to receive benefits in the event of an employee's death.
Employee benefits are defined as indirect, non-cash, or cash compensation paid to an employee above and beyond regular salary or wages. Employee benefits such as health insurance (medical, dental, vision), life insurance, paid vacation, and workplace perks are common offerings used to recruit and retain employees.
A formal request to an insurance company asking for a payment based on the terms of a certain health insurance policy – usually made by the healthcare provider based on services you use.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 is a federal law passed to allow the temporary continuation of group health insurance after losing coverage through an employer.
When a claim is made, this is the percentage of costs you are responsible for. Typically, coinsurance applies after you meet your deductible. For example, you may pay 20% of an allowed expense while your health insurance plan pays 80%.
Consumer-Driven Health Plan (CDHP)
Broadly, CDHP can refer to any of a wide range of health insurance benefit design strategies that encourage more responsibility for and involvement in health care decisionmaking by consumers. More specifically, a CDHP can refer to a specific set of health insurance arrangements in which individuals have a high-deductible health plan coupled with a personal health account (PHA) that they can use to pay health care expenses not covered by insurance. A High-Deductible Health Plan (HDHP) is one example of a Consumer-Driven Health Plan.
Contributions are how much an employee and the employer contribute towards insurance premiums and savings accounts. They can be pre-tax or post-tax.
A fixed payment set by your insurance provider to cover costs of certain medical services.
These are health care expenses that your health insurance plan will cover.
A fixed amount of money you must pay before an insurance company will start to contribute towards qualified medical bills (copays, premiums, and noncovered expenses don't count towards a deductible). See How does a deductible work?
A qualified individual whose expenses can be claimed by someone else’s insurance policy. Generally, a child or other financially dependent person living with you.
The official list of prescriptions covered by your health insurance. It's also referred to as a Prescription Drug List (PDL).
The maximum amount a plan will pay for a covered health care service.
The Employee Retirement Income Security Act (ERISA) of 1974 is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans.
Evidence of Insurability (EOI)
EOI is an application process in which you provide information on the condition of your health or your dependent’s health in order to be considered for certain types of insurance coverage. The completed EOI application requires review and approval by the carrier before coverage becomes effective. Most group life policies offer a certain amount of guaranteed coverage, but EOI may be required if you apply for a higher amount.
Exclusive Provider Organization (EPO)
EPO health plans provide network only coverage and have the most limited group of physicians and hospitals to choose from. However, they combine the flexibility of PPOs with the cost savings of HMOs. Under EPO plans, you don’t need to choose a primary care physician and don’t need referrals to see specialists. EPOs don’t cover costs outside of the network unless it’s an emergency – if you go to a doctor or hospital out of network, you will pay all costs.
Explanation of Benefits (EOB)
A written explanation of how an insurance company processed your claim. It contains detailed information of what was covered or denied, how much applied to your deductible, copays, etc. The EOB tells you how much you owe towards a claim.
Flexible Spending Account (FSA)
Your employer may offer a Flexibile Spending Account (FSA). An FSA can be used to pay for qualified out-of-pocket health care costs. Because money you contribute to your FSA isn't taxed, you can reduce your overall healthcare expenses (you'll save an amount equal to the taxes you would have paid on the money you put into the account). Typically, you must use all money in an FSA within your employer's plan year. Some employers offer a 2.5 month grace period or allow you to rollover up to $500.
A drug formulary is the official list of prescriptions covered by your health insurance. It is also referred to as a Prescription Drug List (PDL).
Guaranteed Issue (GI)
This is the amount of life insurance available to an employee without having to provide Evidence of Insurability (EOI), also known as the proof of good health.
Health Management Organization (HMO)
HMO healthcare plans provide network only coverage and require the selection of a primary care physician through which all of your health care services filter. This network requires a referral from your primary physician to see a specialist except in an emergency. An exception to this rule is that women are not required to have referrals to visit an OB/GYN for routine services. Advantages of HMOs are less paperwork, lower costs, and more coordination between providers.
Health Plan Categories (Platinum, Gold, Silver, Bronze)
Levels of plans in the Health Insurance Marketplace: Bronze, Silver, Gold, and Platinum. Categories (sometimes called “metal levels”) are based on how you and your insurance plan split costs. Categories have nothing to do with quality of care. (“Catastrophic” plans are available to some people.)
For each plan category, you’ll pay a different percentage of total yearly costs of your care, and your insurance company will pay the rest. Total costs include premiums, deductibles, and out-of-pocket costs like copayments and coinsurance.
Health Reimbursement Arrangement (HRA)
This is an employer-owned medical savings account. When a company offers an HRA, it deposits pre-tax dollars into the account for each of its covered employees. Employees can then use this account to get reimbursed for qualified health care expenses.
Health Savings Account (HSA)
An HSA is a tax-favored, personal bank account that can be used to help pay for your current qualified medical expenses as well as save for the future. You can think of an HSA as a sort of "medical 401k". To contribute to an HSA, you must be enrolled in an HSA-qualified high-deductible health plan (HDHP).
High Deductible Health Plan (HDHP)
A health insurance plan that offsets lower monthly premium costs by requiring higher out-of-pocket limits. See High vs Low Deductible Plan
TIP: pair an HDHP with a Health Savings Account (HSA) to reduce your out-of-pocket medical expenses, save money for future medical costs, and complement your retirement savings.
A bank, credit union, insurance company, brokerage or IRS-approved organization that offers health savings accounts (HSAs). Institutions that manage HSAs are also called HSA administrators. The HSA custodian or administrator holds your HSA assets; but, as the account holder, you direct how to use them. When you open an HSA through your employer, you will likely be automatically enrolled with a particular HSA custodian. You can change your custodian, but this will impact your payroll withdrawals so be sure to check with your HR team beforehand.
The value of a benefit provided by an employer to employees, which must be treated as income. Unless specifically exempt, imputed income is taxed. It is calculated for employment-related services, and an employer includes it in the employee's Form W-2.
For example, Section 79 of the Internal Revenue Code (IRC) requires employers to calculate taxable income for employees that receive more than $50,000 in term life coverage. This means an employee who is covered by an employer for more than $50,000 must pay taxes on the "value" of the excess benefits. This is called a taxable fringe benefit.
In-network means that your health care provider (primary care physician, hospital, facility, etc.) has negotiated a contracted rate with your health insurance company. You will pay less out of pocket by sticking to providers that accept your insurance plan. See The Importance of Staying In-Network
Long-Term Disability insurance protects you should you become disabled for a prolonged period prior to retirement. LTD policies are often offered through employers as part of a standard benefits package. LTD is typically used after short-term disability insurance benefits are exhausted. The length of LTD plans varies—some may be limited to a period between 2 and 10 years, while other plans continue paying out until you reach the age of 65.
The maximum amount a plan will pay for a covered health care service. May also be called “allowed amount,” “eligible expense,” or “payment allowance.” If your provider charges more than the plan’s allowed amount, you may have to pay the difference.
An annual period when you can sign up for or change your health insurance plan or benefit program.
Out-of-network means that the health care provider does not have a contract with your health insurance company. Using an out-of-network provider typically results in higher copay and coinsurance costs. See The Importance of Staying In-Network
The amount of money you pay for medical expenses that aren't covered by your insurance (excluding monthly premiums).
This is the most you have to pay for covered medical services in a plan year. After you spend this amount on deductibles, copayments, and coinsurance, your health plan pays 100% of the cost for covered benefits. Monthly premiums are not included in this calculation.
The maximum amount a plan will pay for a covered health care service. May also be called “allowed amount,” “eligible expense,” or “negotiated rate.” If your provider charges more than the plan’s allowed amount, you may have to pay the difference.
Personal Health Account (PHA)
A Personal Health Account (PHA) allows you to manage your health care expenses in partnership with your employer. PHAs are designed to offset the cost of a high-deductible health plan, and you can think of them as basically savings accounts for your health care needs. View the types of personal health accounts:
HSA, FSA, and HRA Comparison Table
Pharmacy Benefits Manager (PBM)
The administrator of the prescription drug portion of a health insurance plan. PBMs enter into contracts with pharmacies, develop formularies (official list of medicines that can be prescribed), and process prescription drug claims. The pharmacy must be contracted with your insurance company to use your insurance benefits.
Your plan year is determined by the date your company's health plan renews. It's important to know because your annual deductible resets on the plan renewal date. A plan year doesn't necessarily align with the calendar year.
POS healthcare plans provide in-network and out-of-network coverage. They require the selection of a primary care physician who handles your referrals, but they may refer you to a specialist that is out-of-network unlike in an HMO or EPO. This difference makes it important to understand the out-of-network cost rates (coinsurance, co-pays, etc.) associated with your plan choice.
A health problem, like asthma, diabetes, or cancer, you had before the date that new health coverage starts. Health insurers can't refuse to cover treatment for your pre-existing condition or charge you more.
Also known as “tax-preferred,” "tax-advantaged," or "tax-free" – money put towards payments or accounts that is not counted as income on federal and/or state taxes. Learn more about pre-tax accounts:
HSA, FSA, and HRA Comparison Table
A health plan may require that you meet specific criteria before a medical procedure or prescription drug is covered. The process of determining coverage is known as precertification. The process may also be referred to as “preauthorization,” “prior authorization,” or “pre-admission authorization.”
Preferred Provider Organization (PPO)
A PPO plan provides in-network and out-of-network coverage. It offers the most flexibility and the largest collection of providers and hospitals. You don’t need a primary care physician and can visit any health care professional without a referral, in or out of network.
Staying in networks means lower copays and full coverage, but out of network care can still be covered for some services for a certain coinsurance cost.
Your non-refundable monthly cost of health insurance – usually paid by a combination of money contributed by employers and employees via monthly payroll deductions.
Prescription Drug List (PDL)
The official list of prescriptions covered by your health insurance. It's also referred to as a drug formulary.
Primary Care Provider (PCP)
A physician, nurse practitioner, clinical nurse specialist or physician assistant who provides, coordinates or helps a patient access a range of health care services. In insurance terms, a medical practitioner who is chosen by or assigned to a patient and both provides primary care and coordinates access to other medical services. See How to Choose a Primary Care Provider
Prior Authorization (PA)
Health plans may require prior authorization in order to cover some prescription drugs. The prescribing doctor must get this approval from your insurance carrier.
Qualified Medical Expenses (QME)
Health Savings Account (HSA) or Flexible Spending Account (FSA) funds that are used to pay for approved, or "qualified", medical expenses are not taxed. View the list of Qualified Medical Expenses
Expenses a Health Reimbursement Account (HRA) can reimburse are limited to qualified medical expenses; however, an employer may choose to be more restrictive on what the plan will reimburse.
Qualifying Life Event (QLE)
A change in circumstance – like getting married or divorced, having or adopting a baby, or losing health insurance coverage – that makes you eligible for a special enrollment period. A QLE allows you to enroll in health insurance benefits outside of the yearly open enrollment period.
The largest amount of medication your plan will cover per copayment or period of time. Also called a "supply limit".
Short-term Disability (STD)
Short-term disability insurance pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers compensation insurance). The amount of time you receive STD benefits varies between specific plans. When STD coverage ends, long-term disability (LTD) coverage typically takes effect.
Special Enrollment Period (SEP)
A qualifying life event (QLE) allows you to enroll in health insurance benefits outside of the yearly open enrollment period. Typically, you have up to 30 days after the qualifying event to enroll in coverage.
Medications used to treat complex or rare conditions that you may need to get from a specialty pharmacy.
When your health insurance plan requires you to try one or more medications before approving coverage for a different one.
Summary of Benefits and Coverage (SBC)
Insurance companies and job-based health plans must provide you with a short, plain-language Summary of Benefits and Coverage (SBC). This helps you make “apples-to-apples” comparisons when you’re looking at plans. The SBC also includes a glossary of health and medical terms and coverage examples in two common medical situations: diabetes care and childbirth.
Also known as “tax-preferred,” "pre-tax," or "tax-free" – money put towards payments or accounts that is not counted as income on federal and/or state taxes. Learn more about tax-advantaged accounts:
HSA, FSA, and HRA Comparison Table
Usual, Customary, and Reasonable (UCR)
The amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service. The UCR amount sometimes is used to determine the allowed amount for out-of-network services.
Employees may purchase additional accidental death and dismemberment (AD&D) insurance through their employers.
Voluntary benefits are products or services offered through an employer but paid for partially or solely by an employee through payroll deferral. Examples might include life, disability, critical-illness and accident insurance, as well as pet coverage, ID theft protection, legal services and financial counseling.
Voluntary Life Insurance
Employees may purchase additional life insurance for themselves, their spouses or their children through their employers in the form of voluntary insurance. Voluntary life insurance is also called supplemental life insurance (or optional life insurance). The insurer may require Evidence of Insurability (EOI).