Health Care Reform Glossary

This glossary contains some of the common terms used to explain health care reform under the Affordable Care Act (ACA).

A

Actuarial justification: A process where a health plan demonstrates that plan dues are reasonable, based on benefits and costs. This is subject to limitations by state and federal law. Afordable Care Act (ACA) requires health plans to publicly disclose actuarial justifications for unreasonable dues increases.
Adjusted community rating: A method of pricing health plan dues based on the member’s age and geographic location – not their health status. ACA requires health plans to use adjusted community rating.
Affordable Care Act (ACA): Health care reform legislation signed by President Obama on March 23, 2010.
Annual limits: The dollar limits health plans place on claims that they will pay throughout a plan year. ACA prohibits restrictive annual limits for essential benefits for plan years beginning after Sept. 23, 2010.

B

Balance billing: The bill you receive from a nonparticipating provider who doesn’t accept HMSA’s payment as payment in full. You are responsible for paying this unpaid amount.

C

Children's Health Insurance Program (CHIP): Health care coverage for children in low- and moderate-income households. Like Medicaid, it is jointly funded and administered by your state and federal government. It was originally called the State Children's Health Insurance Program (SCHIP).
Community Living Assistance Services and Supports (CLASS): A new national program for purchasing long-term care insurance. The Department of Health and Human Services (HHS) will begin working on the framework for CLASS starting Jan. 1, 2011. The program will create more long-term care options for disabled people. Employees can voluntarily contribute pre-tax dollars to the fund. HHS is expected to define the benefit by October 2012. Enrollment and contributions will begin after the benefit is defined. Participants must make payroll contributions for at least five years before they can receive benefits. Employers may automatically enroll their employees and let them opt out.
Consolidated Omnibus Budget Reconciliation Act (COBRA): A 1986 federal law that entitles you and eligible dependents covered by your employer-sponsored group plan to pay for continued coverage for a specified period if your coverage ends due to a qualifying event, such as reduced work hours, loss of employment, or a change in family status.
Coinsurance: A percentage of a health care provider's charge that the member is responsible for paying.
Community rating: A method of pricing health plans that requires members to pay the same rates or dues, regardless of health status, age or other factors.
Co-op plan: A health plan that will be sold by member-owned and -operated nonprofit organizations through an exchange starting in 2014. ACA provides grants and loans to help co-op plans enter the marketplace.
Copayment: The amount you pay to help share the costs of the health care services or supplies you receive. The copayment is either a fixed percentage of the eligible charge or a fixed dollar amount and applies to most covered services.
Cost-sharing: Health care provider fees that you are responsible for paying, such as deductibles, coinsurance and copayments. ACA prohibits total cost-sharing to exceed $5,950 for an individual and $11,900 for a family. These amounts will be adjusted annually to reflect the growth of member dues.

D

Deductible: The dollar amount that you must pay for medical expenses before your plan begins paying benefits. ACA limits annual deductibles for small group policies to $2,000 for individuals and $4,000 for other policies. These amounts will be adjusted annually to reflect the growth of member dues.
Disease management: A program for members who have or are at risk for a specific chronic condition. Members receive information from health professionals to help manage their condition. This preventive approach works to decrease patients' need for medical care and improve their quality of life.

E

Employee Retirement Income Security Act (ERISA)

The federal law passed in 1974 that sets minimum standards for most voluntarily established pension and health plans to provide protection for individuals in these plans.

Essential health benefits

ACA directs the U.S. Department of Health and Human Services (HHS) to define "essential benefits." Essential benefits must include:

Ambulatory patient 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 and devices.
Laboratory services.
Preventive and wellness services and chronic disease management.
Pediatric services, including oral and vision care.

Exchange

An exchange will help individuals and small businesses compare and purchase health plans. An exchange will determine who qualifies for subsidies and make subsidy payments to health plans on behalf of individuals receiving them. They will also accept applications for other health care programs, such as Medicaid and CHIP.

External review

The review of a health care service or treatment by a person or entity with no affiliation to the health plan to determine if the service or treatment is medically necessary. ACA requires health plans to provide an external review process that meets minimum standards.

F

Formulary: A list of drugs that are covered under your drug plan.
Fully insured: When a group is fully insured, the health plan uses the group's past benefit costs or claims experience to calculate future rates. This is usually done annually. This is also known as underwritten business.

G

Grandfathered plans: Coverage provided by a health plan in which an individual was enrolled on March 23, 2010, and to which the plan has made no changes that would trigger a loss of grandfather status under federal regulations.
Group health plan: An employee welfare benefit plan established or maintained by an employer or employee organization, such as a union, that provides health plans for participants and their dependents.
Guaranteed issue: A requirement that health plans provide coverage to those who request it. ACA requires that health plans be sold on a guaranteed-issue basis beginning in 2014.
Guaranteed renewability: A requirement that health plans renew coverage, except in the case of fraud or when member dues are not paid. HIPAA requires health plans to be guaranteed renewable.

H

Health Maintenance Organization (HMO): A health care system used by plans such as HMSA’s Health Plan Hawaii. HMO plans provide coverage for a wide variety of health care services with an emphasis on preventive care. As an HMO member, you select a primary care provider (PCP) and health center from the plan's network. All care you receive must be provided or arranged by your PCP except for emergency care, HMSA's Online Care, vision exams, gynecological exams, HealthPass exams, and mental health and substance abuse treatment.
Health Savings Account (HSA): A tax-advantaged medical savings account available to taxpayers enrolled in a High-Deductible Health Plan (HDHP). The funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate into the following year. More information about HSAs can be found on the U.S. Treasury website.
High-Deductible Health Plan (HDHP): A type of health plan with higher out-of-pocket payments and lower member dues. In 2010, an HSA-qualifying HDHP must have a deductible of at least $1,200 for single coverage and $2,400 for family coverage. The plan must also limit the total amount of out-of-pocket cost sharing for covered benefits each year to $5,950 for single coverage and $11,900 for families.
High-risk pool: A state-subsidized health plan that provides coverage for individuals who cannot purchase a private health plan due to a pre-existing medical condition. ACA creates a temporary federal high-risk pool program that will be administered by states to provide coverage if you have a pre-existing condition and have been uninsured for at least six months.
Health Insurance Portability and Accountability Act of 1996 (HIPAA): A law that addresses health care portability to protect health care coverage for workers and their families when they change or lose their jobs. It is designed to reduce the administrative costs of providing and paying for health care through standardization. It includes requirements to protect the privacy of your health information.

I

Individual mandate: A provision under ACA that requires everyone who can purchase a health plan for less than 8 percent of their household income to do so or pay a tax penalty.
Individual market: Health care coverage that is offered to individuals and not through a group health plan.
Internal review: The review of a health care service or treatment to determine if it is medically necessary. ACA requires health plans to conduct an internal review if requested by a member.
Interstate compact: An agreement between two or more states to provide health care coverage to their residents. ACA provides guidelines for states to enter into interstate compacts to allow health plans to be sold in multiple states.

J

Job lock: The situation in which individuals remain in their current job because of an illness or condition that may make them unable to obtain health care coverage if they leave their job. ACA would eliminate job lock by prohibiting health plans from refusing to cover individuals due to their health status.

L

Lifetime limit: Dollar limits that a health plan will pay over the course of a member’s life. ACA prohibits lifetime limits on benefits beginning Sept. 23, 2010.
Limited benefits plan: A type of health plan that provides coverage for only certain health care services or treatments during a specified period.

M

Mandated benefit: A requirement in state or federal law that health plans provide coverage for a specific health care service.
Medicaid: A joint state and federal program that provides health care coverage to eligible low-income individuals. Eligibility (such as for children, pregnant women, or people with disabilities) and income and asset requirements vary by state. Medicaid often pays for long-term care, such as nursing home care. ACA extends eligibility for Medicaid to all individuals earning up to $29,326 for a family of four.
Medical loss ratio: The percentage of dues that a health plan spends on health care services for its members. ACA requires health plans to spend 85 percent of dues on medical care for large group plans and 80 percent on medical care for small group and individual plans.
Medicare: A federal government program that provides health care coverage for eligible individuals age 65 or older or anyone with a disability, regardless of income or assets. Eligible individuals can receive coverage for hospital services (Medicare Part A), medical services (Medicare Part B), and prescription drugs (Medicare Part D). Medicare Part A and B together are known as original Medicare. Benefits can also be provided through a Medicare Advantage plan (Medicare Part C).
Medicare Advantage: An option that Medicare beneficiaries can choose to receive most or all of their Medicare benefits. Also known as Medicare Part C. Private health plans contract with the federal government and are required to offer the same benefits as original Medicare, but may follow different rules and offer additional benefits.
Medicare supplement insurance: Private health plans that you can purchase to “fill in the gaps” to pay for out-of-pocket expenses, such as deductibles and coinsurance, that original Medicare doesn’t cover. Also known as Medigap plans.
Multi-state plan: A health plan created by ACA and overseen by the U.S. Office of Personnel Management (OPM) that will be available in every state through an exchange beginning in 2014.

O

Open enrollment period: A specified period each year when you can enroll in a health plan.
Out-of-network provider: Physicians, hospitals, and other health care providers who are not under contract with HMSA. You may be required to pay a higher portion of the costs when you seek care from an out-of-network provider.
Out-of-pocket limit: An annual limit on how much you are responsible for paying under your health plan. This limit does not apply to member dues, balance-billed charges from out-of-network providers, or services that are not covered by your plan. ACA requires out-of-pocket limits of $5,950 per individual and $11,900 per family beginning in 2014. These amounts will be adjusted annually to account for the growth of member dues.

P

Plan years

The year that is designated as the plan year in the plan document of an employment-based plan, except that if the plan document does not designate a plan year, if the plan year is not a 12-month plan year, or if there is no plan document, the plan year is:

The deductible or limit year used under the plan.
The policy year, if the plan does not impose deductibles or limits on a 12-month basis.
The sponsor’s taxable year, if the plan does not impose deductibles or limits on a 12-month basis, and either the plan is not insured or the insurance policy is not renewed on a 12-month basis.
The calendar year, in any other case.

Pre-existing condition exclusion

The period when you don’t receive health plan benefits for an illness or medical condition within a specified period of time before you can enroll in a health plan. ACA prohibits pre-existing condition exclusions for all plans beginning in January 2014.

Preferred Provider Organization (PPO)

A type of health plan that allows you to choose any health care provider. Providers within the network agree to accept HMSA’s eligible charge, minus your copayment, as payment in full. Nonparticipating providers have not agreed to accept HMSA’s eligible charge as payment in full. If you receive services from a nonparticipating provider, you owe a copayment plus the difference between the nonparticipating provider’s billed charge and HMSA’s eligible charge.

Premium

Also known as dues, it is the amount you or your employer pays to belong to a health plan.

Preventive health services

Covered services to prevent diseases or identify diseases for early treatment. ACA requires health plans to provide coverage for preventive benefits without deductibles, copayments or coinsurance.

Provider network

A group of physicians, hospitals, and other health care providers who are under contract with HMSA. HMSA negotiates payment rates with the network to provide services to its members.

Q

Qualified health plan: A health plan that is sold through an exchange. ACA requires an exchange to certify that qualified health plans meet minimum standards as required by law.

R

Rate review: A review of proposed rate increases by insurance regulators to ensure that the increases are enough to pay claims, are reasonably priced, and do not discriminate against a certain individual or group.
Reinsurance: Health plans purchased by insurers from other insurers to limit the loss from a disaster or unexpectedly high claims. ACA directs states to create temporary reinsurance programs.
Rescission: Actions taken by a health plan to retroactively cancel a member’s current health care coverage. ACA prohibits rescissions except in cases of fraud or intentional misrepresentation.
Risk adjustment: A process through which health plans that enroll a disproportionate number of sick people are reimbursed for that risk by plans that enroll a disproportionate number of healthy individuals. ACA requires states to conduct risk adjustment for all non-grandfathered health plans.
Risk corridor: A temporary provision in ACA that requires health plans whose costs are lower than anticipated to make payments into a fund that reimburses plans whose costs are higher than expected.

S

Self-insured: A company’s health plan is self-insured (or self-funded) when the employer assumes the financial risk for providing health care benefits to its employees.
Small group market: The market for health plan coverage offered to small businesses that have two to 50 employees. ACA will broaden the market to businesses that have between one and 100 employees.
Solvency: The ability of a health plan to meet its financial obligations. State insurance regulators carefully monitor the finances of health plans to make sure they remain solvent. In extreme circumstances, a state may seize control of a health plan that is in danger of becoming insolvent.

U

Underwritten: The process of using an employer group’s past claims experience to calculate its future health plan rates. This is usually done annually. These groups are also referred to as fully insured groups.
Usual, customary and reasonable charge (UCR): The cost of health care services that is consistent with the cost of similar services within a geographic area. Reimbursement for out-of-network providers is often set at a percentage of the UCR charge and may be different from the provider’s actual charge.

W

Waiting period: A period of time that you may have to wait after becoming employed or applying for a health plan before coverage becomes effective. Member dues are not collected during this period.

Source: National Association of Insurance Commissioners

This information is based on HMSA’s review of the national health care reform legislation. This overview is intended for educational purposes and should not be used as tax, legal, or compliance advice. Interpretations of the legislation vary and some reform regulations differ for particular members enrolled in certain groups. HMSA will continue to present and update information related to national health care reform as additional guidance becomes available.

Health Care Reform Glossary

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