Health insurance jargon is confusing on purpose. Here's plain-English definitions for every term you'll encounter.
Cost Terms
- Premium: Monthly amount you pay to have insurance, regardless of whether you use care.
- Deductible: Amount you pay first before insurance kicks in (e.g., $2,000/year).
- Copay: Flat fee per service (e.g., $30 for primary care visit).
- Coinsurance: Your % share of costs after deductible (e.g., you pay 20%, insurance pays 80%).
- Out-of-pocket maximum (OOP max): Annual ceiling on what you pay. After hitting it, insurance covers 100%.
- Cost-sharing: Umbrella term covering deductible + copays + coinsurance.
Network Terms
- In-network: Doctors and hospitals contracted with your insurer. Cheaper.
- Out-of-network: No contract. Much higher costs — sometimes the entire bill.
- HMO: Health Maintenance Organization. Must use in-network. Need referrals.
- PPO: Preferred Provider Organization. Out-of-network covered (at higher cost). No referrals needed.
- EPO: Exclusive Provider Organization. In-network only, but no referrals.
- POS: Point of Service. Hybrid HMO/PPO.
Plan Type Terms
- ACA (Affordable Care Act): The 2010 law that created the marketplace.
- Marketplace / Exchange: Where you buy ACA-compliant insurance (HealthCare.gov).
- Bronze / Silver / Gold / Platinum: Metal tiers — measure premium vs cost-sharing balance.
- HDHP: High Deductible Health Plan. Required for HSA eligibility.
- Catastrophic: Lowest-premium plan, available under 30 or with hardship exemption.
- Short-term: Non-ACA plan. Doesn't cover pre-existing conditions.
Subsidy & Tax Terms
- Premium Tax Credit (PTC): ACA subsidy that reduces your monthly premium.
- Cost-Sharing Reduction (CSR): Extra subsidy on Silver plans for lower incomes — reduces deductibles/copays.
- FPL (Federal Poverty Level): Income benchmark used to calculate subsidies.
- MAGI (Modified Adjusted Gross Income): Your income calculated for subsidy eligibility.
- APTC: Advance Premium Tax Credit — subsidy paid in advance directly to insurer.
Drug & Rx Terms
- Formulary: List of drugs the plan covers, organized by tier.
- Tier 1–5: Drug pricing levels. Tier 1 = generic (cheapest). Tier 5 = specialty (most expensive).
- Prior Authorization: Plan must approve before covering certain drugs.
- Step therapy: Must try cheaper drug first before plan covers expensive one.
- Specialty drug: High-cost medication, usually for chronic/complex conditions.
Enrollment Terms
- Open Enrollment: Annual window (Nov 1 – Jan 15) to enroll or change plans.
- Special Enrollment Period (SEP): Window after a qualifying life event (60 days).
- Qualifying Life Event: Event that triggers SEP (job loss, marriage, baby, etc.).
- Effective Date: When coverage starts.
- Termination Date: When coverage ends.
Coverage Terms
- Essential Health Benefits: 10 categories ACA requires every plan to cover.
- Preventive Care: Annual checkups, vaccines, screenings — free on ACA plans.
- Pre-existing Condition: Health condition you had before enrolling. Cannot be excluded under ACA.
- EOB (Explanation of Benefits): Document from insurance showing what they paid. NOT a bill.
- Rescission: Insurance canceling your policy retroactively. Mostly illegal under ACA.
- Balance billing: Provider billing you for the difference between charge and insurance payment.
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