Health Insurance Terms

Relating to the mathematics of insurance, including probabilities. Actuarial work involves analyzing data to predict with a reasonable degree of accuracy the amount of claims that will be paid. This work ensures that the risks are carefully evaluated and that the premiums charged are reasonable in relation to the benefits provided.

A document prepared as a formal means of conveying the appointed actuary’s professional conclusions and recommendations of an insurance filing. It records and communicates the methods and procedures, it assures that the parties addressed are aware of the appointed actuary’s opinion or findings, and it documents the analysis of the opinion.

Actuarial value represents the share of health care expenses the plan covers for a typical group of enrollees. The Patient Protection and Affordable Care Act (ACA) establishes various tiers of health insurance coverage. These tiers are used for three primary purposes: 1) To set the minimum amount of coverage many people must have to satisfy the requirement that they be insured or pay a federal tax penalty beginning in 2014. 2) To establish standardized levels of insurance individuals and small businesses can buy in health insurance purchasing Exchanges or in the outside market. 3) And, as benchmarks for premium and cost-sharing subsidies provided to lower and middle income people buying their own insurance in Exchanges.

Administrative expenses include expenses associated with the general administration of the business. Examples include the salaries and fringe benefits of the company president, human resource personnel, accounting, information technology, the depreciation expense for equipment and space used in administration, as well as supplies, utilities, etc.

A federal tax credit you can take in advance to lower your monthly premium for an individual health insurance plan. In Minnesota, the tax credit is available only for plans purchased through the MNsure exchange. When you apply for coverage through MNsure, you can estimate your expected income for the year. If you qualify for a premium tax credit based on your estimated income, you can use any amount of the credit in advance to lower your monthly premium. 

If at the end of the year you’ve taken more premium tax credit in advance than you are due based on your final income, you will have to pay back the excess when you file your federal tax return. If you have taken less than you qualify for, you will get the difference back.

This is the title usually given to the federal health reform passed in March 2010 and collectively refers to the provisions of the Patient Protection and Affordability Act (PPACA) and the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act).

Range of ages that determine premium amounts for a health plan.

Maximum amount on which payment is based for covered health care services. This may be called “eligible expense,” “payment allowance" or "negotiated rate." If your provider charges more than the allowed amount, you may have to pay the difference.

A request for your health insurance company to review a decision that denies a benefit or payment. You should first pursue an appeal through the health plan’s internal appeals process.  If your health plan continues to refuse to pay a claim, you have the right to appeal the decision and have it reviewed by a third party. The Minnesota Commerce Department arranges these external appeals.  (If you have an HMO plan, the Minnesota Health Department arranges the external appeal.)

When a provider bills you for the difference between the provider’s charge and the allowed amount. 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.

One of four plan categories (also known as “metal levels”) in the individual health plan market. Bronze plans usually have the lowest monthly premiums but the highest costs when you get care. They can be a good choice if you usually use few medical services and mostly want protection from very high costs if you get seriously sick or injured.

Bronze plan deductibles can be very high. This means you could have to pay thousands of dollars of health care costs yourself before your plan starts to pay its share.

All health plans in all metal levels provide free preventive services, and some plans offer other services at low or no cost before you meet your deductible.

Health plans that meet all of the requirements applicable to other Qualified Health Plans (QHPs) but that don't cover any benefits other than 3 primary care visits per year before the plan's deductible is met. The premium amount you pay each month for health care is generally lower than for other QHPs, but the out-of-pocket costs for deductibles, copayments, and coinsurance are generally higher. To qualify for a Catastrophic plan, you must be under 30 years old OR get a "hardship exemption" because the Marketplace determined that you’re unable to afford health coverage.

A request that you or your health care provider makes to the health plan to pay for a health care service provided to you. Most health plans require claims to be in writing. Health plans require claims to be on a specific standard form.

Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986.  COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. The COBRA law generally covers health plans maintained by private-sector employers with 20 or more employees, employee organizations, or state or local governments.  While COBRA does not apply to plans of employers with less than 20 employees or plans in the individual market, Minnesota law provides continuation coverage to employees of small firms and those covered under health plans in the individual market. (See Minnesota Statute §62A.146-62A.148, §62A.16-62A.17, and §62A.20-62A.21).

The percentage of costs of a covered health care service you pay (20%, for example) after you have paid your deductible. Generally speaking, plans with low monthly premiums have higher coinsurance, and plans with higher monthly premiums have lower coinsurance.

Commercial health insurance is defined as insurance that may be employer-sponsored or privately purchased. Commercial health insurance may be provided on a fee-for-service basis or through a managed care plan.

A fixed amount ($20, for example) you pay for a covered health care service after you have paid your deductible.Copayments (sometimes called "copays") can vary for different services within the same plan, like drugs, lab tests, and visits to specialists. Generally plans with lower monthly premiums have higher copayments. Plans with higher monthly premiums usually have lower copayments.

A form of financial help that help to reduce the out-of-pocket costs associated with private health insurance, such as deductibles, co-insurance and co-payments.

A dollar amount that a patient must pay for health care services each year before the insurer will begin paying claims under a policy.

The date on which the insurance policy takes effect. Health care you receive before the policy takes effect is not covered.

A managed care plan where services are covered only if you go to doctors, specialists, or hospitals in the plan’s network (except in an emergency).

One of 4 plan categories (also known as “metal levels”) in the Health Insurance Marketplace®. Bronze plans usually have the lowest monthly premiums but the highest costs when you get care. They can be a good choice if you usually use few medical services and mostly want protection from very high costs if you get seriously sick or injured.

The review of a health plan's determination that a requested or provided health care service or treatment is not or was not medically necessary by a person or entity with no affiliation or connection to the health plan. 

This term is used to refer to the Affordable Care Act as well as all the associated regulations, rules and other guidance issued by federal agencies in order to implement that Affordable Care Act.

One of four health plan categories (or “metal levels”) in the individual health plan market. Gold plans usually have higher monthly premiums but lower costs when you get care. Gold may be a good choice if you use a lot of medical services or would rather pay more up front and know that you will pay less when you get care.

A health plan that an individual was enrolled in prior to March 23, 2010 is considered a grandfathered plan under the ACA. Grandfathered plans are exempted from most changes required by the ACA. New employees may be added to group plans that are grandfathered, and new family members may be added to all grandfathered plans.

An employee welfare benefit plan that is established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement or otherwise.

A marketplace that allows individuals and small businesses to compare options for health insurance side-by-side and make an informed purchase. MNsure is the health exchange for Minnesota.

A type of managed care organization (health plan) that provides health care coverage through a network of hospitals, doctors and other health care providers. Minnesota Statute 62D govern HMOs and are under the jurisdiction of the Minnesota Department of Health.

This is a comprehensive term referring to all the legislation and all the activities by both state and federal agencies to improve the health care system. It includes:

• changes in federal law such as the Affordable Care Act,
• changes in Minnesota statutes such as the comprehensive package of reforms passed in 2008, also called “Minnesota’s Vision for a Better State of Health”
• all regulations, rules and guidance issued by both state and federal agencies to implement the various health reform laws.

A type of Health Reimbursement Arrangement that reimburses medical expenses, like monthly premiums, and requires eligible employees and dependents to have individual health insurance coverage or Medicare Parts A (Hospital Insurance) and B (Medical Insurance) or Part C (Medicare Advantage) for each month they are covered by the individual coverage HRA.

An employer can offer an individual coverage HRA instead of other job-based insurance that meets requirements for affordability and minimum value standards.

Employees and dependents with an individual coverage HRA offer qualify for premium tax credits only if the employer’s offer doesn’t meet minimum standards for affordability, and they opt out of individual coverage HRA coverage.

A health insurance plan purchased by an individual. This is different than a group plan, which is purchased by an employer or association.

A company that has a license issued by one or more states to sell insurance in those states.

A type of health insurance that is involved in the choice of medical care providers and the choice of medical treatments.  This includes HMO coverage and PPO coverage.

A health care program for people who meet certain income and other guidelines. Medicaid is paid for by federal and state dollars. In Minnesota this program is called Medical Assistance.

The percentage of health insurance premiums that are spent by the insurance company on health care services. The ACA requires that large group plans spend 85 percent of premiums on clinical services and other activities for the quality of care for enrollees. Small group and individual market plans must devote 80 percent of premiums to these purposes. Minnesota passed regulations in 1993 that initially required insurers in the small group market to meet a 75 percent medical loss ratio and individual market insurers to meet a 65 percent loss ratio.  Both medical loss ratios increased by 1 percentage point each year until 2000, when the loss ratios were 82 percent in the small group market and 72 percent in the individual market.  The loss ratios have remained at these levels since 2000. (Minnesota Statute, 62A.021)

A federal government program that provides health care coverage for all eligible individuals age 65 or older or under age 65 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). Together, Medicare Part A and B are known as Original Medicare. Benefits can also be provided through a Medicare Advantage plan (Medicare Part C).  These plans are regulated by the Center for Medicare and Medicaid Services (CMS).

Minnesota's health insurance marketplace.

A group of health care providers with an HMO or insurer. Your health plan may have a different network depending on the company that provides your coverage and the specific plan you choose.

If your plan was effective after the Affordable Care Act (ACA) was signed on March 23, 2010, or your plan existed before the ACA, but lost its grandfathered status at renewal, it is a non-grandfathered or “other” plan.

A provider who doesn’t have a contract with your health insurer or plan to provide services to you. You will pay more to see a non-preferred provider. Check your policy to see if you can go to all providers who have contracted with your health insurance or plan, or if your health insurance or plan has a “tiered” network and you must pay extra to see some providers.

The most you have to pay for covered services in a plan year. After you spend this amount on deductibles, copayments and coinsurance, your health plan pays 100% of the costs of covered benefits.

The out-of-pocket limit does not include your monthly premiums. It also does not include anything you may spend for services your plan does not cover.

The maximum out-of-pocket limit for any 2016 individual market plan is $6,850 for an individual plan and $13,700 for a family plan.

A specified period during which individuals may enroll in a health insurance plan each year. In certain situations, such as if one has had a birth, death or divorce in their family, individuals may be allowed to enroll outside of the open enrollment period.

Legislation (Public Law 111-148) signed by President Obama on March 23, 2010. One of two laws collectively referred to as the Affordable Care Act or simply as federal health reform.

One of four categories (or “metal levels”) in the individual health plan market. Platinum plans usually have the highest monthly premiums of any plan category but pay the most when you get medical care. They may work well if you expect to use a great deal of health care and would rather pay a higher premium and know nearly all other costs are covered.

Under the Affordable Care Act, health insurance companies cannot refuse to cover you or charge you more just because you have a “pre-existing condition” — that is, a health problem you had before the date that new health coverage starts. This rule went into effect for plan years beginning on or after January 1, 2014.

The periodic payment required to keep a policy in force.

A provider who has a contract with your health insurer or plan to provide services to you at a discount. Check your policy to see if you can see all preferred providers or if your health insurance or plan has a “tiered” network and you must pay extra to see some providers. 

Your health insurance or plan may have preferred providers who are also “participating” providers. Participating providers also contract with your health insurer or plan, but the discount may not be as great, and you may have to pay more.

A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers that belong to the plan’s network. You can use doctors, hospitals and providers outside of the network for an additional cost.

Covered services that are intended to prevent disease or to identify disease while it is more easily treatable. The ACA requires insurers to provide coverage for certain preventive services without deductibles, co-payments or coinsurance.

Private insurance plans include all forms of health insurance that are not funded by the government.

A doctor (M.D. – Medical Doctor or D.O. – Doctor of Osteopathic Medicine), other health care professional, or health care facility licensed, certified or accredited as required by state law.

An insurance plan that is certified to be offered on the MNsure exchange. It provides essential health benefits, follows established limits on cost-sharing (like deductibles, copayments and out-of-pocket maximum amounts) and meets other requirements under the Affordable Care Act. 

A rate is the average an insurance company charges for a defined package of health insurance plans.

Review by insurance regulators of proposed premiums and premium increases. During the rate review process, regulators examine proposed premiums to ensure that they are sufficient to pay all claims, that they are not unreasonably high in relation to the benefits being provided, and that they are not unfairly discriminatory to any individual or group of individuals.  Minnesota's health insurance rate review requirement is outlined in Minnesota Statute §62A.02 and §62A021.

A process through which insurance plans that enroll a disproportionate number of sick individuals are reimbursed for that risk by other plans who enroll a disproportionate number of healthy individuals.  The ACA requires states to conduct risk adjustment for all non-grandfathered health insurance plans.

One of four categories in the individual health plan market (sometimes called “metal levels”). Silver plans fall about in the middle: You pay moderate monthly premiums and moderate costs when you need care.

A time outside the yearly Open Enrollment Period when you can sign up for health insurance. You qualify for a Special Enrollment Period if you have had certain life events, including losing health coverage, moving, getting married, having a baby or adopting a child.

If you qualify for an SEP, you usually have up to 60 days following the event to enroll in a plan. If you miss that window, you have to wait until the next Open Enrollment Period to apply.

If you qualify for Medicaid or MinnesotaCare, you do not need to qualify for special enrollment. You can enroll in one of these programs through MNsure at any time of the year.

Job-based plans must provide a special enrollment period of at least 30 days.

An easy-to-read summary that lets you make apples-to-apples comparisons of costs and coverage between health plans. You can compare options based on price, benefits, and other features that may be important to you. You will get the Summary of Benefits and Coverage (SBC) when you shop for coverage on your own or through your job, renew or change coverage, or request an SBC from the health insurance company.

The cost associated with a health care service that is consistent with the going rate for identical or similar services within a particular geographic area. Reimbursement for out-of-network providers is often set at a percentage of the usual, customary and reasonable charge, which may differ from what the provider actually charges for a service.  Minnesota Statute §62A.61 requires disclosure of methods used by health carriers to determine usual and customary fees.

A period of time that an individual must wait either after becoming employed or submitting an application for a health insurance plan before coverage becomes effective and claims may be paid. Premiums are not collected during this period.  Effective in 2014, the ACA will limit waiting periods to 90 days.

A plan available to members of federally recognized tribes and Alaska Native Claims Settlement Act (ANCSA) Corporation shareholders whose income is between 100% and 300% of the federal poverty level and qualify for premium tax credits. People enrolled in this type of plan:

Don’t pay co-payments, deductibles, or coinsurance when getting care from an Indian health care provider or when getting essential health benefits through a Marketplace plan Don’t need a referral from an Indian health care provider when getting essential health benefits through a Marketplace plan Can get zero costs sharing with a plan at any metal level on the Marketplace Must agree to have their income verified in order to enroll