Glossary

So many terms are being used in discussions of our health care system and the coming changes. Here, we help sort out what the terms actually mean.

Section 1115 Waiver

States can negotiate these waivers with HHS to modify their Medicaid and CHIIP programs to expand eligibility, provide services not always covered by Medicaid, or test new delivery systems that attempt to improve care while cutting or slowing the growth of spending.

Accountable Care Organization (ACO)

There is no single definition for an ACO because models are continuing evolving. Medicare has many models, and Medicaid has its own. Private payers and providers have created similar models, although they may not call them ACOs. Basically, an ACO is a group of physicians, hospitals and other providers that provides coordinated and integrated care, ideally by emphasizing primary care. ACOs are accountable for the cost and quality of care.

Actuarial equivalent

When a health plan has similar coverage to that of a standard benefit plan, the two plans are described as being actuarially equivalent because the expected costs for claims that health insurers would incur for the different plans would be the same. The two plans may not necessarily have the same premiums, cost sharing requirements or benefits.

Actuarial value

The average share of medical costs that a health plan will cover for a beneficiary population. The covered individual pays the rest. The metal tiers on the exchange reflect different actuarial values.

Advance Premium Tax Credit (APTC)

The ACA provides subsidies to some consumers who buy health insurance on the federal or state-based Marketplace exchanges through tax credits that are available when the insurance premium is due, meaning the buyer doesn’t have to wait until a tax return in the next calendar year. Consumers qualify for APTCs based on their annual household income.

Adverse selection

When more sick people—or those who have a higher risk of becoming ill—purchase health insurance than healthier people, this trend is called adverse selection because those choosing health plans created adverse risk for health insurers. When more sick or high-cost people buy insurance overwhelming the number of healthier ones in the risk pool, premiums rise. Then, healthier people may drop out, driving up premiums even more. Adverse selection can lead to what’s called a death spiral (see below) for a health insurer.

Affordable Care Act

Also known as Patient Protection and Affordable Care Act or “Obamacare,” the ACA became law on March 23, 2010. The main coverage provisions, including Medicaid expansion, the federal and state-based health insurance exchanges, and insurance premium subsidies for low- and moderate-income people to buy insurance, went into effect in 2014.

Age band

The Affordable Care Act bans insurers from charging older people more than three times as much as younger people in the small group and individual markets.

Agents and brokers

Agents and brokers are trained, state-licensed professionals who can help consumers enroll in health plans. As a general rule, agents work for a single insurance company; brokers may represent several. They can sign up to enroll people in ACA exchange plans The insurance company pays the commission, not the person signing up. Note that consumers eligible for federal subsidies can get financial assistance only through the federal and state-based insurance exchanges.

All-payer system

A health care payment system in all payers, including state and federal health programs, private insurers, employers and individuals, all pay the same rate for a given health service. Under an all payer system, health care providers can’t shift costs among payers.

All-Payer Claims Databases

APCDs collect data from all payers in a given region, including state and federal health players, health insurers, employers and individuals even though all payers are not likely to use the same payment rates. APCDs were part of a case in which the U.S. Supreme Court ruled in 2016.

Alternative payment models

Under the ACA and The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015, APMs for physicians and other providers are based on financial incentives regarding quality and cost-efficiency, not just the volume of services or length of care delivered to patients.

Annual limit

Before the ACA, many health plans had a yearly limit on what they would pay, either in total costs or for services such as prescriptions or hospitalizations. After hitting the limit, the beneficiary was required to pay all of the other costs for the rest of the year. While the ACA has deductibles and out-of-pocket costs that can be burdensome, it also ended the yearly (and lifetime) limits so that people who get a catastrophic, high-cost disease or condition don’t have to worry about hitting benefit limits.

Any willing provider

Some states require managed care organizations to accept any provider, such as a doctor or hospital, into their networks. This requirement may broaden the choice consumers have when choosing a network, but insurers say such rules undermine their efforts to control costs.

Auto-renewal

Health care plan enrollees are automatically signed up again for the next year, unless they opt out or choose a different plan. Under the ACA, auto-renewal can happen with exchange plans and in employer-sponsored health plans.

Balance billing

When a health care provider bills the patient for the difference between what the provider charges and what the insurer says is the allowed amount. Balance billing is not allowed if the care was delivered in-network and the care is a covered service.

Basic Health Plan (BHP)

Under ACA, consumers whose annual income is less than 133% of the federal poverty level would be absorbed into Medicaid, and other low (and some middle) income people would get subsidies to get health insurance on the federal or state-based Marketplace exchanges. But states offer another option, called the Basic Health Plan, to cover people with incomes between 133% and 200% percent of the federal poverty level. These consumers would have income above the Medicaid limits but still quite low. The basic plan would be offered outside of the state insurance exchange and it would include the ACA’s essential benefits, and premiums would be subsidized. The federal government pays the states 95% of what it would have paid had those consumers received subsidized insurance through the Marketplace exchanges.

Benchmarks

When hospitals, doctors or other provider groups measure quality, they do so against a benchmark, which can be a starting point or a standard. A benchmark also can be a starting point from which to measure a program’s effect on a federal or state budget.

Bending the curve

This phrase refers to efforts to change the trajectory of health care cost growth by slowing or stopping the growth.

The Birthday rule

The birthday rule dictates which health insurance company would be the primary source of insurance coverage for a newborn when both parents have health insurance coverage. The rule requires that the parent whose birthday comes first in the calendar year would cover the cost of delivering the new baby regardless of whether one parent has better health coverage for a newborn than the other. Parents consider the rule to be unfair because it prevents them from choosing which insurer would cover their health costs.

Block grant

A lump sum usually given to a state or local government for a specific health care purpose. There can be some requirements attached to the grant, but the GOP favors giving grants to the states with few strings attached to give governors flexibility in who to cover and which benefits to offer, thus changing the nature of Medicaid.

Budget-neutral

This term means that a waiver, demonstration or other program cannot cost more than whatever would have been spent without the waiver. 

Budget reconciliation

A fast-track budget procedure in Congress that requires a simple majority and cannot be filibustered, but the president can veto the budget law. The measure needs to follow arcane budgetary rules that the Senate parliamentarian rules on.

Cadillac health plan

An employee health benefit plan in which coverage exceeds a certain dollar amount. Starting in 2018, the portion above a certain annual level would be subject to a 40% excise tax. The tax was repealed in 2019.

Capitation/capitated payment

When a health care provider is paid a fixed or per capita amount for each enrolled patient, regardless of how much medical care each person actually receives.

Care coordination

The ACA encourages care coordination, so that providers work together to avoid complications, recurrences, and rehospitalizations, particularly for patients with chronic diseases such as diabetes or congestive heart failure.

Catastrophic plan

A catastrophic health plan is one with a high deductible that kicks in when medical expenses mount. The catastrophic plans in the ACA exchanges also cover preventive care and some primary care.

Centers for Medicare and Medicaid Services (CMS)

Part of the federal Department of Health and Human Services, CMS runs Medicare, Medicaid and the Children’s Health Insurance program. Formerly the Health Care Financing Administration (HCFA), CMS includes centers, or offices, responsible for key elements of health reform.

Center for Consumer Information and Insurance Oversight

The Center for Consumer Information and Insurance Oversight (CCIIO) is an office within CMS that oversees the implementation of various ACA provisions related to private health insurance, especially medical loss ratio rules and the health insurance exchanges.

Certificate of need laws

State certificate of need (CON) laws and regulations seek to limit the building of excess capacity or overbuilding of health care facilities by requiring hospitals and health systems to demonstrate a need for any new hospital construction or to significantly modify an existing one or to expand certain services. The idea is that too much capacity leads to overuse and higher prices. Critics say CON rules lead to overregulation and decreased competition. 

Cherry picking

Before the ACA, health insurers would seek to enroll healthy consumers over less-healthy individuals by “cherry picking: among certain populations. who cost less. The practice is not allowed under the ACA, although critics say some plans have established drug coverage options to discourage the sick from signing up.

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

This law allows a consumer who loses a job to keep his or her group coverage under an employer-sponsored health plan for 18 months as long as the beneficiary pays the whole cost, meaning both the employer and the employee portions, plus an administrative fee.

Copay (or copayment)

A copay is a fixed fee for each health care service, such as $35 or more for a primary care visit, or $50 for a specialist, although copay rates vary widely. Copays tend to be for in-network providers and co-insurance is for out of network care, these arrangements vary from one plan to the next.

Co-insurance

Co-insurance is a percentage that a consumer with health insurance would pay for a visit to a physician, hospital, or other provider. Typically, the co-insurance fee would be about 20% of the cost of care, and the plan would pay the remaining 80%, subject to out-of-pocket limits. Copays tend to be for in-network providers and co-insurance is for out of network care, these arrangements vary from one plan to the next.

Community mental health centers

CMS verifies that these clinics must provide outpatient services, including specialized care for children, the elderly, those with chronic mental illness and those who have been discharged from a mental health inpatient facility.

Community rating

Under community rating, a health insurer would charge all people in a community who are covered under the same type of health insurance policy the same premium without regard to age, gender, health status, occupation or other factors. Before the ACA went into effect in 2014, insurers could charge each consumer based on what’s called experience rating, meaning they could charge higher rates for women, the elderly, those with poor health status or any pre-existing condition. Also, they could choose not to cover some consumers. Under the ACA, community rating was limited so that older consumers could be charged three times as much as younger people (in some states it had been much higher) and there is no extra charge for women of child-bearing years or people who have been sick. Smokers can be charged more and participation in wellness programs can affect premiums.

Comparative effectiveness research

Research that looks at different approaches or treatments for a condition to determine which are most likely to have the best outcomes. This research does not necessarily take cost into account.

Coordination of benefits

In the event of coverage from two sources (such as Medicare plus supplemental coverage, or when two people in one family both have employer plans, insurers will coordinate benefits by determining which insurer is primary payer and which is secondary payer.

Cost sharing subsidies

In addition to the advance premium tax credits (APTC) to help consumers pay premiums, many people can also get cost-sharing subsidies to help them pay for their deductibles, co-pays and other out of pocket expenses. Insurers are legally bound to make these payments on a sliding scale to people who earn as much as 250% of the federal poverty level.

Critical access hospital

Certain small hospitals mostly in rural areas are designated as critical access hospitals. The staffing standards are less rigorous than they are for other hospitals, and CMS pays these hospitals based on their costs, not the usual payment scales. Critical access hospitals need to provide emergency care, but may not have all the services of a larger hospital.

Death spiral

When more sick people — or those who have a higher risk of becoming ill — purchase health insurance than healthier people, this trend is called adverse selection because those choosing health plans create adverse risk for health insurers. When more sick or high-cost people buy health insurance and that number is much higher than the number of healthier members in the risk pool, premiums rise. Then, healthier people may drop out, driving up premiums even more. For health insurers, adverse selection can lead to what’s called a death spiral, in which the insurer may report a steep loss, declare bankruptcy or go out of business. See also adverse selection.

Defensive medicine

Too often doctors and other health providers order tests, screening exams or treatments that may not be necessary because they want to protect themselves from later malpractice suits. Such overuse of services raises the risk of harm from unnecessary care and drives up health care costs for patients and insurers. There is some debate about whether defensive medicine motivates health care providers or if other factors are involved, such as how providers are trained and paid. Some providers have been trained to do more rather than less, at least initially, and then do more if needed. Also, some providers are paid under a fee-for-service system in which they can increase income by providing more treatment whether that increased treatment is necessary, beneficial or not.

Defined benefit vs. defined contribution

When a health plan, whether through a private employer or a government program such as Medicare or Medicaid, promises specified benefits regardless of costs, those are defined benefits. Even if the costs of that benefit rise, the benefits are guaranteed. Under federal law, Medicare and Medicaid must spend the funds required to provide benefits to all eligible members. Beneficiaries may be required to share some of the costs, but the benefit is not capped or limited. Most private health plans use defined benefits in which the employer pays a certain percentage of the premium, and the employee pays the rest.

Some Republicans prefer to shift toward a defined contribution model for Medicare and Medicaid benefits in which a limited, set, or fixed amount would go toward health coverage, whether through a voucher or another form of payment. Beneficiaries may have their choice of health plans, but the contribution is fixed, meaning the government or employer would have a predetermined financial liability. Employers that use a defined-contribution approach would give workers a fixed amount for their health insurance and the employee would pay any balance remaining.

Disproportionate share hospital

A disproportionate share hospital (DSH) is one that has a higher share of low-income patients than other hospitals as defined by Medicare and Medicaid. Hospitals get DSH payments to help compensate for the cost of caring for these low-income patients who may have higher health care costs than patients with higher incomes.

Doughnut hole (or Donut hole)

A coverage gap in the Medicare drug benefit, during which beneficiaries pay all the costs until another level of coverage applies.

Dual eligibles

Under the Affordable Care Act, the federal Centers for Medicare and Medicaid Services seeks to improve the quality and efficiency of care that low-income consumers can get if they qualify for both Medicare and Medicaid. These consumers tend to be poorer and sicker than the rest of the population and use more health care resources.

Durable medical equipment (DME)

Items such as ventilators, wheelchairs, hospital beds, or home oxygen systems are examples of durable medical equipment that a health care provider would prescribe for certain patients.

Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) Services

States must cover these services for all Medicaid-eligible children under age 21. These services include screening for vision, hearing, dental problems and for physical and mental health conditions. Services must include follow-up and treatment for identified problems or conditions.

Effectuate

Insurers use this word to describe the completion of an enrollment. Coverage has been effectuated once a consumer signs up, selects a plan on the Marketplace exchange, pays the premium, and receives a notice that the policy is final and coverage is in effect.

Employer mandate

Under the Affordable Care Act, businesses employing more than 50 workers are required to offer affordable health care coverage that meets federal affordability and minimum coverage standards to all full-time employees, meaning those who work at least 30 hours per week.

ERISA

The federal Employee Retirement Income Security Act (ERISA) of 1974 sets requirements for employer-sponsored health plans, both self-insured and fully insured. The federal Department of Labor oversees ERISA plans, which are not required to meet state insurance regulations.

Essential health benefits

The essential health benefits under the Affordable Care Act are designed so that every health plan covers a comprehensive list of services. All plans, inside and outside of the state-based exchanges, must offer at least these minimum benefits.

Exchanges

See Health Insurance Exchanges

Facility fee

Some hospitals charge a facility fee when a patient sees a doctor at a hospital-owned facility even though the facility looks to be a standard outpatient physician’s office. In this case, ownership is what matters and not appearance. Insurers do not always pay for the facility fee when a hospital or physician adds such a charge to a patient’s bill, or they may cover only a part of it. Often, hospitals or health systems will acquire physician group practices so that they can charge a facility fee for each patient who receives care there.

Federal Medical Assistance Percentage (FMAP)

In the federal and state Medicaid program, the federal government pays each state for the medical services those states deliver to Medicaid members based on two factors. The first factor is the actual amount each state spends for patient care that qualifies as matchable under Medicaid. The second factor is the Federal Medical Assistance Percentage (FMAP), which is determined based on a formula that includes the average per capita income for each state relative to that of the national average.

Full-time worker

Under the Affordable Care Act, an employee who works an average of at least 30 hours per week is considered a full time worker and eligible for coverage. Part-time work would be fewer than 30 hours each week.

Grandfathered plans

When Congress passed the Affordable Care Act in 2010, the law allowed all group health plans that were started before the bill was signed into law on March 23, 2010, to continue to operate even if the plan did not comply with many of the requirements of the ACA. Under their grandfathered status, these plans can add new employees or family members. Also, individual health insurance policies that consumers bought before March 23, 2010, could continue as well. While these plans are exempt from many of the requirements under the ACA, they can lose their “grandfathered” status if they are changed to reduce benefits or add costs to beneficiaries.

Grandmothered or transitional health plans

Individual and small-group health insurance plans that became effective after the Affordable Care Act (ACA) was signed into law on March 23, 2010, but before most of the law’s regulations became effective on Jan. 1, 2014, are called grandmothered or transitional plans. Since grandmothered or transitional plans do not comply with all of the ACA’s requirements, they were scheduled to end on December 31, 2013, so that ACA-compliant coverage could replace them. But instead of being canceled, the life of these plans was extended so that enrolled consumers would not be forced to find other coverage. After being extended in 2013, grandmothered or transitional plans were extended many times since then until 2021 when the federal Centers for Medicare and Medicaid Services ruled they would be canceled at the end of 2022.

Habilitation services

The essential benefits requirements of the Affordable Care include both habilitation and rehabilitation services. Rehabilitation helps a patient regain a lost ability; habilitation helps them develop an ability that they never had, such as for a child with developmental delays who did not walk or talk when expected). Habilitation services can be provided to inpatients or outpatients and can include physical and occupational therapy and speech and language pathology. (See also: Rehabilitation services.)

Health care sharing ministry

Health care sharing ministries are health plans that do not fully comply with the requirements of the Affordable Care Act (ACA). Those who enroll in these plans can be exempt from the ACA’s mandate to have minimum essential coverage. These plans are typically much less expensive than commercial health insurance. Payments to these plans get collected into a shared fund, which is then used to pay members’ medical bills. The plans are not required to cover all of the services that ACA-compliant plans must cover, and there may not be enough money in the fund to pay all bills. For those seeking to enroll in these plans must share a common religious faith and agree to live by certain shared religious principles.

Health insurance exchanges (also known as the marketplaces)

Under the Affordable Care Act, new health insurance exchanges (called the federal and state marketplaces) were established for people and small businesses seeking to purchase health insurance that fully complies with the requirements of the ACA, including all the rules and consumer protections included in the ACA. States have some leeway in how they design their exchanges, but if a state does not set up the exchange, the federal government will run the state marketplace. States can have one exchange for small business and another for individuals, or they can merge them.

Health insurance tax

When Congress passed the Affordable Care Act (ACA), it included excise taxes on health insurance providers, pharmaceutical manufacturers and importers, and medical device manufacturers and importers. Those taxes were expected to help offset the cost of providing health insurance coverage to millions of Americans under the law. In early 2018, Congress suspended the medical device tax for 2018 and 2019 and suspended the health insurer tax for 2019. Subsequent legislation passed in late 2019 permanently repealed the medical device tax starting in 2020 and the health-insurer tax starting in 2021. Excise taxes on the health care industry raised $12 billion in 2019.

Health reimbursement arrangements

A health reimbursement arrangement (HRA) or health reimbursement account is an employer-funded tax-free account that employees can use to pay for qualified medical expenses that their health insurance does not cover up to a fixed dollar amount each year. Unused amounts may be rolled over for use in subsequent years. Unlike a health savings account (an HSA), the employer funds and owns the arrangement so that when a worker leaves a job, the fund reverts to the employer.

Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS)

The Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) is a patient-satisfaction survey that the federal Centers for Medicare and Medicaid Services (CMS) says is the first national, standardized, publicly reported survey of patients’ perspectives of hospital care. Pronounced “H-caps,” the survey also is known as the CAHPS hospital survey. For many years, hospitals have collected information on patient satisfaction for their own internal use. But HCAHPS is now a national standard for collecting and publicly reporting information about patient experience of care, allowing consumers and journalists to compare hospitals against each other. For CMS, the HCAHPS survey is one of several components the agency uses when assessing how much to pay each hospital under Medicare’s hospital value-based purchasing program. The survey has 32 questions, addressing 21 aspects of patients’ perspectives of care including communication with doctors and nurses, responsiveness of hospital staff, pain management and care transitions.

Hybrid health care

Hybrid health care describes the practices of physicians and other providers who offer both telehealth and in-person treatment. These practices may use video conferencing for patient monitoring and text messaging for appointment scheduling and follow-up. Some patients may be managed remotely, face-to-face or both.

Individual coverage health reimbursement arrangements (ICHRAs)

In 2019, the Trump administration established ICHRAs to allow employers of any size to reimburse employees for some or all medical expenses, out-of-pocket costs and monthly premiums for health insurance purchased on their own. Available in 2020, ICHRAs allow employers to cut costs by not offering traditional group health insurance but critics say they offer weaker benefits while creating a potentially discriminatory and expensive form of coverage.

Individual mandate

The individual mandate is a provision of the Affordable Care Act (ACA) (and some state laws) that requires individuals to have health insurance. Disputes over whether the mandate was constitutional was the basis for lawsuits that opponents filed. The U.S. Supreme Court upheld the mandate in 2012, but it was repealed as part of the 2017 tax law effective in 2019. Technically the mandate is still part of the ACA, but since the penalty is no longer valid, the mandate is meaningless.

Invisible risk pool

Under the Affordable Care Act (ACA), health insurers have been reimbursed for enrollees whose health care costs were particularly high, such as more than $45,000 annually. In contrast, health insurers can identify consumers who may incur large health care claims each and place them into the invisible risk pool, thus ceding their costs and premiums to the pool that both the insurers and the government fund. This invisible risk sharing mechanism then pays all of the medical costs for these consumers beyond a certain relatively low threshold, such as $10,000 each year.

Large group health plan

The federal government defines a group health plan as one that covers workers in an employer-sponsored health plan that has 51 or more employees, although some states define large groups as having 101 or more workers.

Lifetime limit

Under the Affordable Care Act, health insurers cannot set a dollar limit on what they spend on essential health benefits for an insured individual’s care either each year or during an insured person’s life. The protections against such limits on coverage apply to all individual and job-based health plans, including grandfathered plans. But the annual limits do not apply to individual health plans that are grandfathered and health insurers can set annual and lifetime dollar limits on spending for health care services that aren't considered essential health benefits.

 

Medicaid and CHIP Payment and Access Commission (MACPAC)

The Medicaid and CHIP Payment and Access Commission reviews state and federal policies and makes recommendations to Congress, the states, the federal Department of Health and Human Services on matters related to Medicaid and children’s access to care. MACPAC was established under a legislation passed in 2009 expanded and funded under the Affordable Care Act.

Market basket

The federal Centers for Medicare and Medicaid Services (CMS) uses the term “market baskets” to define a set of health expenditures in a certain period of time. The market basket allows federal officials to measure price changes for hospitals and other providers and to set payment adjustments.

Market exclusivity

Drug manufacturers use patent protections that the federal Food and Drug Administration grants to market brand-name drugs exclusively in the U.S. market, blocking the introduction of other drugs, particularly generic and biosimilar medications to U.S. consumers.

Medicaid

Created in 1965, Medicaid is a health care program for those who have low income or are disabled. The states and federal governments jointly fund this program to cover long term care, such as nursing homes and for low-income elderly people. Under the Affordable Care Act, Medicaid was expanded to cover more people, including those who were close to or just above the federal poverty limit, including those who had no children and were previously ineligible. When the U.S. Supreme ruled in 2012 that the Affordable Care Act was constitutional, it allowed states to proceed with expanding Medicaid or not without losing all of their federal Medicaid funding. As of September 2022, all but 12 states (mostly in the South) had expanded enrollment under the law. Preliminary data from the Kaiser Family Foundation showed that enrollment in Medicaid and CHIP programs reached 88.3 million Americans as of April 22.

Medical device tax

A 2.3% sales tax on medical devices went into effect on Jan. 1, 2013, as part of the Affordable Care Act to help pay for the increased health insurance coverage under the act. The device industry paid the tax and fought for its repeal. In 2019, it was repealed, according to the Internal Revenue Service. Before the repeal, the tax was on a four-year moratorium, meaning that the sales of taxable medical devices were not subject to the tax after Dec. 31, 2015, the agency added.

Medical loss ratio (MLR)

The MLR is the amount a health plan spends on delivering actual health care services to members, administration and marketing but not on profits. Under the Affordable Care Act, small group and individual health plans must spend at least 80 cents of every dollar on health care, administration and marketing or provide a rebate to members.

 

Health plans for large groups that spend at least 85 cents from every dollar at health care, administration and marketing.

Medicare

Medicare is a federal health program for all Americans starting at age 65, and some of the disabled. Medicare Part A covers hospital care; Part B covers care from physicians, clinical laboratories and other outpatient treatments; Part C covers those who choose to get covered in private Medicare Advantage plans; and Part D covers prescription drug coverage plans.

MEDPAC

The Medicare Payment Advisory Commission is an independent agency established in 1997 to advise Congress on Medicare payment issues, including payments to physicians, hospitals and Medicare Advantage plans.

Minimum essential coverage

The Affordable Care Act includes a minimum essential coverage requirement that all health plans must meet when under the law’s individual mandate requirement, including plans purchased on state and federal marketplace exchanges, employer-sponsored insurance plans or a government plan such as Medicaid. This IRS fact sheet explains the requirement and shows that it’s also known as the individual shared responsibility provision of the law.

Navigators

https://www.cms.gov/CCIIO/Programs-and-Initiatives/Health-Insurance-Marketplaces/assistance

Health insurance navigators provide in-person assistance to consumers, small businesses and their employers when enrolling in insurance plans under the Affordable Care Act. The navigators are trained and certified to help those seeking coverage through the state or federal marketplaces by assisting them in completing eligibility and enrollment forms. The services are free to consumers and the navigators are required to be unbiased.

Networks

Health insurance plans contract with hospitals, physicians, clinical laboratories and other health care providers to supply in-network care at rates that typically are lower than out-of-network care. Many health plans have narrow networks, meaning a relatively limited set of providers are available, although narrow networks still need to meet all of the coverage and access requirements of the Affordable Care Act.

Off-exchange enrollment

Consumers can enroll in health insurance plans that are not available on the state or federal marketplaces and that are offered outside the marketplace exchanges. Although many of the plans that consumers could buy outside of the exchanges meet the requirements of the Affordable Care Act, there is no guarantee that these plans meet those requirements. For example, in 2018, the Trump administration allowed association health plans and short-term, limited duration plans as alternatives to fully compliant ACA plans, but these are not considered to be the legal equivalent of health insurance and they do not have to offer the ACA’s essential health benefits and meet other consumer protections.

Patent protections

Pharmaceutical companies use patents from the federal Food and Drug Administration to gain market exclusivity on their medications and other tactics to delay the introduction of generic competition. Such delays help to keep the prices of brand-name drugs high.

Partial Medicaid expansion

Several states have sought permission from the federal Centers for Medicare and Medicaid Services to offer Medicaid insurance coverage to consumers who have income that equals as much as 100% of the federal poverty level (FPL), rather than the 138% level required under the ACA. In these states, consumers who have income over 100% of FPL would be eligible for subsidized coverage in the ACA exchanges.

Patient Protection and ACA

See ACA

Post-claims underwriting

When a health insurer investigates a consumer’s health history after selling that consumer a health plan and usually after a claim has been filed, the insurer may do underwriting, meaning the insurer will investigate the consumer’s health history, which can lead the insurer to cancel the policy. The term for such a cancelation is rescission, which is illegal under the ACA except in the case of fraud or intentional misrepresentation. Also see Rescission.

Premium shock

Critics of the ACA use the term premium shock to describe the rising cost of health insurance premiums or an anticipated rise in premiums, particularly for younger and healthier consumers.

Premium stabilization

When the ACA became effective on Jan. 1, 2014, the law included three premium-stabilization programs to encourage health plans to participate in the new state-based and federal marketplace exchanges: reinsurance, risk adjustment and risk corridors. The tools were designed to discourage insurers from not covering consumers in poor health, to keep insurance premiums stable and to spread risk so that some health insurers did not enroll too many high-cost members. The reinsurance and risk corridors were in place from 2014 through 2016. Risk adjustment remains in use. See also risk adjustment, risk corridors and reinsurance.

Private option

A public option refers to a health insurance program that a state or the federal government would make available to consumers as an option along with the existing private health insuance plans. After the public option was eliminated from the ACA before the law was passed, some states began debating the possibility of establishing a private option for consumers seeking to enroll in health insurance plans. The private option is intended to promote competition in the health insurance marketplace, improve continuity of coverage and give low-income consumers more access to care. When Arkansas became the first state to expand Medicaid under a Section 1115 waiver, the state introduced a private option in which consumers use Medicaid funds to buy private health insurance coverage on the state’s marketplace instead of having the state pay for the health care coverage costs of consumers through the traditional Medicaid program. (See also Public option.)

Public option

A public option refers to a health insurance program that a state or the federal government would make available to consumers as an option along with the existing private health insuance plans. A private insurer or any private company could run a public option. A public option was considered during debate over the ACA in 2009 and 2010 but was dropped before the law was passed. Since then, several states have begun discussions about implementing a public option and Washington State implemented such an option in 2020. Colorado plans to make a public option available in the fall of 2022, and officials in Nevada are forming such a program for implementation in 2025.

Qualified Health Plan (QHP)

An insurance plan that is certified to be offered to consumers on the state or federal marketplace exchanges, meaning the plan has met all the legal requirements under the ACA such as providing essential health benefits and cost-sharing limits.

Qualifying life event (QLE)

In health insurance, a qualifying life event is change in a consumer’s life, such as getting married, having a baby or losing health coverage. Any of these events can make a consumer eligible for a special enrollment period, allowing the consumers to enroll in health insurance outside the annual open enrollment period. See Special enrollment period.

Qualified small employer health reimbursement arrangements (QSEHRAs)

These health reimbursement arrangements were established under the Cures Act of 2016 to allow small employers with fewer than 50 full-time equivalent employees to pay for or reimburse employees through health reimbursement arrangements for health insurance premiums as long as those insurance plans qualify as minimum essential coverage. The requirement that employers have fewer than 50 full time employees is significant because it means the employers are not subject to the large-employer mandate under the ACA. Payments employers make under QSEHRAs are tax free, cannot exceed a certain limit that the IRS establishes annually and the employer must fund the HRA without employee contributions.

Rate review

Under the rate review process, state insurance regulators review premium increase requests for the coming year. Some states can approve or disapprove rates but other states can only review and seek information about proposed rates.

Readmission

This term usually refers to when a patient returns to the hospital within 30 days. The ACA included financial penalties for hospitals that have had high rates of avoidable readmissions for Medicare patients with certain specified conditions, such as congestive heart failure. Of course, patients can return after 30 days, but the policy is focused on the first month.

Rehabilitation services

The essential benefits requirements of the ACA include both habilitation and rehabilitation services. Rehabilitation helps a patient regain an ability or function for activities of daily living they may have lost, such as mobility after a stroke or accident. Rehabilitation can include physical and occupational therapy, speech and language pathology. (See also Habilitation services.)

Reinsurance

Reinsurance is one of three premium-stabilization programs built into the ACA and refers to a program that provides insurance for insurers. The other two were risk adjustment and risk corridors. Reinsurance provides a backstop to protect health and other insurers against deep or catastrophic losses. To make the exchanges work, the government has an interest in reinsuring health plans by limiting their financial exposure so that they are willing to participate in the exchanges and that they do not avoid offering coverage to people with preexisting conditions or high health risks. CMS projected that reinsurance could keep premiums for coverage offered on the exchanges at 10% or 15% lower than they would be otherwise. The reinsurance program ended in 2016.

Rescission

The act of rescinding or retroactively canceling a health insurance policy, usually after someone files a claim, is called rescission. The ACA outlaws this practice except in a case of fraud or intentional misrepresentation. See also Post-claims underwriting.

Risk adjustment

Risk adjustment is one of the three premium-stabilization programs that Congress included in the ACA. The reinsurance and risk corridor and programs lasted from 2014 to 2016, while the risk adjustment program continues. Using risk-adjustment, the federal government can transfer funds from lower-risk, non-grandfathered plans in the individual and small group markets to higher-risk, non-grandfathered plans, both in and out of the marketplace. The goal of the program is to discourage cherry picking in which plans that enroll healthier populations must compensate plans that have less healthy and more costly enrollees. CMS operates the risk adjustment program in all states.

Risk corridors

Risk corridors is one of the three premium-stabilization programs that Congress included in the ACA. The other two are risk adjustment and reinsurance. All three are designed to address the concern among members of Congress about the uncertainty health insurers would face when enrolling individuals into health insurance on the exchanges during the first few years after the ACA went into effect in 2014. Those writing the law established risk corridors to allow the federal government to share the risk with the health plans from 2014 through 2016. If a health plan had insurance costs that were at least 3% lower than expected, those insurers would send some of the money to HHS. The plans that had higher costs than expected would get payments from HHS to offset some losses. Congress required risk corridor payments to be revenue neutral.

Section 1115 Waiver

States can negotiate these waivers with HHS to modify their Medicaid and CHIIP programs to expand eligibility, provide services not always covered by Medicaid, or test new delivery systems that attempt to improve care while cutting or slowing the growth of spending.

Self-insured plans

Most of the nation’s employers that offer health insurance to workers do through self-insurance plans. Using these plans, employers collect premiums and pay all the medical claims for workers and dependents. In this way, they save money versus contracting with a health insurance plan to offer insurance coverage and cover the financial risk of paying those clains if the employers’ costs are lower than the premiums they collect. Almost always, the employers contract with an insurer as a third-party administrator to do the enrollment, claims processing, and establish provider networks.

Shadow pricing

Shadow pricing describes a practice pharmaceutical companies use to raise prices on prescription drugs in step with price increases from other drug companies competitors. In this way, all drug makers can keep prices high.

SHOP Exchanges

The Small Business Health Options Program (SHOP) provide health or dental insurance coverage for businesses in every state. They are open to businesses with fewer than 50 full-time equivalent employees, meaning those businesses and nonprofit organizations that are not covered under the ACA’s employer mandate. In every state, the SHOP is supposed to offer a variety of plan options, although choices have been limited in some states.

Superuser (or super utilizer)

This term refers to a patient who uses a lot of health care, particularly a lot of avoidable expensive health care services in hospitals and emergency departments. The term is usually used to describe low-income patients with multiple chronic conditions who often have mental health and medical problems.

Third-party administrator

See “self-insured plan.”

Tricare

This federal health care program has almost 9.5 million members worldwide and covers military retirees, and members on active duty and those in the National Guard and reserves. Tricare also serves the families of armed-service members, survivors, certain former spouses, and others registered in the Defense Enrollment Eligibility Reporting System (DEERS) (for family members and dependents). People who have Tricare coverage need do meet the ACA’s individual mandate requirement. People who lose Tricare coverage eligibility generally can then get coverage on the exchanges.

Uncompensated care

When clinics, hospitals or doctors provide care without getting payment from an insurer, the patient, or a government program such as Medicaid, the care is considered to be uncompensated. After the provider tries and fails to collect the payment due, the uncompensated care can become charity care or bad debt. In certain circumstances, the provider can write off charity care and bad debt as a tax liability.

Underinsured

People are considered to be underinsured if they have some form of health insurance but also have high deductibles and high out of pocket costs or limited benefits. The Commonwealth Fund estimated that, as of 2016, about 28 percent of adults who had some form of health insurance were actually underinsured. The advent of new health plans that don’t have to comply with ACA rules will exacerbate this.

Usual, customary and reasonable (UCR)

The term usual, customary and reasonable refers to the amount that health insurers would usually pay for certain medical services, and the amount often varies by region. As the term implies, it’s based on what providers usually charge, and health plans use it to determine their allowable payments.

Underwriting

Under the ACA, medical underwriting is no longer allowed for individual, family or small-group health insurance. Health insurers continue to use medical underwriting went writing policies that are not regulated under the ACA, such as short-term health insurance plans. With medical underwriting, health insurers review each applicant’s medical history, including any pre-existing conditions and risk factors, to base what they will charge that individual for coverage. In health plans sold on the ACA exchanges, underwriting was disallowed starting in 2014 although some rate variations were allowed based on age and tobacco use.

Value-based hospital purchasing

The term value-based hospital purchasing refers to a Medicare program that rewards hospitals with incentive payments for the quality of care they provide.

Work requirement and community engagement

Some states require certain Medicaid recipients to work or take part in “community engagement” such as job training or qualified volunteer activities. The requirement to work usually is about 20 hours each week.

Wrap-around benefits

Low-income people who qualify for various government programs may also qualify for wrap-around benefits, meaning they get some extra funding to pay for gaps in insurance coverage or to pay for some out of pocket costs. These extra benefits wrap around the individual’s health insurance plan.