Health Insurance Acronyms: A To (Almost) Z
Like in a lot of other industries, we in the health insurance biz like to throw around acronyms -- a lot of them. So, in an attempt to make sense of this alphabet soup, we’ve compiled a Glossary of Acronyms (GOA!) to help you better understand some of the more common lingo. Now you can feel more comfortable conversing with all the cool kids – or at least your health insurance broker!
ACA: Affordable Care Act. Full name: Patient Protection and Affordable Care Act. These sweeping health care changes, which passed in 2010 and took effect in 2013, paved the way for state and federal health insurance marketplaces. If you’re not covered by health insurance and aren’t considered exempt under the ACA, you must pay a penalty when you file income taxes.
AD&D: Accidental Death and Dismemberment is usually added as a rider, or addendum, to a health insurance or life insurance policy that covers dismemberment or loss of use of body parts (limbs, speech, eyesight, hearing, etc.). Grim, we know.
ALE: Applicable Large Employer. Under the ACA, this is an employer with an average of 50 full-time employees, including full-time equivalents, in the previous year. ALEs are required to offer health insurance to their employees. Add the total number of full-timers from each month (including full-time equivalents) and divide that number by 12. If the result is 50 or more, congrats! – your business is considered an ALE.
CHIP: Children’s Health Insurance Program. A program that provides low-cost health coverage to children in families that earn too much money to qualify for Medicaid but not enough to buy private insurance. In some states, CHIP covers pregnant women (but not in Pennsylvania). You can apply any time and, if you qualify, coverage can begin immediately, any time of year. The cost varies by a child’s age and family income.
There’s a lot to know about CHIP. Read more about Pennsylvania’s program here.
COBRA: Consolidated Omnibus Budget Reconciliation Act. Never mind; there’s no reason to know what COBRA stands for – there's no quiz. Just know that it’s what gives workers the option to remain in an employer’s group health plan when an employee leaves the company (voluntarily or involuntarily). Under federal law, it must be offered by an employer with at least 20 employees. However, some states – including Pennsylvania – have “mini COBRA,” which requires smaller employers to offer such coverage.
Read about why we think you should outsource your COBRA administration here.
Read more: COBRA Notices: Who Gets What, When, and How?
DCRA: Dependent Care Reimbursement Account. This can help you put aside money, income tax-free, for the care of children younger than 13 or for dependent adults who cannot care for themselves. The account is funded by payroll deductions, before taxes. That money may help pay for a variety of services, including day care, nursery school, preschool, after-school care, or senior day care.
Read more: How Do I Use a Dependent Care FSA?
EAP: Employee Assistance Program. This is an employee benefit program that assists employees with personal problems and/or work-related problems that may impact job performance, physical health, or mental and emotional well-being.
EBHRA: Excepted Benefit Health Reimbursement Arrangement. Not as common as an ICHRA or a QSEHRA (below, under “I” and “Q”!), an EBHRA allows employers of all sizes to reimburse their employees -- tax-free -- for certain medical, dental and vision or short-term disability insurance premiums not covered by their health insurance plan.
EOB: Explanation of Benefits. An EOB is a statement from your health insurance carrier detailing what costs it will cover for medical care or products when you use your coverage. It is important to remember that this is not a bill (yes, it will actually say this on the statement), even though there may be a line reading “amount you owe.” Think of an EOB as a warning from your insurance provider that an actual bill may soon show up.
Read more: Understanding Your EOB
EOI: Evidence of Insurability. Health insurance providers require documentation of good health to obtain certain types of insurance. EOI goes beyond basic information to establish a more specific level or explore a specific area of health. Requirements vary depending on the insurer and the type of insurance being requested. It may be as simple as answering more detailed health history questions, or it may involve documentation of additional tests or exams by a physician or specialist.
EPO: Exclusive Provider Organization. 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). There are no out-of-network benefits under an EPO. An upside is that you generally do not need a referral from a primary care physician (PCP) to see a specialist.
ERISA: Employee Retirement Income Security Act. A federal law passed in 1974 that sets minimum standards for most retirement and health care plans in private industry to provide protection for people in these plans. Not a term you’re likely to need to know, but work it in a conversation with your broker, and they’ll really be impressed!
FMLA: Family Medical Leave Act. Entitles eligible employees to take unpaid, job-protected leave for specific family and medical reasons with the same health insurance coverage as if the employee had not taken leave. Employees are entitled to 12 workweeks of leave in a 12-month period for the birth of a child or care of a child within one year of birth. It also includes 26 workweeks of leave in a 12-month period to care for a servicemember with a serious injury or illness.
Read more here.
FSA: Flexible Spending Account. An FSA, also known as a flexible spending arrangement, is an employer-owned health care account you can put money into tax-free to pay for certain out-of-pocket health care costs. Employers may make contributions to your FSA but aren’t required to. In most cases, the money cannot be carried over from year to year.
Read more: What is a Flexible Spending Account?.
GI: A term more apropos in the military, in this case, it stands for Guaranteed Issue. It refers to health insurance coverage that is guaranteed to be issued to applicants regardless of their health status, age, gender, or income. Mid-market health insurance plans are not guaranteed issue, meaning an insurance company may decline to insure a group of this size if there are too many employees that have health issues.
Grandmothered: We know, this isn’t an acronym, but it is a common term. A Grandmothered Plan is an individual insurance plan or group health plan that existed on March 23, 2010, and has basically stayed the same since. These plans are excused from some ACA requirements, such as coverage of preventive health services without any cost-sharing and the expanded appeals process and external review. But what about grandpa? They’re sometimes also referred to as “grandfathered plans.”
HDHP: A High-Deductible Health Plan is an insurance plan with a higher deductible, higher out-of-pocket maximum, and a lower premium than traditional health insurance plans. You’re required to have a certain type of HDHP to have an HSA (see below). These are structured so you pays less per month if you’re not expecting to have many health care costs throughout the year. For someone with health issues or who plans to need medical care frequently, this type of plan may not be beneficial. Find out more about HDHPs here.
HIPAA: Another one you’ve no doubt heard of but couldn’t say what it stands for: Health Insurance Portability and Accountability Act. A federal law passed in 1996 that protects sensitive patient information from being disclosed without the patient’s consent. Includes health care providers, health plans and anyone who deals with claims processing, data analysis and medical billing.
HMO: Health Maintenance Organization. A type of health insurance that contracts with a network of physicians or medical groups to offer care at set costs. HMOs can be more affordable than other types of health insurance, but they limit your choices of where to go and who to see. An HMO requires that you stick to its network of health care professionals, hospitals and labs for tests; otherwise, the services aren’t covered, except in the case of emergencies. A referral from a PCP is typically required before you go to a specialist or order medical equipment.
Read more: HMO, PPO, EPO, POS: What’s the Difference?
HRA: Health Reimbursement Arrangement. Also called a Health Reimbursement Account, an HRA is an employer-funded group health plan from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts can roll over to the next year. The employer funds and owns the arrangement. For example, with a $1,000 deductible plan where the HRA is 50%, an employer may pay for the second half of the deductible after the employee has paid the first $500.
HSA: Health Savings Account. HSAs are like personal savings accounts, but the money is used to pay for health care expenses. You — not your employer or insurance company — own and control the money in an HSA. One benefit of an HSA is that the money you deposit is not taxed. To be eligible to open an HSA, you must have an HDHP (you remember what that is, don’t you?)
Read more What is a Health Savings Account?.
ICHRA: Individual Coverage Health Reimbursement Account. An ICHRA (ick-rah) is an alternative to offering a traditional group health plan. It’s an account-based health plan that allows employers to provide non-taxed reimbursements to employees for qualified medical expenses, including monthly premiums and out-of-pocket costs, like copayments and deductibles. Employees must be enrolled in individual health insurance coverage to use an ICHRA.
Read more: How Does an ICHRA Work?
LTD: Long-Term Disability. An insurance policy that provides income replacement for workers if they become unable to work due to an illness or injury. Benefits are usually 60% of your gross income and can last between two years and retirement age.
MAC: Maximum Allowable Charge. The maximum amount an insurer will pay for covered service from a provider, whether it's in network or out of network. This is the dollar amount typically considered payment in full by an insurance company and an associated network of health care providers. It is typically a discounted rate, rather than the actual charge.
MEC: Minimum Essential Coverage. Any insurance plan that meets the ACA requirement for having health coverage. To avoid the penalty for not having insurance, you must be enrolled in a plan that qualifies as Minimum Essential Coverage, sometimes called “qualifying health coverage.” Examples of plans that qualify include individual plans, job-based plans, Medicare, Medicaid and CHIP.
MLR: Medical Loss Ratio. A financial measurement used under the ACA to encourage health plans to provide value to plan participants. If an insurer uses 80 cents of every premium dollar to pay its customers’ medical claims and activities that improve the quality of care, the company has an MLR of 80%. This means the insurer is using the remaining 20 cents of each premium dollar to pay overhead expenses, such as marketing, profits, salaries, administrative costs and agent commissions. The ACA sets MLRs for different markets, as do some state laws.
For more information, here’s an excellent blog on MLR from our partners at Mineral.
OEP: Open Enrollment Period. The yearly period in fall when individuals can enroll in a health insurance plan for the next calendar year. This differs from a Special Enrollment Period (see below). However, you may enroll in Medicaid or CHIP at any time. Not to be confused with annual open enrollment for group health plans, which can be at the start of any month, based on when the plan originated.
OOP: Out of Pocket. Simply put, medical expenses that are not reimbursed by insurance. Out-of-Pocket costs include deductibles, coinsurance and copayments for covered services, plus all costs for services that aren’t covered. MOOP, or Maximum Out of Pocket (one of our favorite acronyms), is the most you must pay for covered services in a plan year before your health plan pays 100% of the costs of covered benefits.
OTC: This one should sound familiar: Over the Counter, when referring to drugs that do not require a prescription.
PBM: Pharmacy Benefit Manager. In essence, this is a third-party administrator of prescription drug programs. Many people assume that pharmacy benefits come directly from the health insurance provider when, in reality, PBMs do most of the work for over 80% of employers in the U.S.
PCP: Primary Care Physician. Your main medical doctor, in other words. He or she acts like the quarterback of your health care.
PPO: Preferred Provider Organization. A type of health plan that contracts with medical providers 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.
Read more: HMO, PPO, EPO, POS: What’s the Difference?
QHP: Qualified Health Plan. An insurance plan that is certified by the Health Insurance Marketplace that provides essential health benefits; follows established limits on deductibles, copayments, and out-of-pocket maximum amounts; and meets other requirements under the Affordable Care Act. All Qualified Health Plans meet the ACA requirement for having health coverage, known as “minimum essential coverage.”
QLE: Qualifying Life Event. A change in your situation — like getting married or divorced, having a baby or adopting, losing health coverage or getting out of jail (seriously!) — that can make you eligible for a Special Enrollment Period. This allows you to enroll in health insurance outside of the annual Open Enrollment Period.
QSEHRA: Qualified Small Employer Health Reimbursement Arrangement. (We’ll pronounce this Q-Sarah.) Small employers — those with fewer than 50 employees that don’t offer a group health plan — can contribute to their employees’ health care costs through a QSEHRA. It allows these employers to reimburse employees – tax free -- for certain health care expenses, like health insurance premiums and coinsurance. The IRS sets an annual limit on allowances.
Read more: How Does a QSEHRA Work?
RX: No doubt you’ve heard this one before. This stands for “prescription drug.” The abbreviation RX is derived from the Latin word recipe or “recipere,”which means “to take.” There’s certainly a lot more to know about prescription drugs.
Read more: How Do I Read a Prescription Drug List?
SBC: Summary of Benefits and Coverage. Not to be confused with an SPD, this is a federally mandated summary that lets you make comparisons of costs and coverage among health plans. You’ll get an SBC whether you shop for coverage on your own or have it through your job, when you renew or change coverage, or request one from the insurer.
Read more: How Do I Read an SBC?
SEP: Special Enrollment Period. A time outside the yearly Open Enrollment Period when you can sign up for health insurance. You qualify for an SEP if you’ve had certain life events, including losing health coverage, getting married or divorced, having a baby, or adopting a child. Depending on the situation, you may have 60 days before or 60 days following the event to enroll in a plan. However, you may enroll in Medicaid or the Children’s Health Insurance Program at any time.
SPD: Summary Plan Description. Not to be confused with an SBC, and SPD a detailed guide to the benefits the program provides and how the plan works. It must describe when employees become eligible to participate in the plan, how benefits are calculated and paid, how to claim benefits, and when benefits become vested. Think of it as an owner's manual for a health insurance plan.
STD: Short-Term Disability, not the health term you may be thinking! STD is voluntary insurance that replaces part or all of an employee’s income in the event of a temporary disability. Typically, this insurance policy is paid in full or in part by the employer. To qualify for benefits, the employee must be unable to perform their normal work duties, due to illness or injury.
TPA: Third-Party Administrator. A company that provides operational services such as claims processing and employee benefits management under contract to another company. Insurance companies and self-insured companies sometimes outsource their claims processing to TPAs.
UCR: Usual, Customary and Reasonable. 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 Maximum Allowable Charge.
YTD: Year To Date. Refers to the period of time beginning the first day of the current calendar year or fiscal year to the current date. Health plans can begin on the first day of any month.
Related: Health Insurance Terms Glossary