Over at the Sherpaa blog, we’re creating some content to help companies fully understand healthcare. Here’s episode one.
An important part of our job here at Sherpaa is helping our clients understand healthcare. As we all know, it’s super complicated and when you’re the CEO concentrating on building the awesomest company you can possibly build, you just have no time to dive into the nitty gritty of all these details. Unfortunately, without understanding the details of health insurance, you could be wasting a ton of money— healthcare is the second largest expense behind payroll for most companies. So, in the spirit of clarity and transparency, here is Sherpaa’s Ultimate Health Insurance Lingo Dictionary.
Looking at a typical health insurance information booklet or a claim or an explanation of benefits can be incredibly confusing. There are so many terms and acronyms to try to decipher that it can sometimes seem like you are learning a new language. But fear not. We are here to help you understand some of the most important terms you are bound to come across:
Allowable Amount: Also called a UCR (usual, customary, and reasonable), this is the
dollar amount your health plan considers appropriate for a service provided in your area. In network doctors agree to charge no more than the allowable amount. If you go to an out of network doctor, you will have to pay any fee above the allowable amount
COBRA (Consolidated Omnibus Budget Reconciliation Act): A federal act that requires group health plans to allow employees to continue their group coverage for a stated period of time (18 months) once they leave a company. The employee has 60 days post departure to decide whether to take COBRA coverage.
Co-Insurance: The percentage you must pay of any additional bill after you have met your deductible. For zero, or in some cases low deductible plans, this kicks in immediately.
Co-pay: A fixed dollar amount that you are required to pay for a covered service in order to receive care. Typically, you will see co-pays for primary care physicians, for specialists, for prescriptions, and for hospitalizations.
Deductible: A fixed amount of the eligible expenses you are required to pay before reimbursement by your carrier begins.
EOB (Explanation of Benefits): The form sent to your home or office after a claim has been processed by your insurance carrier. The EOB details the amount the service cost, the amount paid out by the insurance carrier, the benefit available, and (when applicable) the reasons for denial of payment. It is very important to compare your EOB with your claim to ensure that there are no errors.
FSA (Flexible Spending Account): Allows employees to pay for medical expenses on a tax free basis. This is a “use it or lose it” plan, meaning that whatever funds you have contributed to the account will be lost if they are not spent at the end of the year. You also cannot take the account with you when you leave your company.
Health Care Claim: This is a fancy term for your bill. Along with the claim is a claim form which is initially filled out by your health care provider and then submitted to your insurance company for consideration of payment of benefits under your specific plan.
HMO (Health Maintenance Organization): A health plan that consists of a network of contracted doctors and hospitals to provide treatment for HMO members. HMO plans require PCPs to coordinate all health care. This plan type is the most restrictive in terms of options for care.
HRA (Health Reimbursement Arrangement): An account open and funded by an employer which gives employees tax breaks and reimburses them for health care expenses. Unlike an FSA, the balance on an HRA can carry over year to year.
Network: The doctors, hospitals and other providers that a health carrier has contracted with to deliver health care services to their members.
In Network: Covered services provided or ordered by your Primary Care Physician or other network provider
Out of Network: Services not provided, ordered or covered by your Primary Care Physician or other network provider
Out of Pocket: This refers to the maximum amount, per plan year, that you are required to pay out of your own wallet for covered health care services.
PPO (Preferred Provider Organization): A type of plan that is more flexible than an HMO, but still operates with a list of physicians/hospitals that are in network. With a PPO, you are able to see out of network providers, but they are only partially covered.
POS (Point Of Service): A plan that is, essentially, a combination of an HMO and PPO plan. You are required to have an in network PCP. You are able to see out of network providers, but will have to pay the cost unless your PCP refers you.
PCP: This is an acronym for Primary Care Physician
Preauthorization: The process by which a member or their Primary Care Physician notifies the health plan carrier, in advance, of plans for the member to undergo a course of care. This can include a complex test or a hospital admission, as two examples.
Premium: The monthly fee for your insurance coverage. The total monthly fee is often split between employers and employees. Premiums are often deducted from your paycheck on a pre-tax basis.