Understanding Health Insurance Terminology Can be Hard
Health Insurance has a language of its own and the terms used can create brain fog for consumers trying to understand what they actually want and need during the quest to insure their health. To help relieve the frustration we have created a “health insurance dictionary” to help you better understand some of the important health insurance terminology.
Understanding these health insurance terms can empower consumers to make informed decisions about their healthcare coverage and the potential risks of not having insurance, such as facing financial burdens due to high medical expenses or limited access to healthcare services.
7 General Health Insurance Terms
- Moral Hazard: The tendency of insured individuals to take on riskier behaviors or seek more healthcare services because they are protected by insurance, potentially leading to higher costs for the insurer.
- Adverse Selection: The situation where individuals with higher health risks are more likely to seek insurance, leading to an imbalanced risk pool and potentially higher premiums for everyone.
- Underwritten vs. Guarantee Issue: Underwritten health insurance involves an evaluation of an individual’s health status before issuing coverage, which may lead to exclusions or higher premiums for pre-existing conditions. Guarantee issue, on the other hand, offers coverage without considering pre-existing conditions, but it might result in higher overall premiums.
- Deductible: The amount that the insured individual must pay out of pocket before the insurance company starts covering medical expenses. A higher deductible usually means lower premiums but higher initial costs for healthcare services.
- Out-of-Pocket Maximum: The maximum amount an insured person is required to pay in a policy year. Once this limit is reached, the insurance company covers all eligible medical expenses for the remainder of the year.
- Stop Loss: A feature often found in employer-sponsored health plans or self-insured plans that caps the maximum amount an individual or family would have to pay out of pocket in a given year.
- Premium: The amount paid by the insured person to the insurance company to maintain coverage. Premiums are typically paid monthly, quarterly, or annually, regardless of whether the insured person uses medical services.
Affordable Care Act (ACA) Terminology
The Affordable Care Act, also known as Obamacare, is a comprehensive healthcare reform law enacted in the United States in 2010. The primary goal of the ACA is to increase access to affordable health insurance for Americans and improve the overall quality of healthcare. ACA health insurance plans must adhere to certain regulations and offer essential health benefits, including preventive services, maternity care, mental health services, and prescription drug coverage. Some key features of ACA health insurance include:
- Guaranteed Issue: Insurance companies cannot deny coverage based on pre-existing conditions, ensuring that everyone can access health insurance regardless of their health status.
- Subsidies and Tax Credits: The ACA provides income-based subsidies and tax credits to help lower-income individuals and families afford insurance premiums.
- Essential Health Benefits: ACA plans must cover essential health benefits, providing a comprehensive level of coverage.
- Minimum Essential Coverage (MEC): The ACA requires individuals to maintain MEC or pay a tax penalty, although this penalty has been reduced to $0 since 2019.
Short-Term Health Insurance Terminology
Short-term health insurance plans are temporary health coverage options designed to bridge gaps in coverage. These plans are often used by individuals who are between jobs, waiting for employer-sponsored coverage to begin, or need insurance during a life transition. Key characteristics of short-term health insurance include:
- Limited Duration: Short-term plans typically offer coverage for a few months, up to a year, but usually not longer.
- Lower Premiums: Short-term plans generally have lower premiums than ACA plans because they may not provide the same level of coverage or essential health benefits.
- Fewer Regulations: Unlike ACA plans, short-term health insurance is not required to adhere to all ACA regulations, which means they may exclude coverage for pre-existing conditions and some essential health benefits.
- No Guarantee Issue: Insurers can deny coverage based on an applicant’s health status or medical history, leading to potential coverage gaps for those with pre-existing conditions.
Indemnity Health Insurance Terms
Indemnity health insurance, also known as fee-for-service insurance, is a traditional form of health coverage where policyholders have more freedom to choose healthcare providers. With indemnity plans:
- Freedom of Choice: Policyholders can visit any healthcare provider, and the insurance company will reimburse a portion of the cost based on the plan’s fee schedule or a percentage of the usual and customary charges.
- No Network Restrictions: Indemnity plans typically do not have provider networks, allowing insured individuals to seek care from any licensed healthcare professional.
- Higher Out-of-Pocket Costs: Indemnity plans often have higher deductibles and coinsurance, leading to more significant out-of-pocket expenses for the insured.
- Less Comprehensive Coverage: Indemnity plans may not cover preventive services or essential health benefits mandated by the ACA, making them less comprehensive compared to ACA plans.
Which One Is Right For You?
It’s important for individuals to carefully consider their healthcare needs and financial circumstances when choosing between ACA health insurance, short-term health insurance, or indemnity health insurance. Each option has its advantages and limitations, and finding the right fit depends on factors such as health status, budget, and coverage preferences. Health insurance terminology is complicated, that’s why RVer Insurance is not only here to help, but focuses on RVers. The team at RVer Insurance Exchange has experience RVing, and understands the challenges RVers face. Contact Us today, or give us a call at (800) 867-4330.
