This is part of Tonic’s Healthcare Guide series. See the other guides here and a find a PDF of the master document here.
Let’s be honest: Health insurance is confusing, so let’s start at the beginning. Health insurance is a contract you buy that requires an insurance company to pay for some or all of your medical expenses. Some employers offer (heavily subsidized) insurance to their employees, some people buy their own plans, and the government provides insurance for older people as well as for low-income people and those with disabilities. Still, some people in the US go without insurance. But just having insurance doesn’t mean you get medical care for free.
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To help you understand how it all works, here’s a list of the terms you need to know, explained in plain English.
Affordable Care Act (ACA)
Really, its full name is the Patient Protection and Affordable Care Act (PPACA) and it was passed in early 2010 and fully implemented as of January 2014. It’s also known as Obamacare, after the President who shepherded it and signed it into law.
People in the United States aren’t guaranteed to get health insurance. They have to get coverage from their employer or their spouse’s employer, buy it themselves, qualify for a government program, or go without. The ACA sought to get more people covered by insurance and protect people from going bankrupt from medical bills. It did that in a few ways: It said young people could stay on their parents’ plans until age 26, it expanded the eligibility requirements for Medicaid, and it banned insurance companies from discriminating against people for having preexisting conditions [see “preexisting conditions”], which range from having given birth via C-section to having diabetes and other very basic, common things.
The ACA required insurance companies to cover everyone, and charge them the same rates no matter their health history. It also mandated that plans cover, at minimum, the same set of essential services [see “essential health benefits”], including preventive care at no cost, like vaccines and a set of benefits specific to women. The ACA also banned annual or lifetime caps on those essential services.
In 2010, 48.6 million Americans, or 16 percent of the population, didn’t have health insurance. In 2017, the number of uninsured had fallen to 29.3 million people (or 9 percent of the US). That’s still a sizeable chunk of people without health insurance, and that’s why people want to improve upon Obamacare or replace it with universal coverage, like a single-payer system [see “universal healthcare” and “single-payer healthcare”].
Annual and lifetime limits
These are caps on the benefits your insurance company will pay in a given year or over a lifetime; after you hit the number, they stop paying and you’re on the hook. Annual limits can be dollar amounts or a number of visits. Obamacare banned annual and lifetime limits for a set of 10 essential health benefits [see “essential health benefits”].
Coinsurance
The percentage of costs you have to pay for a service after meeting your deductible [see “deductible”]. Your plan will either charge a copay or coinsurance, not both. Coinsurance matters a lot if you see providers that aren’t in your plan’s network [see “insurance network”].
Say your copay for an in-network specialist is $25 and your coinsurance for out-of-network providers is 30 percent. If your therapist charges $250 a visit and they take your insurance but are considered “out of network” (as is common with therapists), you’ll first have to pay in full out of pocket until you hit your deductible, then pay $75 a visit (30 percent of $250) after that. If you see an in-network therapist, you’d owe a $25 copay, and might not even have to pay the deductible first if your plan says office visits aren’t subject to the deductible.
Copay
Short for copayment, it’s a flat fee you pay for seeing a doctor or filling a prescription. Copays typically don’t count toward your deductible [see “deductible”]. Usually you only pay a copay if you’ve already hit your deductible, but many employer plans cover things like office visits and trips to the emergency room before you meet the deductible and so, voila, you only get charged a copay. It’s common to have different copays for primary care providers and specialists, so you might pay $25 to see your doctor about a suspected case of bronchitis and $50 to see a specialist like a podiatrist.
There’s usually an inverse relationship between your monthly premium (the cost of a plan, even if you never use it, see “premium”) and your copays: Plans with lower premiums tend to have higher copays, and plans with higher premiums usually have lower copays.
Deductible
The amount you have to pay out of pocket for medical care before your plan will start footing the bill. Unfortunately, the deductible starts over every year. Many plans cover office visits before you’ve hit your deductible, so you may only have to pay a copayment for those visits rather than the full cost. After you’ve hit your deductible for the year, you usually only pay a copay or coinsurance for care [see “copay” and “coinsurance”].
Similar to a lot of employer plans, Obamacare plans provide certain preventive health services for free, even if you haven’t hit your deductible yet. These services include vaccines and certain medical tests for all adults, and a special set of services for women including birth control and an annual well-woman visit. (Contrary to popular belief, an annual physical with a primary care doctor is NOT one of the things that’s required to be free, and it will cost you at least a copay. For many employer-sponsored plans, both the annual physical and also the well-woman visit are free.)
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Essential health benefits
A set of ten services that all health insurance plans on the Marketplace [see “Marketplace”] must cover as a result of the Affordable Care Act. Insurers also can’t place annual or lifetime limits on these services. The ten categories are: doctors’ services, prescription drugs, hospitalization including surgery, outpatient hospital care, pregnancy and childbirth, emergency room care, mental health and substance use disorder services, laboratory services, rehabilitative services, and pediatric oral and vision care.
Flexible spending account (FSA)
If you have employer-based insurance, you can have money taken out of your paycheck before taxes and use it to pay for approved medical expenses including deductibles, copayments, and coinsurance. It’s often loaded onto a prepaid card that you can swipe at a doctor’s office or the pharmacy. You can also use an FSA account to pay for other expenses like glasses, contact lenses, dental care, and health products sold on FSAstore.com, like bandaids, pain relievers, and sunscreen. In 2018, the most you could contribute to an FSA was $2,650 a year, and you can roll over $500 to the following year.
Health savings account (HSA)
This is similar to a flexible spending account (FSA) in that it’s pre-tax money that can be used to pay for deductibles, copayments, and coinsurance. But you can only put money in an HSA if you have what’s considered a high-deductible health plan (HDHP), which is generally any plan that has a deductible of at least $1,350 for one person. For 2019, you can contribute up to $3,500 to an HSA for individual health coverage. Some insurance companies offer these accounts, or you can open one with a bank. And unlike an FSA, you can roll over the account’s entire balance from year to year and the funds may earn interest, which isn’t taxable.
High-deductible health plan
An insurance plan that requires you to pay at least $1,350 out of pocket for an individual (or $2,700 for a family) before the plan starts to pay its share, though the monthly premium (or cost of the plan) is usually lower than plans with lower deductibles. Some plans sold on the ACA Marketplace have deductibles of more than $5,000 for one person.
Individual mandate
This is one of the linchpins of the Affordable Care Act. In order for insurance companies in the Marketplace not to be saddled with only people who have preexisting conditions—people who buy health insurance because they need to use it and cost the insurance companies more money than people who don’t require a lot of care—the law required everyone in the US to either have health coverage or pay a tax penalty.
Importantly, it doesn’t say that everyone has to buy a plan from the ACA Marketplace, just that they need to have coverage that meets the law’s minimum standards—so getting insurance through work means you’re good. The idea is that having “healthy” people in the pool of insured people helps keep costs down, but a lot of those people were mad that they suddenly had to get insurance. (Truth is, without insurance, healthy people are just one accident or diagnosis away from big, big problems, physically and financially.)
Republicans effectively ended the individual mandate for 2019 in their tax bill. They couldn’t erase it altogether, but they made the tax penalty for not having insurance $0. Experts believe that healthier people will be less likely to buy insurance in 2019 and premiums for others will go up as a result.
Insurance network
A group of providers and facilities that contracts with your insurance company to provide services at a discounted price. A doctor might accept your insurance and be considered in-network, and your insurance company will incentivize you to use providers like this by charging, say, a $25 copay for visits. Other providers may accept your insurance but are out-of-network and your insurance company may charge you more money to see them, for instance by subjecting the visit to your deductible and charging coinsurance, or a percentage of the cost rather than a flat fee.
Marketplace
The health insurance marketplace, also known as the “exchange,” is the service available in every state that helps people shop for and enroll in health insurance. People who are buying their own coverage (i.e., not getting it through their job, spouse, or the government) can shop for plans online, by phone, or in person. In most states, the federal government runs the marketplace and you sign up at HealthCare.gov. But 11 states and Washington DC have their own sites.
Medicaid
A government-run insurance program that provides low- or no-cost health insurance to some low-income people, low-income or uninsured pregnant women and children, people with disabilities, the elderly, and more. People can apply for Medicaid at any time; it doesn’t have to be during the open enrollment period [see “open enrollment”]. Under the Affordable Care Act, more than 30 states expanded eligibility for Medicaid to include all adults below a certain income level—138 percent of the federal poverty level. (This is known as “Medicaid expansion.”) The states that have resisted thus far tend to be in the South and Midwest.
Medicare
A government-run insurance program for people 65 and older and some younger people with certain disabilities and conditions. Some politicians want to make Medicare available to more people by letting them buy into it before age 65, aka a “public option,” or turn it into our nation’s one health insurance program [see “Medicare for all”].
Medicare for all
One way to achieve universal coverage is to make Medicare the insurer for everyone—not just people over 65 or people with certain conditions. Medicare allows both the government and private insurance companies to pay for care, so it’s not a single-payer system. Vermont Senator Bernie Sanders has a plan that he calls Medicare for All, but if you want to get technical, his plan is actually single-payer healthcare because it would eliminate all private insurance companies, which isn’t how Medicare operates now. (Read more about Sanders’s plan here.)
Open enrollment
The period when you can sign up for health insurance for the following year. Each employer has its own window, but for people buying their own plans, open enrollment has run from November 1 to December 15 the past two years in the 39 states that sell their plans on Healthcare.gov. (Most of the 11 states that run their own sites have longer enrollment periods.) You can sign up for or change your insurance outside of that period if you have what’s known as a qualifying life event. Examples include if you get married or divorced, have a baby, lose your health coverage, or if you move.
Out-of-pocket costs
Also known as “cost-sharing,” this is the total of what you, not the insurance company, spend for medical care. It includes deductibles, copays, and coinsurance, but not the monthly premium since that’s the cost of having insurance, not for getting care.
Out-of-pocket maximum
Yes, there is a limit to how much the insurance company can make you pay in one year. After your out-of-pocket costs hit whatever that amount is, the insurance company picks up 100 percent of any costs for covered services thereafter. And while copays don’t usually count toward your deductible, they DO count toward your out-of-pocket max.
Premium
The amount you pay just to have an insurance plan, even if you never set foot in a doctor’s office. If your insurance comes from your employer, the premium gets deducted from each paycheck throughout the year. (This isn’t the true cost of the plan—your employer pays for some of it.) If you buy your own plan, you pay the insurance company directly every month.
Preexisting condition
Before the Affordable Care Act, people who bought their own insurance could be denied coverage for having a preexisting condition like diabetes and Crohn’s disease. Some insurers would cover you if you had a preexisting condition, but they’d charge you more than other people. The ACA banned insurance companies from asking people about their health history and required them to accept everyone and charge them the same rates.
Private health insurance plan
A health plan that isn’t “public,” that is, paid for by the federal government. Private plans include those offered by employers and ones people buy themselves. The majority of Americans have private insurance: In 2016, 49 percent of Americans had insurance through work and another 7 percent bought their own coverage.
Public health insurance plan
A health plan that’s operated by the federal government—so, Medicaid and Medicare.
Single-payer healthcare
One type of universal healthcare. The payer in this case is the government, rather than a for-profit insurance company. A single-payer system would make health insurance companies obsolete: You’d get health coverage from the government and the government would pay doctors a set price for medically necessary care. You, the user, would have no premiums or deductibles, but there would likely be some out-of-pocket costs, and not every country with single payer covers vision or dental care.
Universal healthcare
A system that guarantees that everyone in a country, or even a single state, gets health insurance, no matter their ability to pay. The system is funded by taxes. There are several types of universal healthcare, including single-payer, where the government pays for care provided by private companies (see: Canada), or socialized medicine, where the government pays for and provides the care (see: the UK).
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