Changing Health Care: Terms You Need to Know

In our changing world of health care and health insurance, it's more important than ever to understand the basic terms of health insurance in order to get the best possible care at the best possible price.

Here are key terms you need to know.

COBRA

COBRA is the name of a law that lets you keep your health insurance when you've lost your job or if you get divorced and had insurance through your former spouse's employer. Under COBRA, you can keep the insurance that you had under your old job for 18-36 months, depending on your situation.

You should be aware that if you use COBRA, your insurance will likely be more expensive than when you were employed. That's because you need to pay the share of the premium that your old employer used to pay.

Co-payment

If you have health insurance, a co-payment is a fixed fee that you pay for a medical service that is covered by your insurance company. For example, your insurance may require that you pay $15 each time you visit your doctor. The insurance company pays for the rest of the bill.

Deductible

A deductible is a flat amount that you have to pay for health care services before your insurance plan begins to pay for them.

For example, if your deductible is $1,000 per year, your insurance company won't pay for anything until you've spent $1,000 dollars of your own money for medical bills.

Preventive services, in most cases, are required to be covered even if you haven't yet met your deductable.

Flexible Spending Account (FSA)

An FSA is a special tax arrangement that you set up with your employer. An FSA allows you to set aside money out of your paycheck before taxes so you don't have to pay taxes on it. You can use this money to pay for medical expenses that are not covered by your health insurance plan.

For example, you may use FSA money to pay for:

• Co-payments or deductibles
• Prescription drugs or medical devices not covered by insurance plans

But be careful. FSA money is "use it or lose it." In most cases, you will lose the money if you don't use the FSA funds within the year.

Health Savings Account (HSA)

An HSA is a type of medical savings account that you can set up if you have a "high-deductible" health plan. The money must be used for medical expenses.

There's a tax benefit to an HSA account. Just like an FSA, the money that goes into an HSA is tax-free. But unlike an FSA, the money isn't "use it or lose it." You can spend the money in an HSA account years later if you want to.

For 2020, the HSA limit is $3,550 for individuals and $7,100 for families. If you are over age 55, you can contribute an additional $1,000.

Insurance Marketplaces

Health insurance Marketplaces, also known as exchanges, are a key part of the health reform law.

A Marketplace is an online website set up in each state that allows people to enroll in a health insurance plan. You can compare health plans and prices in a Marketplace and find a plan that's right for you. You'll also be able to find out if you qualify for government subsidies to help pay for a plan's premium. You must shop for a health plan during the annual open enrollment period unless you have a qualifying event, such as a job loss, that allows you to have a special enrollment period.

In a Marketplace, you can also find out if you qualify for Medicaid or government programs like the Children's Health Insurance Program (CHIP). If you are eligible, you can enroll in Medicaid and CHIP at any time during the year.

Pre-existing Condition

"Pre-existing condition" is a term you may have encountered when trying to get health insurance. It refers to a medical condition that you had before you tried to enroll in an insurance plan. Traditionally, preexisting conditions have been used by insurance companies as a reason to disallow coverage for that condition. However, insurance companies are no longer allowed to deny you coverage or charge you more for a plan because you have a preexisting condition unless you try to enroll in a short-term health insurance plan -- one that covers you for less than a full year.

Preferred Provider Organization (PPO)

A PPO is a type of health plan that provides health care coverage through a network of providers. If you have a PPO, you likely will pay much less for medical service from in-network providers than for service from out-of-network providers.

Short-Term Health Plans

Short-term healthplans are plans that provide insurance for less than 12 months. The monthly premium may be cheaper than a regular health insurance plan; however, they dohave to provide the protections and benefits of other health plans. This means for example, that they can exclude or deny coverage for pre- existing conditions and they may not include all the essential health benefits. These plans cannot be purchased through the health insurance Marketplaces and are not eligible for any premium subsidies. You might consider one of these plans if you have a temporary loss of insurance because you are in between jobs, but read the plan’s terms and conditions carefully before buying one.

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