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Health plan terminology
by Tony Novak, CPA, MBA, MT
, revised 11/21/11
This article includes a quick summary of terminology commonly used in health plans today:
Basic Health Insurance and Core Health Insurance – trimmed-down limited benefit coverage at an affordable price to anyone regardless of health history.5
Cafeteria Plan – an employee benefit plan that may include a wide variety of benefits like retirement savings, education benefits, dependent care along with the health plan. Employees can mix and match to suit their needs.1
COBRA – a federal law that guarantees continuation of health insurance coverage to those in special situations who can afford to pay the high premium cost. This option is usually available for 18 months to the employees or former employees of medium-sized and large businesses. 2
Consumer-Driven Health Plan – a non-specific buzzword that usually refers to an HRA plan but may also be applied to any other type of health plan with user-selected features.1
Flexible Spending Account (FSA) – an arrangement to allow employees to use their own pay to pay for medical expenses on a pre-tax basis. The election is irreversible, thus these plans are also know as “use it or lose it” plans. 1
Health Reimbursement Arrangement (HRA) – a way for employers to provide flexible health benefits to employees without health insurance restrictions. 1
Health Savings Account (HSA) – a new insurance and tax-saving program available to anyone, but attractive usually only to healthy people without pre-existing medical conditions. Administrative details are still evolving, so these plans might be more popular once potential tax problems and insurance issues are resolved. 3
HIPAA – a federal law that controls privacy medical information and portability of health insurance. The key to accessing benefits afforded under this law is keeping ongoing coverage in force, even if it is only a trimmed down or short-term medical coverage.
Medical Reimbursement Plan (MRP) – a way for employers to cover the out-of-pocket medical expenses incurred by employees on a pre-tax basis. These have been largely replaced by more modern HRAs and FSAs.1
Medical Savings Account (MSA) – an experimental health insurance and tax –saving program that ended 12/31/03 and was replaced by health savings account.3
Preferred Provider Organization (PPO) – a feature used by almost all health plans today to reduce costs through pre-negotiation of reimbursements with medical providers. PHCS is a large well-known example of a PPO network.4
Section 125 Plan – another name for a Cafeteria Plan listed above.1
Short Term Medical Insurance – a low cost health insurance issued in lengths of 6 to 12 months. A new policy deductible and exclusion to pre-existing conditions applies to each subsequent policy. In the past, this has been the most popular way for individuals to cut health insurance costs.5
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Footnotes:
1 More information at www.FreedomBenefits.org
2 More information at www.COBRAplan.com
3 More information at www.healthsavingsaccount-hsa.com
4 More information at www.Ehealthdiscountplan.com
5 Basic Health Insurance is no longer available in any state. More information about Core Health Insurance is available at Corehealthinsurance.net
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