Navigating the health-insurance maze is a little easier if you
understand the terminology. Here’s a guide to most of the important
terms you’ll need to know as a small business owner:
Blue Cross and Blue Shield Association :
The national trade organization that links 38 independent regional
health insurance companies in the United States. Some of the BCBS
companies are not-for-profit. The association operates through a series
of administratively independent franchises offering insurance plans
within defined regions.
Catastrophic health insurance :
It protects you against the high cost of treating severe injury or long
illness. These policies usually cover some, if not all, of your medical
expenses above the maximum liability limit of another insurance policy.
Co-pay : This is your out-of-pocket cost per doctor visit under the terms of your policy, often $5 to $25 for each visit.
Co-insurance :
Ever hear of an 80/20 or 50/50 policy? It’s a policy with a
“co-insurance” provision, and is typically less expensive than other
policies.
Essentially, you pay an annual deductible,
then your insurance company pays a percentage of your expenses after
that (e.g. 80 percent in an 80/20 policy). You pay the difference (20
percent in an 80/20 policy). This type of policy also has a lifetime
maximum, which limits the amount the insurance company pays toward
health-care expenses in your lifetime.
Deductible :
The amount you agree to pay out-of-pocket toward health care expenses
each year. It’s usually true that a higher deductible means a lower
insurance premium.
Drug coverage : Most
policies have some prescription drug coverage, but don’t assume it’s
there. Ask about it, and be sure you understand how the coverage works
(e.g. Is there a co-pay, does it cover brand-name drugs, etc.).
Evidence of insurability : Proof of a person’s physical condition that affects acceptability for insurance or a health-care contract.
First-dollar coverage :
Insurance with no “front-end” deductible. Your coverage begins
immediately for any covered benefit. It’s common for many plans to
provide first-dollar coverage for preventive care such as annual
physical exams and immunization for children.
Guaranteed renewability :
Be sure that your health insurance cannot be cancelled after you become
sick. You need “guaranteed renewability” in your policy.
Health Maintenance Organization (HMO) :
A plan that covers visits to doctors in a network defined by the HMO.
If you need to see a specialist or doctor outside of the network, you
need a referral or approval from the HMO.
High-risk pools : Thirty states operate these groups for the uninsurable. They guarantee to issue a health insurance plan, although at a higher cost.
HIPAA :
Primarily affecting the small-group and individual markets, the Health
Insurance Portability and Accountability Act of 1996 (HIPAA) was
designed to allow portability of health insurance between jobs. It also
required the passage of a federal law to protect personally
identifiable health information.
Medical underwriting :
Most individual policies are written against the specific medical
status of an insured individual, while group policies (usually 10 or
more employees) typically are not. Under this type of coverage, someone
with a pre-existing condition or illness may not get coverage, or their
coverage may be more expensive.
Out-of-pocket expenses : Your portion of health-care costs that are not reimbursed by the insurer, including deductibles, co-payments and co-insurance.
Preferred Provider Organization (PPO) :
A plan that covers visits to doctors in a network. If you go to a
doctor outside the network, a smaller portion of your expenses are
covered. The advantage of a PPO is the ability to choose doctors
without referrals or approval, which isn’t the case with an HMO.
Pre-existing conditions :
For insurance purposes, a pre-existing condition exclusion must relate
to a condition for which medical advice, diagnosis, care or treatment
was recommended or received during the six-month period before an
individual's enrollment in a new policy plan.
Portability :
A requirement that health plans provide you continuous coverage without
waiting periods if you move from one plan to another. Portability
requirements vary by state. In some, you get no credit for prior
coverage and must wait, uninsured, during the entire pre-existing
condition exclusion period.
Report card :
An accounting of the quality of services rendered by comparable
providers over time. You can use report cards to choose a health plan
or doctor, or check up on the overall effectiveness of your current
plan or provider.
Risk pool : A
legislatively created program that groups together individuals –
sometimes including entrepreneurs – who can’t get coverage in the
private sector.
Waiting periods : The time an individual must wait to become eligible for benefits for a specific condition after overall coverage has begun.
