Making sense of health care reform jargon
Trying to sort through the lingo of federal health care reform might be confusing enough to give you a headache. Here’s a glossary of 12 terms that can help you understand the federal Patient Protection and Affordable Care Act, which became federal law in March of 2010.
1. Affordable insurance exchange
The health care reform law calls for each state to set up an affordable insurance exchange, also called a health insurance exchange, by 2014.Through these exchanges, individuals and small business owners can buy health insurance. According to HealthCare.gov, consumers will be able to access their state’s exchange online or by phone to buy private insurance or, if eligible, enroll in public insurance programs such as Medicaid. Through the exchanges, consumers also will be able to apply for tax credits to reduce their premiums.
“It’s a little like a shopping mart that allows you to pick a health insurance plan,” says John Rother, president and CEO of the nonprofit National Coalition on Health Care.
Rother says plans sold through the exchanges will be offered in four tiers – platinum, gold, silver and bronze – to make it easier to compare benefits. States can opt out of setting up an exchange; in those states, the federal government will step in and run the exchanges. According to the Kaiser Family Foundation, seven states, including Louisiana, Florida and Texas, had decided as of August 2012 to not create exchanges.
2. Grandfathered health plan
Some health plans that were in effect before March 23, 2010, when the new health care law kicked in, are “grandfathered.” This means they must comply with only some provisions of the law. For example, unlike other plans, grandfathered plans do not have to offer certain preventive services for free. But, like other plans, they may not retroactively take away coverage because of a small error on an insurance application. (See rescission.)
3. Group health insurance
Group health insurance typically is available through an employer and covers a group of eligible employees. Premiums for group insurance can be lower than similar insurance would cost on the individual market, partly because a group has more buying power. Employers also usually pick up part of the cost. Furthermore, risks are spread among the group – so, if one person becomes seriously ill, the healthy group members who are paying premiums will offset those treatment costs. Compared with individual insurance, group insurance gives “you get better benefits at less cost,” Rother says.
4. Guaranteed issue
Guaranteed issue means that a health insurance company must allow a consumer – young or old, male or female, healthy or sick – to buy and renew a policy. “If you send in your check, they cover you regardless of your health status,” Rother says. Starting in 2014, all individual health insurance policies must be “guaranteed issue.”
5. Individual health insurance
Individual health insurance is purchased by a consumer, often someone who is self-employed or who can’t get insurance through work. “If you’re buying (health) insurance today as an individual, you’re buying the most expensive, least generous policy you can get,” Rother says.
But the health care reform law will let individuals act as a “group” within the exchanges, he says. “Although you are making your own decisions and buying with your own dollars, the exchange will give you the advantage of group negotiations for rates and coverage,” Rother says.
6. Individual mandate
The federal health care reform law requires almost all individuals to buy health insurance or pay a fine. Some extremely poor people or those with religious objections will be able to apply for waivers exempting them from the mandate. The U.S. Supreme Court upheld the individual mandate in June 2012 after 26 states sued, claiming it was unconstitutional.
7. Lifetime dollar limits
A lifetime dollar limit is a cap on the total amount an insurer will pay during a policyholder’s lifetime. In cases where a patient has a serious injury or illness – for example, a brain injury or cancer – and reaches the limit, the insurer would stop paying and the patient then would be responsible for all health care costs.
The health care reform law prevents private health insurers from imposing lifetime dollar limits on care for essential benefits, including hospitalization, emergency services, maternity care, mental health services, prescription drugs and rehabilitation. “That’s the most basic function of insurance – to offer you and your family protection from being financially wiped out,” Rother says.
8. Pre-existing condition
A pre-existing condition is a “physical or mental health condition, disability or illness that you have before you enrolled in a health plan,” according to HealthCare.gov. Depending on the insurer, a pre-existing condition could be anything from asthma to high blood pressure to a stroke. According to the U.S. Department of Health and Human Services, up to 50 percent of Americans under age 65 have pre-existing conditions. Beginning in 2014, insurers no longer can refuse to sell a policy – or to charge much higher premiums – for someone with a pre-existing condition.
9. Pre-existing Condition Insurance Plan (PCIP)
This is a special type of health plan that will be available until 2014, when insurers must begin selling policies to consumers with pre-existing conditions. These plans, offered by state and federal agencies, are available to U.S. citizens or legal residents who’ve been denied health insurance because they have pre-existing conditions and have been uninsured for at least six months.
10. Preventive services
Preventive services are health care checkups, screenings and other services done to prevent illnesses or to diagnose conditions before they become more serious. The health care reform law requires that all new plans and policies created on or after March 23, 2010, offer some free preventive services through health care providers in the insurer’s network. Preventive services can include well-baby visits, flu shots, cholesterol tests, depression screenings, blood pressure checks and HIV tests.
Rescission happens when an insurance company retroactively voids an insurance policy and refunds all premiums. Usually, the company cites a misrepresentation on your insurance application as the reason.
Before the health care reform law, insurers could void a policy, right after a policyholder got sick, for a tiny mistake on the application. For example: A woman is diagnosed with breast cancer, then her insurer goes back to her initial application, sifts through her medical records and finds that she failed to mention she once had been treated for acne. The insurer drops her coverage for that omission – even though acne has nothing to do with breast cancer – and avoids paying for her cancer treatment.
“Rescission is a very scary thing you never want to face as a consumer,” says Amy Bach, executive director of the nonprofit consumer advocacy group United Policyholders.
Bach says it’s important to be completely honest on an insurance application. The federal health care reform law states that insurers now can yank coverage only if fraud was committed or if the policyholder intentionally misrepresented a key fact about their health. So, rescission still could be allowed if, for example, a patient lied about a past bout with cancer, but probably not because he or she forgot to mention a heat rash in 2009. This means consumers have better protection against unfair rescission than they did before the law, Bach says.
12. Summary of benefits and coverage
Starting in September 2012, health insurers must provide a short, standardized outline that makes it easy to understand what each plan covers and how the coverage works. A full summary of benefits and coverage can be at least 100 pages long and “very confusing,” says Susan Combs, president of Combs & Co., an insurance brokerage in New York.
The shorter summaries will give examples of how a particular health plan would cover, for example, having a baby and having type 2 diabetes. For each example, the summary will give a breakdown of all costs, showing how much the insurer would pay as well as how much the patient would pay in deductibles, co-pays and other costs. “This breaks it down into smaller bites so (policyholders) can understand it better,” Combs says.