• What is the COBRA subsidy? The COBRA subsidy is designed to help you pay for health insurance during unemployment. It pays for 65% of the cost of your COBRA premiums.
• Who is eligible for the COBRA subsidy? You can get subsidy if you were laid off between September 1, 2008 and May 31, 2010. The subsidy lasts for up to 15 months.
• What happens after 15 months? You can stay covered under COBRA for another 3 months (more in some states), but you will have to pay 100% of the premiums. For example, if you are currently paying $350 per month under the subsidy, your premiums will increase to $1000 per month.
• Where can I find less expensive health coverage? While the benefits from COBRA are great, the cost is often too high. Take a look at our article Health Coverage Help During Unemployment for ways to find great health coverage for as low as $39 per month.

• Allowable Amount: The dollar amount that a managed care company assigns to a particular medical service. Doctors that are part of a managed care organization agree to accept this amount, even if the doctor would normally charge a higher rate. For example, you visit a dermatologist. You are told that the checkup is $150, but your managed care insurance company says the allowable amount is $125. As a member of the managed care network, the doctor accepts $125 less your co-payment from the managed care company. The doctor does not collect the $25 difference. Managed care organizations determine the allowable amount for various levels of medical care based on what they deem to be reasonable, what comparable care would cost in the marketplace, and how much doctors are willing to accept.

• Benefits: Services and payments you receive as part of a health plan.

• Explanation of Benefits: A document prepared by your insurance company indicating the cost of service, benefits received (i.e. the amount the insurance company will pay), and your co-insurance or co-payment amount. For example, let’s say you visit a doctor who charges $100 for the visit. You submit your insurance information and make a $20 co-payment upon leaving the doctor’s office. About 30 days later, you will receive an explanation of benefits from the insurance company informing you of the total amount billed, the allowable amount, your co-payment, and an additional payment required. The Explanation of Benefits is often abbreviated as “EOB”.

• Generic Drug: As described by the Food and Drug Administration, a generic drug is identical in dosage, form, safety, strength, route of administration, quality, performance characteristics, and intended use to its brand name equivalent prescription drug.

• Group Plan: A health insurance plan that provides insurance to a group of people (e.g. employees of a company or members of an organization). Buying insurance as part of a group is theoretically cheaper than buying insurance individually. Insurance companies are able to charge lower rates to groups because they view the group as diversifying risk. Note: COBRA is a form of group insurance.

• Guaranteed Issue: State provisions where health insurance companies operating in the state are required to provide health insurance to all applicants, regardless of medical history, age, or current medical condition. Insurance companies operating in the state must charge the same rates to all members of a given health insurance plan without differentiating based on the personal factors mentioned. As a result of these requirements, guaranteed issue policies benefit older people with medical conditions at a cost to younger people without any health issues.

• HIPAA: The Health Insurance Portability and Accountability Act is a law that was passed in 1996 to protect your right to qualify for health insurance in situations where you have experienced a change in employer, employment status, or relationship (e.g. divorce). HIPPA is important because under the law health insurance companies are required to renew health plans.

• Insurance Broker: An independent company that represents a variety of insurance companies. Insurance brokers can provide you multiple health insurance alternatives for comparison purposes.

• Network: A group of doctors, hospitals, and other healthcare providers who belong to a managed care organization. A healthcare provider who is part of the managed care organization is considered to be “in-network,” while a provider who does not contract with the managed care organization is described as “out-of-network.” Doctors may belong to more than one managed care organization. When applying for a health plan, you will have access to a list of all of the providers in the network.

• Open Enrollment: A 30 day window occurring once per year, during which you can join a managed care plan, regardless of your medical history. Not all states require that insurance companies have an open enrollment period. The benefit of an open enrollment period is that you will be able to qualify for coverage even if you have a pre-existing condition. States that do not require insurance companies to offer open enrollment will likely have a high-risk pool, which provides another alternative for people who would otherwise not qualify for health insurance.

• Policy: The document from your insurance company that provides the details of your coverage, fee schedules, and contact information. Insurance companies also refer to a policy as “evidence of coverage.”

• Pre-Existing Condition: A medical condition that may limit the health coverage that an insurance company is willing to provide. For example, if you have a chronic medical condition, a health insurance company may qualify this as a pre-existing condition, meaning they may do the following:
  • refuse to provide you any health coverage
  • provide you health coverage, but exclude treatment of this condition
  • provide you full coverage

For an insurance company or managed care organization to discriminate based on your medical history or current medical condition may not sound fair, but this is the way the system is structured throughout most of the United States. Exceptions exist in states that have guaranteed issue laws and open enrollment periods. In addition, high-risk pools are another option for people who experience difficulty finding health insurance because of a pre-existing medical condition.

• Preferred Provider: A physician, hospital, or other medical provider who is a member of a managed care network. Visits to these “in-network” medical providers are covered by your managed care plan, meaning that you will generally only pay the co-payment portion of the medical bill.

• Primary Care Physician: A doctor who provides general overall care (e.g. annual physicals), and is responsible for providing recommendations to specialist doctors. In an HMO, your selection of a primary care physician is very important, as he or she is the gatekeeper, determining which specialists you are able to see.

• Prior Approval: Requirement that doctors receive permission from the insurance company before going forward with a certain procedure (typically expensive procedures). Such procedures include imaging services (e.g. MRIs), clinical trials, and certain types of surgeries. Prescriptions (e.g. brand name pharmaceuticals) may also be subject to prior approval. Managed care insurance companies incorporate prior approval procedures to help manage costs. Prior approval is also referred to as “prior authorization.”

• Qualifying Event: An occurrence that would cause a change in your eligibility for health coverage. Qualifying events include the following: change in employment status (e.g. a layoff or a reduction in work hours), change in marital status, or change in number of dependants (e.g. a new child). A qualifying event enables you to make changes to your health plan within a given timeframe (usually 30 days). This is particularly relevant as it pertains to joining your spouse’s health plan.

• Specialist: A doctor who specializes in a certain field of medicine. Many insurance plans allow you to see specialists directly, while HMOs require a referral from your primary care physician prior to seeing a specialist.

See our Health Insurance Glossary for a collection of even more healthcare terms.

We present three categories of key terms to be aware of regarding your healthcare coverage.  Below are terms that fall under the category of Coverage Alternatives

• COBRA: COBRA stands for the Consolidated Omnibus Budget Reconciliation Act. It’s a policy that gives you the option to continue your current healthcare plan (i.e. the health insurance plan provided by your former employer). Here’s the catch: With COBRA, you now pay for 100% of the cost! You have 60 days after your departure to “elect” COBRA coverage. COBRA coverage lasts for up to 18 months. To learn more about COBRA, see COBRA:  What You Need To Know.

• Fee for Service: A health insurance plan where you pay a fixed percentage of the cost for any service received. As an example, you pay 25% of the cost for any doctor’s visit, hospital stay, or prescription, and the insurance company pays the remaining 75%. Fee for service health insurance plans have largely been replaced by managed care plans in the United States. Fee for service health insurance is also referred to as indemnity health insurance plans.

• High-Risk Pools: Health insurance provided by states that cover individuals who have been denied health insurance because of a pre-existing medical condition. High-risk pools generally take the form of an HMO or PPO, and premiums are capped at a certain level. Over 30 states offer high risk pools. High-risk pools can be tricky, because many states offering these programs use different names to describe them.

• Managed Care: Managed care plans (also referred to as managed care “organizations,” managed care “insurance,” or managed care “companies”) include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Point of Service (POS) plans. Managed care plans employ the concept of a network, which refers to a group of doctors, hospitals, and other healthcare providers. When insured under a managed care plan you’ll be referred to as a “member” of the plan. As a member, you are entitled to seek medical service with doctors and facilities that are part of the managed care network. If you require care outside of the network, you will pay a premium for this service. In addition, managed care companies may require prior approval for certain types of medical care (e.g. seeing a specialist or undergoing expensive procedures). In doing so, these groups are able to “manage” the care that patients receive, thereby reducing overall costs. Collectively, managed care plans currently account for the vast majority of private health insurance in the United States.

• Health Maintenance Organization (HMO): A type of managed care insurance plan. Services are provided by doctors who are employed by, or “contracted with,” the HMO. In contrast with other managed care plans, HMOs require that you seek a referral from a primary care physician prior to seeing a specialist. In addition, HMOs do not provide insurance coverage for you to see out-of-network doctors, meaning that if you need to see a doctor who is not contracted with the HMO, you will have to pay 100% of the cost. The HMO network of doctors will likely be large enough to have a doctor that meets your needs. Because of these limitations, HMOs are typically the most affordable healthcare option.

• Point of Service (POS): A type of managed care insurance plan that combines some the features of an HMO and a PPO. A point of service plan enables you to see out-of-network doctors and receive some insurance coverage. Think of a point of service plan as having more flexibility than an HMO, but less than a PPO.

• Preferred Provider Organization (PPO): A type of managed care insurance plan offering the most flexibility. As a member of a PPO, you can see in-network and out-of-network doctors, and may seek the care of a specialist without the referral of a primary care physician.

• Self Insurance: Going without health insurance. Technically, self insurance refers to setting aside an appropriate amount of money to pay for both expected and unexpected medical care.

• Temporary Health Insurance: Short-term health insurance plans that last anywhere from one month to twelve months in duration. Temporary health insurance plans offer limited healthcare coverage relative to traditional health insurance plans, and the insurance companies that provide these policies have the option to prevent you from renewing the plan at expiration. Because of their limited scope and unfavorable renewal provisions, temporary plans are typically priced at a discount compared to traditional healthcare plans. Temporary health insurance plans are also referred to as “short-term policies.”

Health Maintenance Organizations (HMOs)

HMOs are offer good care at a low cost.

Under an HMO plan, healthcare is provided by doctors who are members of the HMO network.  From a coverage standpoint, the defining feature of an HMO is the concept of a primary care physician.  This doctor is the primary point of contact for all medical needs, and is required to provide a referral prior to patients seeing a specialist.  While this referral system is in place to more efficiently manage costs, limits your flexibility to see a specialist directly.

From a cost perspective, HMOs are more affordable relative to PPOs.  They generally carry a very low deductible, if any at all.  A low deductible can meaningfully reduce your medical costs in a scenario where you are in need of significant medical care.  HMOs will typically have a small co-payment for both doctor visits and prescription drugs.

Preferred Provider Organizations (PPOs)

PPOs are offer greater flexibility in terms of patient care, but have a higher cost when compared with HMOs.

You may have a general physician under a PPO plan, but the plan does not require a referral prior seeking the attention of a specialist.  In addition, PPOs provide some insurance coverage for out-of-network doctor visits, which are not covered at all in an HMO plan.

The increased range of options associated with a PPO leads these plans to be somewhat more expensive relative to HMOs.  These higher costs come in the form of higher deductibles, as well as higher co-payments.  Despite the increased cost, there are many ways to lower the cost of your PPO plan, some of which we discuss in Individual Health Insurance: How To Lower Your Premiums In Three Steps.