Health Benefits Alphabet Soup

Sometimes reading an insurance document can be like swimming in alphabet soup. Even when the words are spelled out, it can be daunting. The following is a quick guide to some of the abbreviations, words, and phrases you’re likely to encounter.

ACA: The Affordable Care Act (aka, Obamacare), the federal comprehensive health coverage law.

Allowed Amount: The most your insurer will pay for a covered service.

Benefit Period: A timeframe for benefits use. This is usually a calendar year, but could have other parameters.

COBRA: The law requiring employers to offer an employee to purchase group plan benefits after a loss of coverage resulting from such things as reduced work hours or termination.

Co-pay: The fixed amount you pay for a healthcare service or prescription drug.

Coinsurance: This is a percentage of medical costs you may be required to pay after you have met your deductible.

Deductible: This is what you pay for healthcare services before your plan pays anything. There are two types of deductibles: embedded and non-embedded. With embedded deductibles, each covered individual must meet a personal deductible amount. With a non-embedded deductible, expenses for each covered family member build towards one shared deductible amount.

EOB: Short for “Explanation of Benefits,” this is the document you receive after a covered healthcare service. It shows the original cost of the service, the cost you actually are charged under your insurance plan, deductibles and co-payments, and the total benefit your insurer will pay.

FSA: Flexible Spending Account, which allows you to set aside pre-tax money for health expenses.

HDHP: This stands for “High Deductible Health Plan,” which is a health plan with low premiums and higher deductibles.

HSA: This is a Health Savings Account you use to set aside pre-tax dollars for health needs, so long as you’re enrolled in an HDHP (see above).

Network: A list of the healthcare providers that have contracted with an insurer to provide service to plan participants. Providers on this list are “in-network.” Those not on the list are “out-of-network” and typically cost more.

Out-of-Pocket Maximum (OOPM or OPX): This is the maximum you pay out of your pocket each benefit period.

PPO: This is short for “Preferred Provider Organization,” a group of physicians, hospitals, and other healthcare providers that have contracted with an insurer to provide services at a reduced cost.