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.