Health Care 101: Commonly Asked Questions

Commonly Asked Questions
Common Health Care Definitions
Financial Definitions

 
 

An ASO (Administrative Services Only) plan is an arrangement in which a licensed insurer provides administrative services to an employer's health benefits plan (such as processing claims), but doesn't insure the risk of paying benefits to enrollees. In an ASO arrangement, the employer pays for the health benefits and decides what benefits will be a part of the plan. 

 

A High Deductible Health Plan (HDHP) is a health insurance plan with lower premiums and higher deductibles than a traditional health plan. A Consumer Driven Health Plan (CDHP) also has lower premiums and higher deductibles; however the deductible is improved with a funding account. These accounts may be funded in part by the employer – such as a health reimbursement arrangement or HRA, and/or with the employee pre-tax funds such as a Health Savings Account (HSA) or Flexible Spending Account (FSA). CDHPs oftentimes also provide 100% coverage for preventive medicine, health improvement programs such as health coaches and 24 hour health information lines and online tools for selecting the most high-quality and cost effective treatments, physicians and healthcare facilities.
 
 

Pharmacy tier pricing is a method of segmenting brand name and generic drugs into price classifications making it easier for individuals to consult with their physician to find the most effective medication at the lowest cost. Most plans today generally have three tiers. The third tier (non-preferred brand name drugs) has the highest out-of-pocket costs. The second tier is preferred brand name drugs which have a lower co-payment or coinsurance than non-preferred brand name drugs. Generic medications are the least expensive options and are on tier one. Many pharmacy benefit plans are starting to offer a fourth tier, which usually includes either specialty medications or lifestyle drugs. 
 
 

An electronic health record (EHR) or electronic medical record (EMR) refers to an individual patient's medical record in digital format. Electronic health record systems co-ordinate the storage and retrieval of individual records from many physicians and other health care professionals with the aid of computers. A personal health record (PHR) is typically a health record that is initiated and maintained by an individual. An ideal PHR would provide a complete and accurate summary of the health and medical history of an individual by gathering data from many sources and making this information accessible online to anyone who has the necessary permission to view the information. EHR systems are the preferred method of gathering data as they allow all care providers to update the patient’s information rather than relying on the patient to do so. EHR’s are believed to increase physician efficiency and reduce costs, as well as promote standardization of care. 
 
 

The Health Insurance Portability and Accountability Act (HIPAA) was enacted by the U.S. Congress in 1996. According to the Centers for Medicare and Medicaid Services (CMS) website, Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs. Title II of HIPAA, known as the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic health care transactions and national identifiers for health care professionals, health insurance plans, and employers. The Administration Simplification provisions also address the security and privacy of health data. The standards are meant to improve the efficiency and effectiveness of the nation's health care system by encouraging the widespread use of electronic data interchange.. The protection and privacy of an individual’s information is important to both the insurance provider and the individual, therefore, by law, insurance companies can not discuss a person’s care, health implications or other aspects of the case with out the express written consent of the individual.
 
 

Virtually no health plan—public or private, U.S.– based or international, including countries that have a nationalized system—provides coverage for treatments that the medical community considers to be unproven or ineffective, and therefore experimental. Therefore, such treatments are not covered by employer benefit plans. The decision on whether a treatment is considered experimental is based on peer reviewed medical literature and evidenced-based medicine and not an insurer’s opinion. Experimental treatments are a complex societal issue for which there is no easy answer. We continue to work with the industry and the federal government to determine the appropriate approach to unproven and experimental treatments. 
 
 

Universal health care is health care coverage that is extended to all eligible residents of a governmental region and often covers medical, dental, and mental health care. These programs vary in their structure and funding mechanisms. Typically, most costs are met via single-payer health care system or national health insurance, or else by compulsory regulated pluralist insurance (public, private or mutual) meeting certain regulated standards. 
 
 

Single-payer health care is a term used in the United States to describe the payment of doctors, hospitals, and other health care providers from a single source. It is often mentioned as one way to deliver universal health care. The administrator of the fund is usually the government. 
 
 

Original Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over, or who meet other special criteria.

Medicare Advantage is a plan offered by a private insurer that contracts with Medicare to provide Medicare Part A and Part B benefits. These plans are regulated by Medicare. Medicare Advantage Plans can be either HMOs, PPOs, or Private Fee-for-Service (PFFS) Plans. For enrollees in a Medicare Advantage Plan, Medicare services are covered through the private insurers, and often offer more benefits than Original Medicare. Medicare Advantage Private Fee For Service is a type of Medicare Advantage Plan in which you may go to any Medicare-approved doctor or hospital that accepts the plan’s payment. The insurance plan, rather than the Medicare Program, decides how much it will pay and what you pay for the services you get. Depending on the plan you choose, you may pay more or less for Medicare-covered benefits and may have extra benefits the Original Medicare Plan doesn’t cover. In addition, unlike Original Medicare, there is a maximum out-of-pocket expense a person will have to pay each year. Medicare Advantage PPOs are network-based plans in which a Medicare Advantage PPO must provide a network of providers that offer reduced out-of-pocket costs than the health care professionals not in the company’s network of providers.
 
 

A health savings account (HSA), is a tax-advantaged medical savings account available to taxpayers in the United States who are enrolled in a Consumer Driven Health Plan (CDHP). The funds contributed to the account are not subject to federal income tax at the time of deposit, and any interest and investment income accrue tax free and are not taxed at the time of withdrawal provided you follow the guidelines. Unlike a flexible spending account (FSA), funds roll over and accumulate year over year if not spent. HSAs are owned by the individual and thus “portable” This means individuals may take the funds with them should they change employers or health plans, and may use the funds to pay for their health expenses in retirement.

Health Reimbursement Accounts or Health Reimbursement Arrangements (HRAs) are Internal Revenue Service (IRS)-sanctioned programs that allow an employer to set up an account for an employee to pay for medical expenses paid directly by participating employees, thus yielding tax advantages to offset health care costs. HRA’s are not portable, in other words, you may not take the funds with you when you change employers.

A flexible spending arrangement (FSA), or Flexible Spending Account, as they are commonly called, is one of a number of tax-advantaged financial accounts that can be set up through a cafeteria plan of an employer in the United States. An FSA allows an employee to set aside a portion of his or her earnings pre-tax to pay for qualified expenses as established in the cafeteria plan, most commonly for medical expenses but often for dependent care or other expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes, and can therefore result in payroll tax savings.

The most common FSA, the medical expense FSA (also medical FSA or health FSA), is similar to a health savings account (HSA) or a health reimbursement account (HRA). However, while HSAs and HRAs are almost exclusively used as components of a consumer driven health care plan, medical FSAs are commonly offered with more traditional health plans as well. Any money set aside in an FSA that is not spent in a given year by the employee is forfeited. 
 
 

Coinsurance is the portion of eligible expenses that plan members are responsible paying, most often after the deductible is met. Coinsurance is expressed as a percentage or pair of percentages generally with the insurer's portion stated first (such as 80 percent paid by the insurer/20 percent paid by the individual). The deductible is the portion of any claim that is not covered by the insurance provider before the expenses begin to be covered. It is normally quoted as a fixed amount and is a part of most policies. The deductible must be "met", that is, paid by the insured, before the benefits of the policy can apply. 
 
 

A Pharmacy Benefit Manager (PBM) is often a third party administrator of prescription drug programs. They are primarily responsible for processing and paying prescription drug claims. They also are responsible for developing and maintaining the formulary, contracting with pharmacies, and negotiating discounts and rebates with drug manufacturers. An independent PBM is mostly in the business of managing drug distributions and availability, and is less interested in managing over-all health care costs.

Some insurers have in-house PBMs because they can integrate pharmacy, medical and behavioral data to allow the company to see the individual as a whole. This model tends to use pharmaceuticals to improve the health and well-being of the individual and therefore lower overall medical costs.