Understanding Health Plan Terminology By Tony Novak, MBA,
MT, www.tonynovak.com, OnlineAdviserTM at
FreedomBenefits.org
Here is a quick summary of some terminology common in health
plans today:
Basic Health Insurance - a trimmed-down coverage as the name
implies that provides limited coverage at a very affordable
price to anyone regardless of health history. This type of
coverage is not authorized in all states.5
Cafeteria Plan - an employee benefit plan that may include a
wide variety of benefits like retirement savings, education
benefits, dependent care along with the health plan.
Employees can mix and match to suit their needs.1
COBRA - a federal law that guarantees continuation of health
insurance coverage to those in special situations who can
aford to pay the high premium cost. This option is usually
available for 18 months to the employees or former employees
of medium-sized and large businesses. 2
Consumer-Driven Health Plan - a non-specific buzzword that
usually refers to an HRA plan but may also be applied to any
other type of health plan with user-selected features.1
Flexible Spending Account (FSA) - an arrangement to allow
employees to use their own pay to pay for medical expenses
on a pre-tax basis. The election is irreversible, thus these
plans are also know as "use it or lose it" plans. 1
Health Reimbursement Arrangement (HRA) - a way for employers
to provide flexible health benefits to employees without
health insurance restrictions. 1
Health Savings Account (HSA) - a new insurance and tax-
saving program available to anyone, but attractive usually
only to healthy people without pre-existing medical
conditions. Administrative details are still evolving, so
these plans might be more popular once potential tax
problems and insurance issues are resolved. 3
HIPAA - a federal law that controls privacy medical
information and portability of health insurance. The key to
accessing benefits afforded under this law is keeping
ongoing coverage in force, even if it is only a trimmed down
or short-term medical coverage.
Medical Reimbursement Plan (MRP) - a way for employers to
cover the out-of-pocket medical expenses incurred by
employees on a pre-tax basis. These have been largely
replaced by more modern HRAs and FSAs.1
Medical Savings Account (MSA) - an experimental health
insurance and tax -saving program that ended 12/31/03 and
was replaced by health savings account.3
Preferred Provider Organization (PPO) - a feature used by
almost all health plans today to reduce costs through pre-
negotiation of reimbursements with medical providers. PHCS
is a large well-known example of a PPO network.4
Section 125 Plan - another name for a Cafeteria Plan
listed above.1
Short Term Medical Insurance - a low cost health insurance
issued in lengths of 6 to 12 months. A new policy deductible
and exclusion to pre-existing conditions applies to each
subsequent policy. In the past, this has been the most
popular way for individuals to cut health insurance costs.5
Footnotes:
1 More information at www.FreedomBenefits.org
2 More information at www.COBRAplan.com
3 More information at www.healthsavingsaccount-hsa.com
4 More information at www.Ehealthdiscountplan.com
5 More information at www.MedSave.com
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About the Author: Tony Novak, MBA, MT, is an accountant,
writer and financial adviser based in the Philadelphia area.
He provides tax and financial planning consultations
nationwide by telephone on an hourly basis in conjunction
with the work of accountants, attorneys, financial advisers.
Over the past 20 years he has responded to tens of thousands
of questions posed by telephone, e-mail and on the radio.
Hundreds of his articles on financial planning topics are
published in dozens of publications throughout the nation.
He an be reached at (877) 529-1112 or through
www.tonynovak.com. To subscribe to OnlineAdviser News with
daily tips on current financial topics, send an e-mail to
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