Posted in Offering health benefits

What Health Insurance Terms Should I Know?

As you’re hatching the details of your new health plan, you’ll quickly realize that deciphering insurance is like learning a second language. When all you want is to know what you’re about to sign up for, memorizing vocab words may be the last thing you want to spend your time on. We don’t blame you. In this article, we’ll make the understanding part a cinch. No, we won’t give you any mnemonic devices, but we will run through the biggest health insurance terms you need to know. Ready, set, vocab.

Your vocab list:

The Affordable Care Act (ACA)

The ACA is a health care law that went into effect in 2010 and requires certain employers to offer health insurance to their teams. The Act is huge — clocking in at over 1990 pages — and outlines health care rules for companies, individuals, insurance companies, and many other entities.

Applicable large employer (ALE)

This is any company that has 50 or more full-time equivalent employees, and therefore needs to provide their team with health care.

Employer mandate

The mandate is a section in the ACA that requires companies with 50 or more employees to offer health insurance or get penalized.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA)

HIPAA is a law that protects people’s protected health information, called PHI. It does this by spelling out the kinds of health information that must be kept private, along with creating high standards to hold everyone who has access to sensitive information responsible for its security. If you’re HIPAA compliant, it means that you follow all the laws laid out in this important Act.

HIPAA business associate agreement (BAA)

This one sounds like it’s all business, but don’t get frightened. A BAA is a simple agreement that allows companies who follow HIPAA, called covered entities, to hire other employees or contractors, called business associates. Companies who enter into a BAA agree to follow the same stringent HIPAA regulations that the covered entity they’re working for does.

Plan document

This is the source of truth for your health plan. The document describes the benefits provided, the plan administrator, all terms and conditions, and any other essential nuggets of information about your plan.

Summary plan description (SPD)

This is your team’s version of the plan document. Inside, it explains how the plan actually works, what’s offered, and other important details that an employee needs when using the plan. If the plan changes ever so slightly, you’ll still need to hand your team a new copy of the SPD.

Summary of benefits and coverage (SBC)

The SBC is a quick plan overview that is put together by your insurance carrier. It explains the basics of the coverage being offered, so you can easily compare a variety of different plans. This is what you’ll find inside:

  • The monthly premium price
  • Deductible price
  • Co-pay price
  • Coinsurance rate
  • Out-of-pocket maximum
  • Treatments covered
  • And other details

If you’re a participant or simply shopping around, your carrier will give you one directly — just ask.

1094-C and 1095-C forms

Do you have 50 or more FTEs on staff? Then these forms need to be sprinkled into your vocabulary. The two documents exist so you can show the IRS that you’re giving your team meaningful health insurance. The 1095-C needs to be handed to your employees by January 31st. Once that’s done, send a copy of both the 1094-C and 1095-C to the IRS by February 28th or March 31st, if you fill it out online. Get more instructions here.

The Employee Retirement Security Act of 1974 (ERISA)

ERISA is a law that regulates health plans, and provides more transparency on the dynamics of those plans. According to the American Benefits Council, ERISA lays the entire foundation for both company-sponsored health and retirement plans. All employers need to follow ERISA if they’re offering healthcare to their teams.

Premium-only plan (POP)

POP plans are the most elementary version of section 125 plans, which allow employees to pay for their premiums before taxes are taken out. Since contributions are deducted pre-tax, a person’s total taxable income is reduced, allowing both you and your team to save money in the end.

Say hello to clarity, and goodbye to frantically looking up every other word that crosses your path. Studying the vocabulary above will make it easier to understand what’s happening as you delve into unfamiliar territory. The more you learn, the more you’ll become a health insurance champ. And when that happens, anything is possible.