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 self-individuals to cut health insurance costs. Also commonly used as a cost-effective alternative to COBRA coverage.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

The traditional fee-for-service plan allows you to receive reimbursement of a portion of the medical expenses. The fees that you have to pay do not vary depending on which doctor you attend, but your doctor may charge more than the provider reimburses.

There are three types of plans which are known as “managed care plans” which provide the customer with a specific network of health providers and hospitals. The first of these is called the Health Maintenance Organization (HMO). This option enables you to choose a primary care physician who functions as your care coordinator, and refers you to specialists as required. If you choose to go outside the network then you will be paying more of the cost unless the network was unable to provide the service that was needed.

The next type of plan is called the Preferred Provider Organization (PPO). This is similar to the HMO, but without the requirement of having to select a primary care physician. Some reimbursement of expenses from outside the network is available but you should expect to pay a greater portion of the cost.

The third type of managed care plans are called Point-of-Service (POS). They are characterized by the provision of network and non-network doctors. With these plans, a referral from your primary care provider will reduce the cost of subsequent treatment.

A more recent addition to the health insurance family is what is called Consumer Directed Health Plans (CDHPs). These are high-deductable plans which enable you to access an account for the payment of medical expenses. There are three types of CDHPs.

The first is known as the Health Savings Account (HSA). This plan enables you to contribute to your account from your income tax and sometimes from your pay itself if your employer participates in a plan known as the IRS 125 plan. This account is flexible and allows you to keep it going if you change employers. The funds can be used for non-medical expenses, but there would be costs involved in the form of tax penalties etc.

The next type of plan is known as the Health Reimbursement Arrangement (HRA). This plan is controlled and funded by your employer, and as such, you are not able to use the money for other purposes. If you leave this plan, you lose the funds that are left in it.

The third of the CDHPs is the Flexible Spending Account (FSA). This is funded by a deduction from your pay and is used to pay for health related services and certain other services such as day care. What expenses can be paid for by the FSA is up to the IRS. FSAs are not as flexible as other plans inasmuch as they are lost by the employee if not used by the end of the year, or if the employee changes employers.

This range of health care plans may seem a little bewildering at first glance, but you will find that it was worthwhile spending a little time and effort to find the most appropriate plan for you and your family.

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