Glossary of Insurance Terms

An EPO works a lot like an HMO — you use a specific network of doctors and hospitals — but you usually don't need referrals to see a specialist. The trade-off is that there's no coverage at all if you go outside the network, except in a true emergency.

A plan with lower monthly premiums but a higher deductible, meaning you pay more out of pocket before insurance kicks in. The big upside is that HDHPs are the only plans that qualify you to open a Health Savings Account (HSA), which lets you save pre-tax dollars for medical expenses.

An HMO plan requires you to pick a primary care physician (PCP) who coordinates your care. You'll generally need a referral from your PCP to see a specialist, and services are only covered when you use in-network providers. HMOs tend to have lower premiums and predictable copays.

Sometimes called a “traditional” or “fee-for-service” plan, indemnity insurance lets you see any doctor or hospital you want without worrying about networks. You pay upfront and the plan reimburses you a set percentage. These plans offer maximum flexibility but typically come with higher premiums and more paperwork.

A POS plan is a hybrid between an HMO and a PPO. You choose a primary care physician and need referrals like an HMO, but you also have the option to go out of network like a PPO — you'll just pay more when you do. It's a middle ground for people who want some flexibility without full PPO pricing.

A PPO gives you the most flexibility of any standard plan type. You can see any doctor or specialist without a referral, and you'll still get partial coverage if you go out of network. The trade-off is higher premiums compared to HMOs and EPOs. PPOs are popular with people who want freedom to choose their providers.

After you've met your deductible, coinsurance is the percentage of costs you share with your insurance plan. For example, if your plan has 20% coinsurance, the insurer pays 80% of a covered service and you pay 20%. This continues until you hit your out-of-pocket maximum.

A copay is a fixed dollar amount you pay at the time of a medical service — like $30 for a doctor visit or $15 for a prescription. It's a predictable, flat fee that doesn't change based on the total cost of the service. Not all services have copays; some go toward your deductible instead.

The amount you pay out of your own pocket for covered services before your insurance starts paying its share. For example, with a $2,000 deductible, you cover the first $2,000 of eligible costs each year. After that, your plan kicks in (usually through coinsurance). Preventive care is typically covered before you meet the deductible.

An employer-sponsored account that lets you set aside pre-tax dollars for medical expenses like copays, prescriptions, and dental work. The catch is the “use it or lose it” rule — most of the money you contribute must be spent by the end of the plan year, though some plans allow a small rollover or grace period.

An employer-funded account that reimburses employees for qualified medical expenses and sometimes individual health insurance premiums. Unlike an HSA or FSA, only the employer contributes to an HRA — employees don't put money in. The employer sets the rules for what's covered and how much rolls over year to year.

A tax-advantaged savings account available only to people enrolled in a High-Deductible Health Plan (HDHP). You contribute pre-tax dollars, the money grows tax-free, and withdrawals for qualified medical expenses are also tax-free — a triple tax benefit. Unlike an FSA, your HSA balance rolls over every year and the account is yours even if you change jobs.

The most you'll have to pay for covered services in a plan year. Once you hit this limit — through deductibles, copays, and coinsurance combined — your insurance covers 100% of covered services for the rest of the year. This is your financial safety net and one of the most important numbers to look at when comparing plans.

The amount you (or your employer) pay each month to keep your health insurance active, regardless of whether you use any medical services. Think of it like a subscription fee. For employer-sponsored plans, the premium is typically split between the company and the employee, with the employee's share deducted from each paycheck.

California's state-run health insurance marketplace, created under the Affordable Care Act. Individuals and families who don't have employer-sponsored coverage can shop for plans here, and many qualify for subsidies that lower their monthly premiums. Open enrollment runs annually, typically from November through January.

A set of ten categories of services that all ACA-compliant plans must cover, including things like emergency care, hospitalization, prescription drugs, maternity care, mental health services, and preventive care. These requirements ensure a baseline level of coverage no matter which plan you choose on the individual or small-group market.

A statement your insurance company sends after a claim is processed. It's not a bill — it's a summary showing what was billed, what the plan covered, what discount was applied, and what you may still owe. Comparing your EOB to any provider bills you receive is a good way to catch errors.

A list of prescription drugs that your health plan covers, organized into tiers. Generic drugs are usually on the lowest (cheapest) tier, while brand-name and specialty medications cost more. If your medication isn't on the formulary, you may pay full price or need your doctor to request an exception from the insurer.

Routine health services designed to prevent illness or catch problems early — things like annual physicals, vaccinations, cancer screenings, and well-child visits. Under the ACA, preventive care must be covered at no cost to you (no copay, no deductible) when you use an in-network provider.

A requirement from your insurance company to approve certain services, procedures, or medications before they're provided. Your doctor's office usually handles the request, but it can take a few days. If you skip this step when it's required, your plan may deny the claim entirely.

A standardized document that every health plan must provide, giving you a snapshot of what the plan covers and what it costs. SBCs use a consistent format so you can compare plans apples to apples. You'll find key numbers like deductibles, copays, out-of-pocket maximums, and coverage examples right on the first page.

The federal law — sometimes called “Obamacare” — that reshaped health insurance in the U.S. It created marketplace exchanges, required insurers to cover pre-existing conditions, established essential health benefits, and set rules for employer-sponsored coverage. For employers with 50+ full-time employees, the ACA requires offering affordable health insurance or facing penalties.

Under the ACA, employer-sponsored coverage is considered “affordable” if the employee's share of the premium for self-only coverage doesn't exceed a certain percentage of their household income (around 9% in recent years). If your coverage isn't deemed affordable, employees may qualify for marketplace subsidies — and larger employers may face penalties.

An employer with 50 or more full-time equivalent employees, as defined by the ACA. ALEs are required to offer affordable minimum essential coverage to full-time employees or potentially face penalty taxes. The calculation includes part-time hours, so even if you don't have 50 full-time employees, your part-time staff can push you over the threshold.

A federal law that lets employees (and their dependents) continue their employer-sponsored health coverage for a limited time after leaving a job, getting laid off, or losing eligibility due to reduced hours. The catch is you pay the full premium yourself — both the employee and employer portions — plus a 2% administrative fee. COBRA coverage typically lasts 18 to 36 months depending on the qualifying event.

The approach an employer uses to share the cost of health insurance premiums with employees. Common strategies include paying a percentage of a reference plan (like 80% of the Gold HMO), a percentage of whichever plan each employee selects, or a fixed dollar amount. The right strategy depends on your budget, your team, and ACA affordability requirements.

The Employee Retirement Income Security Act — a federal law that sets standards for employer-sponsored benefit plans, including health insurance. ERISA requires employers to provide plan documents, follow fiduciary duties, and give employees certain rights. If you sponsor a group health plan, ERISA compliance isn't optional — it's a legal requirement.

The baseline level of health coverage that satisfies the ACA's requirement for individuals and employers. For employers, offering MEC means providing a plan that covers a core set of benefits. Some “MEC-only” plans meet the technical requirement but offer limited benefits — so it's worth understanding exactly what a plan covers beyond the label.

The annual period when employees can enroll in, change, or drop their employer-sponsored health coverage. Outside of open enrollment, changes are generally only allowed when you experience a qualifying life event. For Medicare, there are separate enrollment windows — the Annual Election Period (October 15 to December 7) is the main one.

A major life change that allows you to enroll in or modify your health insurance outside of open enrollment. Common examples include getting married, having a baby, losing other coverage, or moving to a new state. You typically have 30 to 60 days from the event to make changes, so don't wait.

A document required by ERISA that describes your benefit plan in plain language — what's covered, how to file claims, your rights as a participant, and how the plan operates. Every employer that sponsors a group health plan is legally required to provide an SPD to participants.

A document that “wraps around” the insurance carrier's materials (like an SBC or certificate of coverage) to create a single, ERISA-compliant plan document. Most carriers don't provide all the information ERISA requires, so the wrap document fills in the gaps — covering things like claims procedures, plan administration details, and participant rights.

The window from October 15 to December 7 each year when Medicare beneficiaries can make changes to their coverage — like switching from Original Medicare to Medicare Advantage, changing Advantage plans, or enrolling in a different Part D drug plan. Changes made during AEP take effect January 1.

The seven-month window when you first become eligible for Medicare, centered around the month you turn 65 (three months before, your birthday month, and three months after). This is your best opportunity to enroll without penalties or restrictions. Missing this window can mean late-enrollment surcharges that last for life.

An extra charge added to your Medicare Part B and Part D premiums if your income exceeds certain thresholds. It's based on your tax return from two years ago. If your income has dropped since then (due to retirement, for example), you can appeal to Social Security for a reduction.

The part of Original Medicare that covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health services. Most people don't pay a premium for Part A because they (or a spouse) paid Medicare taxes for at least 10 years while working. There are still deductibles and coinsurance for hospital stays.

The part of Original Medicare that covers doctor visits, outpatient care, preventive services, lab work, and medical equipment. Part B has a monthly premium (which most people pay), an annual deductible, and 20% coinsurance for most services. This is the piece that Medigap plans are designed to supplement.

A private-insurance alternative to Original Medicare that bundles Part A and Part B coverage (and usually Part D) into a single plan. Many Advantage plans include extras like dental, vision, hearing, and gym memberships. The trade-off is that most use provider networks, so you may have less flexibility in choosing doctors compared to Original Medicare with a Supplement.

An optional Medicare benefit that helps cover the cost of prescription drugs. Part D is offered through private insurance companies and each plan has its own formulary, premiums, and pharmacy network. If you don't enroll when you're first eligible and don't have other creditable drug coverage, you may face a permanent late-enrollment penalty.

Private insurance that works alongside Original Medicare (Parts A and B) to cover some of the costs Medicare doesn't — like coinsurance, copayments, and deductibles. Medigap plans are standardized by letter (Plan G, Plan N, etc.), so the benefits are the same regardless of which company sells it. The best time to buy is during your Medigap Open Enrollment Period, when you can't be denied for health reasons.

A window outside the regular enrollment periods when you can make changes to your Medicare coverage due to certain qualifying events — like moving to a new area, losing employer coverage, or qualifying for Medicaid. SEPs vary in length depending on the event, so it's important to act quickly once you qualify.

Both brokers and agents are licensed to sell insurance, but they work differently. An agent typically represents one or a few specific carriers — they sell that carrier's products. A broker is independent and works on your behalf, shopping across many carriers to find the best fit for your situation. At Caffrey, we're brokers — we're not tied to any single carrier, and our job is to represent you, not the insurance company.

In-network providers have a contract with your insurance plan, which means they've agreed to discounted rates. You'll pay less when you see in-network doctors and use in-network facilities. Out-of-network providers don't have that agreement, so your share of the cost is higher — and with some plan types (like HMOs and EPOs), out-of-network care may not be covered at all except in emergencies.

Your main doctor for routine and preventive care — annual checkups, sick visits, managing ongoing conditions, and coordinating referrals to specialists when needed. In HMO and POS plans, you're required to choose a PCP and get referrals through them. In PPO plans, having a PCP is recommended but not required.

A doctor who focuses on a specific area of medicine — like cardiology, dermatology, orthopedics, or oncology. Depending on your plan type, you may need a referral from your primary care physician before seeing a specialist. Specialist visits typically have higher copays than PCP visits.

A company that handles the day-to-day administration of a health plan on behalf of the employer — processing claims, managing enrollment, coordinating benefits, and handling customer service. TPAs are common in self-funded plans where the employer assumes the financial risk but outsources the paperwork to a specialist firm.