The Open Enrollment period—November 1 to January 15—is the Federally-mandated time in which Americans can select, update, and/or renew ACA healthcare plans for 2023. This time is especially important for small business owners or those who work for themselves. With all of the industry-specific terminology and jargon, selecting the right healthcare plan can feel overwhelming. In order to make the process a little easier, below are some of the most important terms you’ll need to know.
ACA
ACA stands for the Affordable Care Act. It is also known as Obamacare, in honor of the president under whom the act was passed in 2010.
ACA Healthcare is a government-run healthcare system that was created to ensure that all Americans can get adequate health insurance, regardless of employment status, preconditions and income. ACA healthcare plans provide customers with comprehensive coverage, including preventive care and essential health benefits.
And, based on an individual’s income level and number of dependents, eligible Americans can qualify for lower premiums (or no-cost premiums) due to the law’s subsidies and tax credits.
Copayment
A copayment is a fixed dollar amount of out-of-pocket expenses for medical services that you incur after meeting your deductible. If you haven’t met your deductible for the year, then you will likely have to pay the full cost of your medical service. Some insurance plans, however, will provide copayment regardless of the status of your deductible. The size of your copay will also depend on your insurance plan. In many cases, the higher your premiums, the smaller your copay will be and vice versa
Coinsurance
Like a copayment, coinsurance is another form of out-of-pocket expense you pay towards the cost of medical services after you have met the deductible. The difference between coinsurance and copayment is that coinsurance is a percentage of the cost of medical services as opposed to a fixed amount like a copay.For example, the cost of an MRI might be $500, and your healthcare plan requires you to cover 20% as coinsurance. You would have to pay $100 for the MRI.
Deductible
A deductible is the amount of expenses you must cover before your health insurance will activate. For example, a deductible of $3,000 means that you wouldn’t exceed $3,000 of out-of-pocket expenses for the year. Your deductible accumulates over the course of a year and then resets at the beginning of the next year (i.e., January 1st). Your health insurance plan will likely exclude certain medical expenses and preventative care from the deductible requirements (e.g., annual physical exams).
Like copayments, the size of the deductible generally corresponds to a lower or higher monthly premium (e.g., low deductible plans come with higher premium payments). Understanding a plan’s deductible along with your medical needs can help you choose a plan that will better serve you. Additionally, knowing your deductible needs can help you plan your emergency fund accordingly, so you have enough savings to cover it.
Dependent
A dependent is someone you can add to your insurance plan because of their relationship to you (i.e., they rely on your financial help and other needs). Generally, health insurance plans allow you to add spouses and children as dependents within your household. Generally children are no longer considered dependents for insurance purposes at 26. The number of dependents on your plan may impact the costs (e.g., premiums, deductibles, etc.).
Network
A health insurance network refers to the doctors and other healthcare providers whose services will accept your insurance. Sometimes an insurance plan will require you to get care from a predetermined list of providers (i.e., providers in-network). If you want healthcare from a provider who is out of network, you may have to pay a higher percentage of coinsurance or deductibles or risk having to pay the entire cost of the service altogether. When reviewing a plan, you may want to consider its network and if it offers providers that are close to where you live.
Essential Health Benefits
Essential Health Benefits (EHBs) are a set of 10 categories of services and treatments that ACA health plans must cover. These include: doctor visits, hospital care, preventive/wellness services, prescription drugs, laboratory services, mental health services, maternity/newborn care, habilitative and rehabilitative services, emergency services, and pediatric services.
Monthly Premium
A monthly premium is the fixed cost you pay each month for health insurance (just like renters or homeowners insurance). This cost is in addition to the deductible, copay, coinsurance, or other costs that may arise under the terms of a plan.
Premium Tax Credit
The Premium Tax Credit (PTC), also known as the Advance Payment of the PTC, is a government program that helps eligible individuals and families to lower their health insurance premiums. The amount of PTC you qualify for depends on your household size, income level, and cost of coverage in your area.
Qualifying Life Event
A Qualifying Life Event (QLE) is a circumstance that gives you permission to purchase or modify your health insurance plan outside of the Open Enrollment period. Examples include: losing your job, getting married or divorced, having a baby, and moving.
HMO
A health maintenance organization (HMO) is a limited insurance plan focused on preventative care and wellness. These plans generally won’t cover care from out-of-network providers except for medical emergencies. An HMO may also require an insured to live or work within the geographic boundary of its network to remain eligible for coverage.
PPO
A preferred provider organization (PPO) is an insurance plan that gives its insureds certain advantages when they use health care providers within the network (e.g., lower copays and other costs). Generally, a PPO allows you to use providers who are outside of the network for an additional cost and without a referral from a provider in the PPO’s network.
Health Spending
Health spending refers to the expenses you assume towards services and products related to your well-being and medical needs. You may find the term most frequently used in the context of various health saving accounts that provide different advantages such as tax breaks. Health spending is a broad term that may include expenses such as:
- Routine preventative care (physical exams, cancer screenings)
- Curative treatments (i.e., surgeries and other medical procedures to diagnose and treat a condition)
- Prescriptions
- Physical or occupational therapy
- Dietary supplements
- Medical equipment (e.g., wheelchairs, casts, braces, etc.)
HSA
A health savings account (HSA) is a resource that you can use to allocate pre-tax dollars towards future medical expenses. Your employer may offer an HSA and a matching component as a benefit, or you can open an account through various banks and financial institutions. Generally, an HSA will only be available to insureds with a high deductible health plan (HDHP).
Limits exist on the amount of contributions you can make to an HSA within a tax year and those limits usually adjust for inflation each year. For 2023, the contribution limits are:
- $3,850 for an individual
- $7,750 for a family
An HSA can be an excellent option for growing a fund specifically for health expenses, which tend to increase the older you get.
FSA
A flexible spending account is another type of health savings account that you can use towards medical costs your insurance may not cover (e.g., copays, deductibles, etc.). Contributions to an FSA are pre-tax ($3,050 contribution limit for 2023), but you must generally use the funds within the year of contribution.
As a small business owner, if you own more than 2% of the company and are an LLC, PC, sole proprietor, partner, or have a schedule S corporation, you’re not able to contribute to an FSA plan. However, if you own a C-corp, the IRS allows you to participate in an FSA plan.
If you want to apply for an ACA plan during 2023 open enrollment you can do so at this site.