When navigating the health insurance market, you will likely encounter terminology that seems unfamiliar. However, understanding exactly what a health insurance plan includes and what benefits a provider offers is essential to selecting the plan that’s best for you.
So, whether you’re shopping for health insurance or trying to figure out exactly what kind of coverage you have, understanding the jargon and common terms used in the health insurance industry will go a long way to helping you choose the right provider and make the most out of your health insurance plan.
7 Important Health Insurance Terms and What They Mean
1. Stop-Loss Insurance
Stop-loss insurance is a type of insurance purchased by corporate employers who have chosen to self-fund their insurance plans. Stop-loss insurance provides corporations protection from the full liability of incurring 100% of the losses assumed by catastrophic or unexpected employee medical cost claims.
Two types of stop-loss insurance exist:
- Specific Stop-Loss Insurance – This type of stop-loss insurance shields employers from unusually high claims on an individual employee once the claims exceed a predetermined threshold.
- Aggregate Stop-Loss Insurance – This type of stop-loss insurance puts a ceiling on the total liability that an employer would face covering over a specified period of time.
Stop-loss insurance doesn’t cover all costs associated with self-funded plans, but coverage kicks in when the insured’s costs exceed a certain threshold called a deductible.
2. Pharmacy Benefit Manager
Pharmacy benefit managers (PBMs) act as liaisons between pharmaceutical companies, wholesalers, pharmacies, and health insurance plan sponsors including health plans, labor unions, employers, and other organizations to negotiate prices and curate formularies (prescription benefit plan options) for optimal patient outcomes.
3. Prescription Rebates
Although they sound attractive, prescription rebates do not directly lower patient costs on prescription medications. A patient’s prescription medication cost is based on a pharmaceutical company’s list price (similar to a retail price), and this is always the case.
PBMs negotiate prescription rebates on the list price of medications with pharmaceutical manufacturers. When they strike a deal, a PBM pays a discounted price on the list price while the patient continues to pay the list price for the medications. PBMs can either hold onto the savings they accrue when negotiating prescription rebates, keep a portion as a commission, or pass on the entire savings to the health plan sponsors they work with.
When the savings are passed on to health plan sponsors, prescription rebates usually result in a reduction in premium costs for patients.
4. Spread Pricing
Spread pricing can occur in two situations:
- The first is when a PBM contracted with a health plan charges the health plan more for prescription medications than they pay the pharmaceutical company for the prescriptions, resulting in a higher cost to the consumer.
- Spread pricing can also occur when a PBM keeps a portion of the savings earned from prescription rebates instead of passing on the full rebate to the insurer.
Often health plan sponsors do not know that their PBM is charging them a spread. Ultimately, spread pricing benefits the PBM, hurts health plan sponsors, and increases consumer costs.
5. Open Access
Under the average health plan, a patient must obtain a referral from their primary care provider before seeing other healthcare providers that are within the health plan network or face covering 100% of the costs out of pocket.
This need for a referral can often result in higher costs overall – even when a specialist or other provider is covered in the insurance plan’s network – because patients often have to schedule two appointments: one with their primary care provider and the second with the referred doctor.
In an open-access health plan, patients do not need a referral from a primary care provider to have the costs of seeing other providers who are in-network covered. In an open-access health plan, patients can simply choose to see the providers they want to see, schedule their own appointments, and have their healthcare needs met with less hassle and minimal costs.
6. Network Free
One of the first questions most people ask when shopping for insurance is whether or not they’ll be able to continue seeing their doctor on their new health plan. The answer to that question usually depends on whether that healthcare provider and the clinic or hospital where they work are in-network on the new plan.
A health plan’s network is a list of healthcare providers and even clinics or specific hospitals that are either considered to be in-network or out-of-network. Healthcare obtained from in-network providers at in-network healthcare facilities are covered by the health plan’s in-network payment structure, while out-of-network care is not typically covered.
Network-free insurance does away with in-network and out-of-network care by considering every doctor, healthcare provider, clinic, and hospital in-network. With a network-free health plan, patients can keep their doctors and visit the healthcare centers they choose.
7. Transparent Pricing
The cost of healthcare services and pharmaceuticals can vary drastically across providers, clinics, hospitals, and insurance providers. This is largely due to the price negotiations which occur behind the scenes. As a result, patients tend not to know what their healthcare costs are until after they receive their bills.
With transparent pricing, plan sponsors and patients experience greater transparency when it comes to costs. With transparent pricing, you always know the price of your health insurance plan and enjoy greater insights into costs up-front before accessing care.
Learn More About Open Access, Network Free Health Insurance
At ClearChain Health, we aim to improve the health insurance experience by offering health plan sponsors, members, and providers an elevated experience. To learn more about how an open-access, network-free health insurance plan could benefit you, contact ClearChain Health today.