More than half (56%) of small businesses in the U.S. offer health insurance to their employees, according to a recent National Federation of Independent Business survey. As an employer, shopping for small business health insurance can be overwhelming. Throw in the alphabet soup of acronyms and abbreviations, and it can feel like you’re traveling abroad without a translation app. Not to worry, CO— has you covered.
Here are 22 of the most important letter strings in the health insurance lexicon:
ACA: Affordable Care Act. Enacted in 2010, this comprehensive health care legislation changed the health insurance landscape by aiming to increase access to affordable health insurance. It remains a work in progress.
AHP: Association Health Plan(s.) These are insurance plans offered to small businesses in the same group, association, geography, or industry. AHPs are noteworthy because the category rules changed in 2018, allowing more small employers and sole proprietors to shop for insurance the way a large business would.
ALE: Applicable Large Employer. Broadly defined as businesses with more than 50 full-time (or full-time equivalent) employees, a business with this classification is required by the ACA to offer qualifying health insurance to its employees and meet the associated reporting requirements.
The ACA’s small business health insurance marketplace SHOP is available to employers with fewer than 50 workers.
ASO: Administrative Services Only. ASO involves employers hiring external entities to manage employee health benefits — solely for administrative services and not actual benefits. Employers self-fund these benefits by using a third-party administrator for claims processing. An ASO covers traditional health care and may extend to dental and short-term and long-term disability.
DI: Disability Insurance. This type of insurance replaces lost income due to illness or injuries. However, DI isn’t solely for accidents, as about 90% of long-term disabilities stem from illnesses like cancer or heart disease. Short-term policies typically cover around 60% to 80% of income temporarily, while long-term policies replace income for severe or permanent disabilities.
EOI: Evidence of Insurability. EOI is crucial for life and disability insurance and when plans aren’t guaranteed. Applicants provide their health details to insurers using questionnaires or exams, where risk is then determined. If an applicant is unqualified, premiums may rise or coverage may be denied. Insurers use this data to gauge necessary coverage levels based on the applicant’s health history or changing health care needs.
EPO: Exclusive Provider Organization. An EPO offers in-network coverage without the need for referrals and is one of the most common types of health networks (falling in line with HMOs and PPOs). Out-of-network care is limited to emergencies only. Some EPOs pair with HSAs, in which medical expenses can be deducted from taxes.
FSA: Flexible Spending Account. This employer-administered benefit takes money from the employee’s paycheck pretax. These funds are then available to the employee for qualified medical expenses, such as deductibles and copays. Use of these funds is time-sensitive.
FTE: Full-Time Equivalent employee. An FTE can be one employee working full time or the equivalent of part-time employees. To arrive at this figure, total the hours worked by all part-time employees in a given week and divide that sum by 30 (the number of hours the ACA has defined as full time). Add that to the number of full-time employees to determine the total FTEs.
[For everything you need to know on buying small business health insurance, check out our small business health insurance guide.]
HDHP: High Deductible Health Plan. An HDHP has a higher deductible than traditional plans, which leads to lower premiums but higher initial out-of-pocket costs. Often referred to as an “HSA-eligible plan,” pairing HDHPs with an HSA allows tax-free payments for medical expenses.
HIPAA: The Health Insurance Portability and Accountability Act of 1996. HIPAA establishes national standards for safeguarding patient health information. The U.S. Department of Health and Human Services implemented the HIPAA Privacy Rule, which controls health information use by covered entities, and ensures protection while enabling the use of health care data. Covered entities include health care providers, health plans, clearinghouses, and certain business associates.
HMO: Health Maintenance Organization. A popular choice in the health insurance marketplace, an HMO functions through a network of doctors. Unlike PPOs, HMOs require referrals from a primary care physician for specialist visits and restrict coverage to in-network providers, offering lower premiums as a trade-off for limited flexibility.
HRA: Health Reimbursement Arrangement. Funded by the employer, these plans pay tax-free money to employees for qualified expenses. The list of acceptable expenditures is long, including over-the-counter medications if they are prescribed by a doctor.
HSA: Health Savings Account. An HSA is a consumer-directed, tax-favored savings account, which must be paired with a high-deductible insurance plan. Withdrawals are not taxed if they are used for qualified health expenses (including dental and vision).
LTDI: Long-term Disability Insurance. LTDI substitutes a portion of previous income if an individual becomes injured or develops a disability. This type of insurance covers a prolonged period where the individual is unable to work — typically lasting from one to two years up to the age of Social Security retirement.
MEWA: Multiple Employer Welfare Arrangement. MEWAs were established as a way to offer health coverage (and certain other benefits) to employees and owners of two or more companies, as well as the self-employed. While MEWAs are marketed as a low-cost alternative for small employers, there has been mismanagement and fraud by some plan operators. Lawmakers are tightening regulations, but caution is advised if you are considering these plans.
OOPM: Out-of-Pocket Maximum. An OOPM sets the annual limit on what an individual will pay for covered health care expenses. After reaching this threshold in deductibles, copays, and coinsurance for in-network health care, the insurer covers 100% of medical costs.
PPO: Preferred Provider Organization. A PPO is a health care plan with a network of contracted providers offering reduced rates to policyholders. Managed by insurance companies, PPOs include various medical professionals and facilities. Those who enroll in a PPO plan have access to services without referrals, but out-of-network care generally involves higher costs and isn’t mandated.
QLE: Qualifying Life Event. A QLE, such as marriage, birth, or loss of coverage, qualifies for special enrollment in health insurance outside of the open enrollment period. It includes categories like losing coverage, household changes, residence changes, income alterations, and specific life milestones (i.e., gaining citizenship).
QSEHRA: Qualified Small Employer Health Reimbursement Arrangement. This is a system through which small (fewer than 50 employees) businesses that do not offer health insurance reimburse employees for the cost of obtaining it elsewhere. Reimbursement is a key distinction here. Employees must have insurance and they must spend the money first, then provide proof of the expense to be repaid.
SHOP: Small Business Health Options Program. The ACA’s small business health insurance marketplace SHOP is available to employers with fewer than 50 workers. This is where small businesses go to learn about their options. Many states have their own marketplaces and healthcare.gov will direct employers to them.
STDI: Short-term Disability Insurance. STDI offers temporary income replacement when an individual can’t work due to medical reasons. It substitutes a portion of income and covers various expenses like rent, utilities, loans, and even entertainment. This type of insurance is typically part of employer-provided group plans, tailored for short-term medical situations — often with a duration of one year maximum.
[Read more: A Complete Guide to COBRA Health Insurance]
This story was originally written by Joyce Walsack.
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