2023 | Understanding Marketplace Health Insurance: Terms & Definitions to Know
February 7, 2024
The Open Enrollment period for the federal Marketplace starts on November 1st and runs until January 15th. This means now is the time for you and your clients to prepare! During Open Enrollment for the Marketplace, your clients can:
- Switch from an alternative health plan (like short-term health plans and health sharing ministries) to a Marketplace plan.
- Switch from one Marketplace plan to another.
- Enroll in the Marketplace if they’re uninsured.
Marketplace health insurance can get confusing with all the various technical terms and definitions, so consider this your cheat sheet to use whenever you’re helping clients with their Marketplace coverage!
The Marketplace is a term often used when talking about Affordable Care Act (ACA) health plans. The “Marketplace” or “Exchange” is an online service where individuals and families can shop for and enroll in medical insurance. The Marketplace consolidates all ACA-compliant plans to one location and is intended to simplify the process of determining eligibility and costs, as well as comparing plans and enrolling in health insurance. All Marketplace health plans, whether they’re on the federal exchange or a state-run exchange, must meet the ten essential health benefits set by the ACA.
Metal Tiers of Healthcare
The four metal tiers – Bronze, Silver, Gold, and Platinum – are simple ways to guide decision-making and to better understand health plan structures and costs.
The easiest way to think about it is the more expensive the metal, the more your client's monthly payments are but the sooner the plan will start to share costs with them. For example, a Bronze plan will have lower monthly premiums than a Silver plan, but the deductible, the amount you pay out-of-pocket before your insurance kicks in, is higher. On the other hand, Platinum plans have the highest monthly premiums, but the plan pays sooner because the deductible is usually lower. Bronze plans are recommended for someone who needs minimal coverage whereas Gold and Platinum plans may be more cost-effective for someone who has high healthcare usage.
Types of Marketplace Plans
Aside from the metal tiers, there’s an additional way to classify health plans. There are four classifications: PPO, HMO, EPO, and POS.
Preferred Provider Organization (PPO) Plan
PPO plans usually have a larger provider network but the highest monthly costs or premiums. Enrollees are not required to have a referral from their primary care doctor (PCP) in order to see a specialist and sometimes out-of-network care is covered. Note: out-of-network emergency care is always covered. However, your client will get the highest value from their health plan by going to a provider in their plan’s network.
PPO plans are ideal for people who see multiple specialists, have high healthcare usage, and like the option of seeing a specialist without going to their PCP.
Health Maintenance Organization (HMO) Plan
HMO plans operate through a managed care system where there is a restricted network of providers. These provider networks are contracted to accept lower rates for participating members; thus, HMOs tend to have lower monthly premiums. However, enrollees will typically need a referral from their PCP to see a specialist and the plan only covers out-of-network care in an emergency.
HMO plans are ideal for people who are generally healthy, do not go to the doctor often, and prefer to pay less for monthly premiums.
Point of Service (POS) Plan
POS plans are a cross between a PPO and HMO plan. Monthly premiums vary depending on the plan but, typically, enrollees will pay less when they seek in-network healthcare providers (and luckily, the provider networks in POS plans are not restrictive). Just like HMOs, POS plans most often require a referral from a primary care provider who is the “point of service” in order for enrollees to see a specialist.
POS plans are ideal for people who may have one or two health conditions, prefer a PCP coordinating their care, and would like the flexibility to see doctors who are not in their network.
Exclusive Provider Organization (EPO) Plan
EPO plans are a type of managed care plan where enrollees can only use providers in their plan’s network. However, this network is larger than that of an HMO. Monthly premiums vary but are usually between the cost of an HMO and a PPO. A referral is typically not needed to see a specialist, but out-of-network coverage is not available except in an emergency.
EPO Plans are ideal for people who may need a larger network, don't want the hassle of going to their PCP for a referral, and like the lower price tag than that of a PPO.
This is the monthly payment for having a health insurance plan. Typically, the lower the monthly premium, the higher the deductible.
Premium Tax Credits
Premium Tax Credits (PTCs) are a type of sliding-scale subsidy that reduces the premium amount for individual or family health plans purchased through the Marketplace. For your clients to be eligible, they must have an annual household income between 100% and 400% below the Federal Poverty Level (FPL), be enrolled through a Marketplace plan, have U.S. citizenship or legal residency, file federal income tax returns, and must not qualify for other programs such as Medicaid and Medicare.
A deductible is the amount of money your clients will pay out of their own pocket before their health insurance will start paying for medical expenses. For example, if your client has a $5,000 deductible that means that until they pay for $5,000 worth of medical expenses in a year, their insurance won’t cover anything. It’s important to note that despite the deductible, there are some services that your health insurance will cover no matter what. For example, most health plans must cover certain preventive services — like shots, screening tests, and certain wellness visits — at no cost even if someone hasn’t met their deductible.
This is the percentage your client pays for medical expenses after meeting their deductible. Let’s say your client’s coinsurance is 20 percent. If their doctor visit is typically $100, they will only pay $20 for visits after they meet their deductible.
This is a fixed amount your client pays toward certain medical services whether they’ve met their deductible or not. Every plan has different services they cover, and different copay amounts. Typically, the lower the monthly premium, the higher the copays.
Health insurance plans contract with providers to create a network. When doctors, pharmacies, labs, hospitals, and other healthcare professionals enter such a contract, they negotiate rates with the insurance company to serve the company’s members. This type of contract is referred to as “being in-network.” This is beneficial for all parties: providers get access to the plan’s members, insurance companies pay less to contracted providers, and patients get lower prices for services from the plan's providers.
If your client accesses care outside of their plan’s network, also known as “out-of-network (OON)” they’ll lose the health plan’s negotiated discount. If their health plan makes a payment, they’ll have to make up the difference between what the health plan pays and what the provider billed. This practice is called balance billing. Some insurance plans may provide some payment to OON providers. However, because the provider is not obligated to accept the plan’s rates for reimbursement, balance billing can still apply.
The out-of-pocket maximum is the most your client could potentially pay in a year on deductibles, copays, and coinsurance. If your client meets this maximum, their insurance will cover 100% of all medical expenses that fall under their network of qualified services. The out-of-pocket maximum exists to keep people from owing an exorbitant amount if they or a covered family member have a major medical incident.
This stands for health savings account. These are only available with high-deductible health plans and exist to help people pay for medical expenses. It works like a normal bank account (HSA account holders even get a debit card) but it can only be used for medical expenses. Your client chooses how much money to pull from their paycheck each month to go into their HSA. The government sets a limit on how much they can contribute to their HSA each year, but the money belongs to your client and rolls over even if they don’t use it all in one year.
This is not an exhaustive list, but this covers all the basics you need to know to successfully navigate the Marketplace. Knowing health insurance terminology is a great start to helping clients optimize their healthcare coverage, and definitely makes the Open Enrollment process for the Marketplace less daunting. Just like you learn the lingo to properly equip yourself to optimize clients’ healthcare costs, you can also equip yourself to be a more well-rounded comprehensive financial advisor who offers healthcare planning by utilizing tools and strategies. But where to start? Look no further than Caribous’ HealthPlanner software. Our healthcare planning software takes the heavy lifting off of you, the advisor, and simplifies the process for your clients too. Schedule a call with me to learn how HealthPlanner can support you during Marketplace Open Enrollment and beyond.