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Children's Health Insurance Program (CHIP)

The Children's Health Insurance Program (CHIP) provides health coverage to children in families that can't afford it, yet who earn too much to qualify for Medicaid.

Each state administers its own CHIP program, with funding from both federal and state taxes. The programs are overseen by the Centers for Medicare & Medicaid Services.

For more, visit

Cost-Sharing Reduction Subsidies

Payments from the federal government to insurance companies used to make insurance more affordable to those earning 1 - 2.5 times the Federal Poverty Level (FPL) (those who make less than the FPL are eligible for Medicaid Expansion in states that have accepted it).

Cost Sharing Reduction Subsidies apply only for silver plans purchased on the insurance exchange their state uses.

They work by reducing deductibles, copayments, and out-of-pocket maximums.

In technical terms, they increase the actuarial value of silver policies for those who are eligible.

The law requires that companies provide this benefit. If the federal government does not make these payments to insurance companies, the companies will need to make up for the cost elsewhere - most likely through increased premiums. Without the payments, insurance premiums would increase by 20 percent, according to the Kaiser Family Foundation.

Referenced by...
House will pay ObamaCare subsidies it fought to withold (2017-Mar-30)
Trump passes on first real chance to end ObamaCare (2017-Feb-21)

Disproportionate Share Hospital Program (DSH)

Money the federal government pays hospitals to offset their cost of treating people without insurance or the ability to pay.

Essential Health Benefits

Services that health insurance plans must cover under the Patient Protection and Affordable Care Act (Obamacare).

o Care you receive without being admitted to a hospital. This includes home health services and hospice care - though plans may set a 45-day maximum on those services.

o Emergency services - including ambulance service. You cannot be penalized if the hospital is not in your provider network.

o Treatment you receive in a hospital, including room and board. Some plans limit coverage for care in a skilled nursing facility to 45 days.

o Maternity and newborn care

o Mental health services and addiction treatment

o Prescription drugs

o Rehabilitative services and devices. Plans must cover 30 visits a year for services such as physical or occupational therapy.

o Laboratory services

o Preventive services, including screening for colorectal and breast cancers, diabetes, and sexually transmitted diseases.

o Pediatraic services - including dental and vision care for those younger than 19.

Exclusive Provider Organization (EPO)

A type of health insurance plan similar to a Preferred Provider Organization (PPO) in that your plan provides a network of health care providers for you to use.

With an EPO, the network may be much smaller than with a PPO - giving you fewer choices of providers. Also, the insurance company may pay nothing if you use a provider not in your plan's network.

Health Care Provider

A person or organization that provides health care. Types of providers include doctors, clinics, and hospitals.

Health Maintenance Organization (HMO)

An organization that provides health care for its members. The providers (doctors, etc) are employed by the organization. The organization also owns the facililities such as hospitals that it uses.

Health Savings Account (HSA)

A Health Savings Account is a way for an individual (or family) to pay for their health care with money that is not taxed.

Here's how it works...

o An individual has part of his or her income deposited into a Health Savings Account

o The amount deposited can be deducted from the person's taxable income.... so they don't pay taxes on that part of their income.

o The money in the account can be used to pay for health care expenses. Though the money can only be used for health care expenses, the rules regarding what constitutes such an expense can be broad.

Health Savings Accounts provide the most benefits for those with the highest incomes, because those with the highest incomes...

o More likely can afford to put aside enough to pay for their own health care.

o Pay the highest tax rates, meaning the tax savings would be much more significant to them.

Independent Payment Advisory Board (IPAB)

A government agency created by the Patient Protection and Affordable Care Act (PPACA) to reduce Medicare costs.

The agency would consist of 15 medical experts appointed by the president and confirmed by the Senate.

If Medicare spending exceeds predetermined thresholds, the board can act to reduce costs. The reduction cannot ration care, increase costs to recipients, or increase taxes. Congress can refuse the change - however it would need to come up with its own plan to cut those costs.

The IPAB would replace the Medicare Payment Advisory Commission (MedPAC), which can submit recommendations to Congress, but had no authority to enact changes on its own.

Insurance Exchanges

Online (Web) marketplaces where you can compare and purchase health insurance policies that meet the requirements for ObamaCare.

The exchange lists the monthly premium for each policy. You might be eligible to have part of that premium subsidized (paid for) by the federal government. While on the exchange website, you can choose to provide basic information about your income to determine how much of a subsidy you are eligible for (many Americans will be eligible for at least some help).

The intent of the Affordable Care Act was that each state would set up its own exchange. While several states have done this, many have not. Residents of states without an exchange will be able to use one set up by the federal government. Also, a few states had technical difficulties with their exchange so they switched to the federal one.

If your state has its own exchange, you should use it. If not, you should use the federal site. Click here to find the site you should use.

Insurance Navigator

A trained person who helps consumers understand their options under the Obamacare, and helps them complete their eligibility and enrollment forms on their state's insurance exchanges.

Insurance: Actuarial Value

The percentage of a person's total healthcare costs that an insurance company expects to pay. As an example, for a policy with an actuarial value of 70, the insured person can expect to pay 30 percent of their healthcare costs.

Actuarial values are the basis for determining an insurance policy's metal level.

It's important to note that it is not an exact determination of how much you would pay. It's an average of what policyholders with that policy likely would pay. As a rule though, a plan with a higher actuarial value likely will have more expensive premiums, but cost you less for actual expenses.

Insurance: Adverse Selection

The phenomenon that those who most need health care are those most likely to buy insurance.

Since insurance companies make money by having customers not using their product, adverse selection results in insurance companies requiring more income to make a profit. Sources of this money can include higher premiumns or the government.

Insurance: Catastrophic Plan

An insurance plan designed to help out only in the case of a catastrophic health problem. These plans have low premiums, but high deductibles and other out-of-pocket costs.

Under the Patient Protection and Affordable Care Act (Obamacare), catastrophic plans are available only to those under age 30.

Insurance: Coinsurance

Even if you have health insurance that covers expensive treatments, your insurance company typically will pay only part of the bill. The amount you pay is referred to as coinsurance.

For example, if your plan specifies a 20-percent coinsurance and your bill is $1,000, you would pay $200 (20 percent of $1,000).

Insurance: Community Rating

A rule that requires health insurance companies to charge the same amount to people within a geographic area - without regard to factors such as gender or health status.

Insurance: Copayment

A copayment is the amount you pay (typically $5 - $50) for a doctor's visit or some other health care service.

For example, if your insurance plan allows four office visits for routine care in a year with a $20 copayment, then you will pay $20 for each of the first four times you visit the doctor for routine care. After the fourth visit - or if you need something other than routine care - you will pay the full cost until you have spent the amount of your deductible.

Insurance: Cost-Sharing

The portion of the cost of your health care that insurance doesn't cover, such as deductibles and copayments.

The quality of a health insurance policy is measured by what percentage of the cost of your health care the policy would pay on the average. This is referred to as the policy's actuarial value.

Insurance: Deductible

An insurance deductible is the amount of your own money you will need to pay before your insurance begins paying for most services.

For example, if your plan has a $4,000 deductible and you get sick or injured, your insurance company will not pay the first $4,000 of your expenses. You will be responsible for that amount.

Insurance: Formulary

The list of pharmaceuticals that an insurance company will cover under a specific policy.

Insurance: Guaranteed Issue

Requirement that heath insurance companies enroll someone regardless of factors that might predict their use of health care services - such as their health status (i.e. pre-existing conditions) or gender.

It is a protection required under the Patient Protection and Affordable Care Act (ObamaCare).

Under ObamaCare, insurance companies can charge more for some factors such as age.

Insurance: High-Risk Pool

A health insurance plan available to those who cannot obtain health care insurance due to pre-existing conditions.

Insurance: Lifetime Cap

The maximum amount an insurance company will pay to reimburse your health care over your lifetime.

Once the insurance company has paid that amount over your lifetime, they can terminate your policy. You then would be responsible for all of your health care expenses for the rest of your life.

Lifetime caps stopped being an issue in 2011, as the Patient Protection and Affordable Care Act (PPACA) prohibited them.

Insurance: Out-of-Pocket

The amount of something that you pay (i.e. out of your pocket).

Out-of-pocket expenses include deductibles and copayments.

For example, under the Patient Protection and Affordable Health Care Act, there will be $6,350 cap on out-of-pocket expenses for an individual's health care starting in 2015. That means that the most any individual will be required to pay of their own money for health care will be $6,350 in a year - regardless of how much their care (including prescription drugs) costs.

Note: Health care out-of-pocket maximums apply to money paid to health care providers, but not to premiums paid to insurance companies.

Related term: Cost-Sharing.

Insurance: Out-of-Pocket Maximum

The maximum amount of your own money you would need to pay for medical expenses covered by your insurance.

The amount usually is specified in terms of either a year or in a lifetime.

Insurance: Overhead

The amount of your health insurance premium that is not used to pay for health care benefits.

This includes company salaries, executive bonuses, advertising, lobbying, etc.

The premium you pay for a policy is based on the total benefits the company expects to pay out plus the overhead (typically 20 percent).

Insurance: Policy (or Plan)

An insurance policy or plan is a legal document that describes what your medical insurance will pay for, and how much it will pay.

A policy contains several components that determine how much of your own money you must pay for care you receive...

In addition, most policies restrict which providers you are allowed to visit in order to receive full benefits as described by the above terms. If you choose to use a provider not in your policy's network, the insurance company will pay less for your treatment (meaning you most likely will pay more).

Insurance: Premium

A premium simply is another word for what you pay for insurance.

For some types of insurance, premiums are paid yearly. For health insurance, premiums typically are paid monthly.

Determining health care insurance premiums
A health care insurance company calculates premiums by estimating the total benefits they expect to pay out, and then add an administrative overhead (typically 20 percent).

Insurance: Provider Network

A list of health care providers that are available to you under your health insurance policy.

Insurance: Reinsurance

A way of insuring insurance companies - reinsurance effectively limits their losses from insuring sick people who need expensive medical care.

ObamaCare requires insurance companies to cover everyone regardless of health. Rensurance uses public money to pay insurance companies for exess losses to encourage them to charge lower premiums.

Insurance: Rescision

The practice by insurance companies of canceling an insurance policy after the insured person became seriously ill.

This was not supposed to happen, since this type of thing is exactly what insurance policies are meant to protect against. However, if a covered person did become seriously ill, the company would review the person's initial application, and use even the slightest error as justification for the cancellation.

The practice of recision was outlawed by the Patient Protection and Affordable Care Act (ObamaCare).

Insurance: Risk Selection

Since insurance companies make money by having customers not using their product, it is in their benefit to insure healthy customers.

One consumer protection of ObamaCare is that insurance companies must insure anyone regardless of their health risks or pre-existing conditions.

ObamaCare also requires every insurance plan to cover essential health benefits. However, they can adjust other aspects such as drug formularies and out-of-pocket expenses.


The Mandate is a term for the provision of the Patient Protection and Affordable Care Act (ObamaCare) that requires most Americans to have at least a minimum level of health care insurance.

Although a vital component of the health care law, the mandate has become such a controversial issue that we have devoted an an entire page to explain it.


A program that provides health care for those with low income. Each state runs its own Medicaid program, which is funded by both federal and state taxes.

Related term: Entitlement

Medicaid Expansion

The provision of the Patient Protection and Affordable Care Act that provides virtually free health care to those who earn less than the Poverty Level.

It does this by having the federal government pay each state to expand its Medicaid program. The federal government would cover 100 percent of the states' costs through 2016 and at least 90 percent on a permanent basis.

In the 2012 Supreme Court decision National Federation of Independent Business v. Sebelius, the majority of justices ruled that the federal government could not force states to accept expanded Medicaid.

As of 2016, more than 14 million people in just over half of the U.S. states receive health care due to Medicaid Expansion.

The rest of the states have rejected Medicaid Expansion - leaving many of their poorest residents without health care coverage.

For more about Medicaid Expansion and other parts of the Patient Protection and Affordable Care Act, see our discussion.


The government-run health insurance program that serves primarily those 65-years-old and older.

Related term: Entitlement

Medicare Advantage


Medicare For All

A term used to describe a single-payer health care system that would cover all Americans.

Metal Level

Health care plans available under the Patient Protection and Affordable Care Act are classified by the level of benefits they provide. The levels are determined by actuarial value. These classifications are..

o Bronze: The policies with the lowest premiums. These policies have the highest deductible and other out-of-pocket costs, so they typically are best for young people and others who do not expect to require significant medical care in the coming year. They have an actuarial value of at least 60 percent.

o Silver (Actuarial Value at least 70 percent)

o Gold

o Platinum: The policies with the highest premiums. You will pay more up front, but if you require significant medical care, you will pay less out-of-pocket with these plans.

Because these classifications are named for metals, they often are referred to as metal levels.

Open Enrollment

A period of time that anyone can enroll in or change their health care insurance. After an open enrollment period, it still may be possible to obtain insurance under certain conditions, such as a change in family or employment.

Pre-existing Condition

A medical condition someone had before being accepted under a health insurance plan.

Approximately half of all non-elderly Americans and 80 percent of those over the age of 55 have at least one health condition that would qualify as a pre-existing condition, according to the Department of Health and Human Services (HHS).

Prior to 2014, this limited people's ability to obtain insurance coverage for health care. For example, an insurance company could refuse to insure someone with a genetic disease. This changed in 2014 under the Patient Protection and Affordable Care Act (ObamaCare), which required insurance companies to accept everyone - regardless of their health situation. An insurance company also could not charge someone more because of their health.

This not only made health care insurance more accessible to the less healthy, it made the application process and comparing costs easier for everyone.

Allowing insurance companies to set premiums based on pre-existing conditions requires an application process that involves filling out many details about your health - some of which might require verification or an explanation by your doctor.

Aside from the inconvenience and possible cost of a doctor visit, comparing policies would be more complicated because you would not know how much each would cost until you submitted your application and it was reviewed. This process would need to be completed for each policy you would consider.

Preferred Provider Organization (PPO)

A type of health insurance plan in which you pay less if you use health care providers that are in your plan's provider network.

You have the option of using providers outside of your plan's network, but the insurance company will compensate you less.

Public Option

A government-run insurance plan that would compete with private health insurance companies.

It was considered for inclusion in the Patient Protection and Affordable Care Act (Obamacare), but was dropped in the final version of the bill.

Single-Payer Health Care

A single-payer system is one method of paying health care providers for services they provide. Various ways include...

o You pay them out of your own pocket
o An insurance company pays them.
o The government pays them (single-payer).

Under a single-payer system, all providers would be reimbursed from a single source, rather than from one of a multitude of insurance companies (that is where the name single-payer comes from).

One example of a single-payer system is Medicare. For the most part, only those older than 65 are eligible for Medicare. This is why creating a single-payer system for all U.S. citizens is referred to as Medicare for All.

Watch this 2-minute video for a clearer understanding...

Skinny Repeal

Term used to describe a Senate amendment to the American Health Care Act.

The 8-page amendment - that would have replaced the entire bill - would have eliminated key components of the Patient Protection and Affordable Care Act (Obamacare).

State Children's Health Insurance Program (SCHIP)

State Children's Health Insurance Program - another way to refer to the Children's Health Insurance Program (CHIP).

Tax: Cadillac

A tax on expensive health care coverage provided by employers. It was created to help pay for Patient Protection and Affordable Care Act (Obamacare).

It is called the Cadillac Tax because it taxes only the most expensive and generous plans that companies can employees instead of a higher salary. While the salaries would have been taxed, there previously had been no tax on policies such as this.

Implementation of the tax has been delayed several times. It now is scheduled to take effect in 2020.

Referenced by...
2020 deficit will exceed $1 trillion (2020-Feb-12)

Tax: Medical Device

The Medical Device Tax is a 2.3 percent tax on medical devices (such as artificial knee joints). It was created by the Patient Protection and Affordable Care Act (Obamacare).

Implementation of the tax has been repeatedly delayed. It now is not set to take effect until 2022.

Referenced by...
2020 deficit will exceed $1 trillion (2020-Feb-12)
Senate giving ObamaCare repeal big final push (2017-Sep-19)
Bipartisan group seeks to fix ObamaCare problems (2017-Aug-05)
Issue: Repealing (and Replacing?) Obamacare

Tax: Medicare

A separate tax on wages that is used to pay for Medicare. It also is known as the Medicare Hospital Insurance (HI) tax.

As part of the Patient Protection and Affordable Care Act (PPACA), high-income individuals pay about one percent more.

Tax: Net investment

A tax on investment income on those with investment profits exceeding $200,000 in a year.

It is part of the Patient Protection and Affordable Care Act (PPACA).

The official name of the tax is the Unearned Income Medicare Contribution Tax. In spite of that name, revenue from this tax goes into the nation's General Fund.

Universal Health Care (UHC)

A policy of guaranteeing health care to citizens or residents of a country, state, or city.

It can be implemented in a number of ways, including...

o A single-payer system, in which health care providers (doctors, hospitals, etc) are businesses, and are paid for their services by a government entity rather than by insurance companies who operate for profit. Medicare is an example of a single-payer system.

o A socialist system in which the government owns the facilities and directly employs the doctors and other health care providers. Health care provided by the Veteran's Administration (VA) is an example of a socialist system.

The United States is the only industrialized nation in the world that does not provide some type of universal health care to all of its citizens.

Veterans Health Administration

The Veterans Health Administration (most often referred as simply the VA) is the part of the Department of Veterans Affairs that provides health care to U.S. military veterans.

The VA health care system is separate from other health care systems in the U.S. Unlike the other systems, the VA is a socialized system in that its doctors and other providers are employees of the government, and its facilities are government-owned.

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