North Carolina Healthcare Insurance Basics, Terms, & Subsidies

As you navigate the complex Health Insurance Marketplace, you’ll likely build a range of questions around topics and terms that may be unfamiliar. It’s important to us at Osborne Insurance Services that you are equipped with knowledge and information to help you make the best decision for you and your family. So use this FAQ as a point of reference throughout the process of purchasing a comprehensive healthcare plan.

What is health insurance?

Basically, a health insurance policy is a contract between you and an insurance provider. You pay a monthly premium (set amount) in exchange for the company to help pay for medical bills. Consumers maintain a policy either through an employer’s group plan, an individual policy, or a government-funded program like Medicare and Medicaid.

Why do I need health insurance?

Though you never plan on falling ill or becoming injured, there will be times when you need medical care — and it can be expensive. Without the safety net of a comprehensive health insurance plan, you would experience tremendous financial stress. Making your regular premium payments ensures that money will be available to help defray the costs of most medical needs. 

What is the difference between a deductible, a copayment, and coinsurance?

A deductible is the set amount of money you are responsible for annually to cover eligible medical expenses before the insurance policy starts payments. 

Coinsurance is the amount you pay to share the costs of services covered by the insurance plan after the deductible has been paid (e.g. if the insurance company pays 70% of a claim, you pay 30%).

A copayment is the flat fee you pay each time you receive medical care, and the insurance company pays the rest. Note that, in most cases, you do not need to meet your deductible before the copayment applies.

Do I really have to buy health insurance?

Though it’s not illegal to live without a health insurance policy, the Affordable Care Act has an individual mandate that requires most Americans to maintain a comprehensive plan that meets ten essential healthcare benefits. If you do not maintain a health insurance plan, then you must pay a penalty fee that shows up as an additional tax or a reduction of your federal income tax return.  

What if I cannot afford to buy health insurance?

The Affordable Care Act, also known as Obamacare, offers subsidies to help reduce the cost of health insurance. Eligibility depends on your income. You may also qualify for free or low-cost coverage through government programs like Medicaid and the Children’s Health Insurance Program (CHIP). 

How can I get these subsidies I keep hearing about?

An ACA subsidy is only available to qualifying individuals and families who also do not have employer-sponsored coverage: individuals and families must make between 100-400% of the Federal Poverty Level, which is based on the size of your household. 

For example, for a family of two people that is from around $16,000 to $63,000 per year. That size of the subsidy depends on where you fall in that range. The savings are given as an advance premium tax credit. You may also qualify for assistance with your out-of-pocket healthcare expenses.

Common healthcare terms you should know.

Benefit—the amount payable by the insurance company to a medical provider for costs on behalf of the consumer.

Claim—a request made by a consumer, or the consumer’s healthcare provider, for the insurance company to cover medical services.

Cost Share Reductions—these are additional funds used to increase your coverage, working like an upgrade paid for by the Health Insurance Marketplace. Eligibility is based on income, and there are different levels of reductions, but they all generally lower your copays, deductible, and out-of-pocket maximum.

Dependent—an individual (spouse or child) covered by the primary insured member’s plan.

Effective Date—the date a policyholder’s coverage starts.

Explanation of Benefits—a written explanation from the health insurance company provider that explains how a medical claim was paid, including what the company paid and the costs you’re responsible for.

Health Maintenance Organization (HMO)—a healthcare finance and delivery system that offers comprehensive services for enrollees within a specific geographic area. HMOs require consumers to use specific, in-network plan providers.

Health Savings Account (HSA)—a personal savings account into which a participant allocates pre-tax income to pay for medical expenses. This type of account is designed as a complement for an HSA-qualified high-deductible health plan (HDHP). Consumers typically have lower monthly premiums than traditional healthcare plans.

In-Network Provider—a healthcare professional, hospital, or pharmacy that is part of a health plan’s network of preferred providers. When a consumer uses an in-network provider, he or she generally pays less for services because of previously negotiated discount prices.

Medicaid—Medicaid is a state-based health insurance program that provides benefits to low-income and disabled persons who cannot afford basic coverage. This program, created in 1965, is funded by the federal and state governments.

Medicare—Medicare is a health insurance program that provides benefits to Americans 65 years of age and older. This program has two parts: Part A covers hospital services; Part B covers doctor services.

Out-of-Network Provider—a healthcare professional, hospital, or pharmacy that is not part of a health plan’s network of preferred providers. Consumers typically pay more for services received from these providers.

Out-of-Pocket Maximum—the maximum amount of money a consumer pays for all covered services in a calendar year of coverage. This includes deductibles, copayments, and coinsurance; it does not include your regular monthly premiums. Beyond this amount, an insurance company pays 100% of all covered services for the remainder of the calendar year .

Pre-Existing Condition—a health issue that has been diagnosed, or for which a consumer has been treated, prior to purchasing a health insurance plan.

Preferred Provider Organization (PPO)—a healthcare plan that offers more freedom of choice than an HMO. Consumers who are members of a PPO are free to receive care from both in-network and out-of-network providers, but they receive the highest level of benefits when an in-network provider is used.

Premium—this is the amount that a consumer  pays each month in exchange for insurance coverage.

Subsidy—this is a set amount of money an eligible consumer has discounted each month from his or her health insurance plan each month. The discount comes in the form of a tax credit that is paid in advance. Eligibility is determined from household size, income, and other qualifications.