Employee Benefits Blog

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Insurance terminology sometimes makes discussions about healthcare feel like we’re all speaking in different languages. The jargon insurance companies use is oftentimes confusing for the average person to understand, only further exacerbated by the legalese in which everything insurance-related is written. It feels like we all need a translator just to figure out what insurance policies cover and what participants will be responsible for.

The truth of the matter is that people understand less about health insurance than they like to believe. A 2016 survey by PolicyGenius found that just 4 percent of those polled could correctly identify four common insurance terms: copayment, copay (some people think they mean something different), deductible, and coinsurance. And while 83 percent of people believed they understood the word “copay,” only 52 percent could actually define it correctly. To make matters worse, only 36 percent of millennials could define any of the four terms properly.

As a member of the human resources team, the responsibility of bridging this knowledge gap and educating your workforce oftentimes falls to you. An educated workforce will make better employee benefit enrollment decisions, and will be less of a burden on your employee benefits hotline.

With that in mind, we’ve put together a glossary of common insurance terminology that you can easily slip into your employee benefits enrollment guide or your employee handbook. While we’ve included 11 of the most common terms here, you can download another 52 by clicking here.  

According to The Commonwealth Fund’s most recent study of 11 different countries’ healthcare systems, the United States comes in dead last. This study measures overall industry performance and each country is ranked by five factors that contribute to their score: care process (in which the U.S. placed 5th), access (11th), administrative efficiency (10th), equity (11th), and outcomes (11th).

For being one of the richest countries in the world, the U.S. just can’t seem to get a grip on their healthcare system. No matter the proposed solution over the past century, the system has slowly but surely become more and more expensive, which means it’s also becoming less and less accessible.

If you were to ask 10 people why America’s healthcare system is broken, you’re sure to get 10 different answers — and you might even get into a debate about what “broken” means, both of which could help explain why we haven’t been able to fix it yet. Experts have many opinions, but one thing is for sure: the problems with our healthcare system don’t point back to just one cause. There are multiple issues at hand and none of them are easy fixes. 

5 Major Ways Our Healthcare System is Broken

Lack of Cost Transparency

One of the most common complaints among consumers is the lack of cost transparency in our healthcare system. You’d be hard-pressed to find another industry where this is the case. Even in other insurance situations, such as a car repair after an accident, the driver can figure out a fairly accurate estimate before ever paying a dime. The same goes for a homeowners claim.

The term “healthcare” gets thrown around quite a bit these days. As HR professionals, you may have seen “healthcare” used interchangeably with “health insurance,” although it’s the layman doing so, rather than industry professionals. Healthcare and health insurance are two completely different things. They have different definitions, even though we, as a country, have largely co-mingled the two.

This co-mingling has led the county to erroneously focus on health insurance as an equal target of wrath for the rising cost of medical care, when in truth, healthcare has been the driving force. This understanding is critical if we’re to wrestle the ever escalating cost of medical care in this country.

Healthcare vs. Health Insurance

Healthcare

Healthcare is defined as “the field concerned with the maintenance or restoration of the health of the body or mind.” This also pertains to any “procedures or methods” related to the care of a person’s physical or mental health.

The industry in which medical professionals work is often referred to as the “healthcare industry.” Healthcare is provided by doctors, nurses, dentists, therapists, hospital systems, and pharmaceutical companies. The price these providers set for their products and services is the primary driver of health insurance costs.

In the never-ending quest to decrease employee benefits spending on healthcare, some employers are turning to a somewhat revolutionary concept called reference based pricing. This switch is most common among large employers (500 employees or more) who are self-funded, and is gaining popularity rather quickly. For those who may be interested in implementing such a program, it’s important to understand how it differs from traditional healthcare plans, as well as how it will affect those enrolled in it.

What Is Reference Based Pricing?

Reference based pricing (RBP) is a system that some employers have started to use for cost containment purposes. This method is different from more traditional pricing options in that the employer caps the amount they’ll agree to cover for certain non-emergent medical procedures that can vary greatly in price yet not in outcome, such as hip or knee replacements.

With healthcare costs continuing to rise, small employers that aren't obligated to offer health/medical insurance per the Affordable Care Act’s (ACA) “employer mandate” have been dropping group coverage. This is a trend that started in 2009 during the recent recession. Some larger employers have also considered doing the same (though, they must pay steep ACA penalties if they do). At first glance, it might seem like this would bolster the health and stability of the individual insurance market. Despite the numbers of insured rising, however, increased costs and fewer options have put a serious squeeze on what was once a very healthy marketplace.

Group Health Insurance and Individual Health Insurance by the Numbers

Occasionally, a news piece predicts major shifts in the health insurance landscape, including dire predictions about employers dropping group health plans due to their high costs. However, it’s important to look closely at these numbers, as well as the size of the companies cited in the statistics.

It seems like the only thing we can talk about these days is the rising cost of healthcare. Whether it’s in the news or in the boardroom, healthcare costs are a major topic of conversation — and with good reason. Healthcare costs have been increasing for decades with no apparent end in sight. There are many differing opinions on how exactly to decrease costs and even more debate as to the cause behind them. What is the reasoning behind the drastic increases?

While that question may have many answers, one of the most impactful is the effect of chronic conditions, which require constant care from medical professionals. Chronic conditions range in severity and attention needed to manage them, which can dramatically affect the healthcare costs associated with them.

A recent study by the RAND Corporation, a nonprofit, nonpartisan research organization committed to making “the world safer and more secure, healthier and more prosperous,” looked into chronic conditions in the United States and their effect on healthcare costs. Their findings were both surprising and disheartening — but they do help explain at least one reason why overall costs are increasing so dramatically.

What Is a Chronic Condition?

A chronic condition is an illness that lasts for a prolonged period, but most definitions do not specify an exact period of time. For the purposes of the RAND study, they defined the term as a “physical or mental health condition that lasts more than one year and causes functional restrictions or requires ongoing monitoring or treatment.”

By this definition, we could assume that the term “chronic conditions” includes ailments such as heart disease, high blood pressure, asthma, anemia, diabetes, arthritis, cancer, and mood disorders, among many others.

What Causes (and Contributes to) Chronic Conditions?

According to the CDC (Centers for Disease Control), there are four major health risk factors that “cause much of the illness, suffering, and early death related to chronic diseases and conditions.” They are: