HMO, PPO, HSA, WTF...Translating Insurance Acronyms

Insurance is its own language. Even those of us who work in the insurance industry smile and nod like we understand – even though we don’t a lot of the time. Especially when people start throwing out the alphabet soup of abbreviations common to the insurance world.

Have you ever felt like responding with the only appropriate acronym back….WTF?

You’re not alone. That’s why we put together this list of common insurance abbreviations and what they mean. You will be fluent in insurance-eze by the end of this list (Hey, new skill to add to your LinkedIn profile. Score!)

Common insurance acronyms

ACA: Affordable Care Act. The health care reform law passed in 2010.  

AD&D: Accidental Death & Dismemberment. A type of insurance that pays you if you or another covered individual suffers an accidental death or loses a limb.

ASO: Administrative Services Only. Used when an organization is self-funding their claims, and the insurance carrier is simply providing the network, the claims processing, customer service, enrollment, and other administrative services for a flat monthly rate.

COB: Coordination of Benefits. Used when a group is switching from one insurance carrier to another and the two carriers coordinate to continue coverage during the transition process.

COBRA: Consolidated Omnibus Reconciliation Act. Legislation that allows terminated employees to maintain their insurance coverage uninterrupted through their previous employer until they get new coverage.

DED: Deductible. The amount a member has to pay for services before the plan begins to pay out claims.

DME: Durable Medical Equipment. Refers to equipment that is used by the member repeatedly, usually outside of the doctor office. Examples include C-PAP machines, diabetes testing machines, wheelchairs, and oxygen tanks.

EAP: Employee Assistance Program. A program that is offered to employees to help them with difficult things in their personal or work lives. They often offer counseling services, legal assistance, child care connections, and other support for daily life.

EOB: Explanation of Benefits. This is the document sent from the insurance company to the member that explains the processing of a recent claim. It will show the discounts and coverage applied, ask for additional information if applicable, and will be a useful comparison for the member to see what their cost responsibility is. An EOB is not a bill, but members can compare their bills to the EOB to ensure the provider billed them correctly.

ERISA: Employee Retirement Income Security Act. Refers to a federal law that sets minimum standards for voluntary retirement and health plans in private industry to protect individuals in these plans.

FMLA: Family & Medical Leave Act. The legislation that requires employers to give eligible employees going through severe family or medical distress job-protected, unpaid leave without terminating them. It also keeps the employee’s health insurance coverage in place under the same terms during the leave.

FSA: Flexible Spending Account. A type of health savings account that allows employees to contribute a portion of their regular earnings to pay for qualified expenses. It is also commonly called a “cafeteria plan”. The benefit to the employee is that the funds are taken out before being taxed.

FTE: Full-time employee. Often there are different levels of coverage for full-time and part-time employees, so this acronym is often used when discussing coverage eligibility.

HDHP: High Deductible Health Plan. Refers to a type of health plan that has a lower premium and a higher amount that members pay out of pocket before the plan begins paying claims.

HIPAA: Health Insurance Portability and Accountability Act. This act was passed to provide standards for protecting individual’s health and personal information stored by insurance carriers. Allows for the transfer of files between carriers and outlines confidentiality rules for insurance carrier employees handling personal information.

HMO: Health Maintenance Organization. This is an organization that provides health insurance coverage for a monthly or annual fee. It is made up of medical insurance providers that limit coverage to medical care provided through doctors and other providers who are under contract to the HMO.

HRA: Health Reimbursement Arrangement. This is a type of plan that reimburses employees for qualified health care expenses. Sometimes it is offered in place of employer-funded health insurance and allows employees to go and get individual health coverage and be reimbursed for premiums, copays, and/or deductibles.

HSA: Health Savings Account. A type of individual savings account that is offered as part of a high deductible plan and can be used for qualified health care expenses. Funds are often deposited prior to being subject to taxes, so it gives members a tax advantage to contribute.

MAC: Maximum Allowable Cost. Insurance carriers have determined reasonable costs to health care services they will pay providers, in addition to contracted rates with their network of preferred providers. If a member goes out of network, the insurance carrier may still pay the claim, but only up to the maximum allowable cost of that service.

MEC: Minimum Essential Coverage. A type of medical plan that meets the Affordable Care Act requirement for having health coverage. It offers coverage for preventive care and wellness tests, and is a low cost alternative to traditional plans/HDHP plans.

OON: Out of network. Insurance carriers curate provider networks that agree to offer health care services for specific rates and not charge the member more on the back end. This keeps costs predictable and stable, and discounts are passed on to the member in lower premiums and less cost sharing. When members get care outside of the contracted provider network, there are no negotiated rates, so the member could be responsible for paying the remaining cost through balance billing.

OOP: Out of pocket. Refers to the expenses members pay themselves in the form of copays, deductibles, or cost-sharing up to their OOPM (out of pocket maximum)

PCORI: Patient Centered Outcome Research Institute. As part of the Affordable Care Act, PCORI was set up to conduct research on the effectiveness and quality of health care services. Their funding comes from an annual fee from employers offering health insurance.

PCP: Primary Care Provider. This refers to the member’s primary physician, often an OB/GYN or a family practitioner.

PEO: Professional Employer Organization. An outsourced Human Resources solution for small businesses. A PEO might handle things like payroll, benefits (like insurance coverage), compliance, and more.

PEPM: Per Employee Per Month. This term is often used when discussing fees or costs, such as a flat cost per employee per month for offering telemedicine services with your medical plan.It is sometimes written as PMPM (per member per month) which includes all individuals covered on the plan in addition to the employee.

PHI: Personal Health Information. Refers to the type of information protected by HIPAA guidelines. This includes diagnoses, identification information, medications, etc.

PPN/PPO: Preferred Provider Network/Organization. Used to describe the insurance carrier’s group of providers that they have negotiated rates for services with.

RX: Prescription. The “Rx” comes from a symbol used for “recipe”. It is used in reference to medications and prescriptions.

SBC: Summary of Benefits and Coverage. This is an easy to use booklet that explains an insurance plan’s coverage and benefits in detail using examples and definitions of insurance terms.

TPA: Third Party Administrator. For self-funding plans, a TPA performs all the administrative tasks such as claims processing and enrollment. They do not pay out claims or assume any risk. They likely work with a variety of provider networks and third-party vendors so it is an a la carte insurance plan.

Congratulations! You are now fluent in insurance language. Have a great time entertaining your friends and family at the next happy hour or reunion. (We only recommend that if your friends and family are in the insurance industry, otherwise they might not invite you back.)