HMOs, PMOs, step therapy, co-pay accumulator adjustors, pharmacy benefit managers, insurance drug formulary—what do all these terms mean? Even for those with chronic conditions who are no strangers to understanding their health insurance policies, keeping up with the latest terminology can be challenging. Here we’ll examine some terms to be aware of when selecting and using your health insurance plan.
Let’s begin with the basics…
Premium: Fixed amount the patient pays for insurance
Deductible: Fixed amount patient pays before the insurer pays
Copay: Fixed amount the patient pays for certain healthcare services, typically after deductible is met
Coinsurance: Fixed amount, usually a percentage, the patient pays for healthcare services, typically after the deductible is met
Out-of-Pocket Maximum / Limit: The most a patient pays for covered services in a plan year; does not include premiums
Pharmacy Benefit Manager (PBM): The company that manages prescription drug benefits on behalf of health insurers.
Prior Authorizations (PA): A cost-control process that requires advance approval for certain health care needs, especially specialty medications. All health plans have different PA rules. With different payer/provider contract negotiations, the rules are also complex and constantly changing.
Insurance Drug Formulary: List of generic and brand-name drugs covered and/or excluded by your health insurance plan.
Specialty Tiers: Cost-sharing strategy by insurers placing drugs into “tiers”. The tiers are organized by patient payment and drug coverage—tier 1 being the lowest co-payment on the most generic drug and tier 4 being the highest co-payment on the most unique, high-cost drug.
Step Therapy: Also known as a “fail-first” policy, step therapy requires patients to try one or more preferred medications to treat a condition. A patient must “fail” medication before “stepping up” to another drug.
Specialty Pharmacy Mandates: Many insurance plans mandate the specialty pharmacy that patients can use. Insurers will move injectable and infusion drugs from medical to pharmacy benefit, requiring the drug to be delivered via the plan’s preferred specialty pharmacy. If patients experience a service issue with a plan-mandated specialty pharmacy, an appeal can be filed to use the pharmacy of your choice.
Copay Accumulator Adjusters: Insurance-designed policies meant to control a patient’s cost-sharing agreement with the insurer. An insurer will accept the drug manufacturer copay cards towards prescribed drugs but will not apply that amount toward a patient’s out-of-pocket costs. Once the drug copay card’s balance is $0, the out-of-pocket costs will be the patient’s responsibility.
ACA Healthcare Marketplace: Established by the Affordable Care Act (ACA) by the federal government, the ACA Healthcare Marketplace is a platform that offers insurance plans to individuals, families, and small businesses. Its purpose is to extend health insurance coverage to those who would otherwise be uninsured.
The following terms often get confused with one another. Here we examine the definitions of these terms as well as points of clarification.
HMO’s vs PPO’s
An HMO—short for a Health Maintenance Organization—is a network of doctors, hospitals, and other healthcare providers who agree to provide care and services at a lower rate. Because of this network, patients have fewer choices when it comes to their healthcare providers. Patients may also be required to select a primary care physician who will need to first refer them to a specialist vs choosing to see a specialist without a referral. Benefits of HMOs include:
Typically lower premiums
Lower out-of-pocket costs
Average 2021 out-of-pocket costs were $427/mo and $5124/yr
PPOs on the other hand—short for Preferred Provider Organization—while still providing maximum benefits for using an in-network provider, still provides some coverage for out-of-network providers. PPO’s allow specialist visits without a referral from a primary care physician and typically do not require a primary care physician for the patient at all. The downsides of PPO’s are:
Typically higher premiums
Higher out-of-pocket costs
Average 2021 out-of-pocket costs were $517/mo and $5628/yr
Medicare vs Medicaid
Medicare is a federal program that provides insurance if you are over 65 or under 65 and have a disability or have end-stage renal disease, no matter your income. Medicare does require a person to have worked (usually ten years) and paid into the program.
Medicaid is not an insurance-specific program but is a state and federal public assistance program that provides financial support and health insurance for persons with low incomes, regardless of their age.
You can be dual eligible for Medicaid and Medicare.
When and where can I sign up for Medicare?
Most people sign up for Part A and B at age 65. You may begin the enrollment process 3 months before your 65th birthday. If you are starting your Social Security benefits and are approved, Part A coverage will be granted automatically, but you will have to enroll in Part B by filling out Form CMS-40B.
You can enroll in Medicare by visiting Social Security and signing up online at www.ssa.gov/benefits/medicare/. You can also enroll by calling Social Security at 1-800-772-1213.
For persons under 65, everyone eligible for Social Security Disability Insurance (SSDI) is also eligible for Medicare 24 months after being awarded disability benefit entitlement.
Thereafter, the general enrollment period and when changes may be made to plans is Jan. 1 – March 31 every year.
Medicare is a complicated program with many rules and sub-rules. If you have more specific questions, please reach out to BioMatrix. Here are some additional articles on Medicare eligibility, coverage, coverage gaps, and resources:
Understanding Medicare Eligibility
Understanding Medicare Coverage
Understanding Medicare Coverage Gaps
To investigate Medicaid eligibility this government resource may be helpful: https://www.medicaid.gov/medicaid/eligibility/index.html
Here is a list of and contact info for all state Medicaid plans:
https://www.medicaidplanningassistance.org/state-medicaid-resources/
Medical vs. Pharmacy Benefits
Plans divide claim payments into either Medical or Pharmacy Benefits. Pharmacy contains most drug benefits. Medical contains the rest, which includes labs, tests, procedures, physician visits, and other non-prescription drug costs. Medical benefits, however, often contain injectables, which in some plans includes infusion products for IVIG and medication used to treat bleeding disorders.
Medical Benefits:
Handles about 50% of specialty drugs, esp. injectables requiring healthcare professional
Has no PBM
Copayment can change with different vial sizes
Pharmacy Benefits:
Handles 50% of specialty drugs, especially drugs that can be self-administered
Has a PBM
Copayment can change with changes in number of vials or units on some meds
Cost-sharing is typically higher than medical benefit
Private Employer vs. Individual Health Plans
Per the Affordable Care Act (ACA), employees have the right to choose between insurance offered from a private employer or an individual health plan.
Private Employer Advantages:
Employer researches and purchases plan
Employer shares cost of premiums with you
Premium contributions are not subject to federal taxes and your contributions can be made pre-tax, lowering your taxable income
Individual Advantages:
You choose plan and provider networks
Your plan is not tied to your job, so you can change jobs without losing coverage
You may be eligible for a subsidy to help pay for insurance, if you enroll in a plan offered through the ACA/marketplace
HSA vs HRA
An HSA (Health Savings Account) is an individually-funded health savings account used in conjunction with high-deductible plans that allows individuals to save money tax-free against medical expenses. With an HSA:
Money comes directly from your paycheck before taxes and is owned by individual
Money may be withdrawn at any time to pay for medical expenses, including those of spouse and other family members. It is an actual account.
Funds roll over year to year
2023 contribution limits are $3850/$7750. Over 55 can add $1000.
Money cannot be used to pay for premiums
HSA must be used with a high deductible health plan (HDHP)
HSA is not the same as FSA (Flexible Spending Account)
An HRA (Health Reimbursement Arrangement) is an employer-funded account that helps employees pay for qualified medical expenses. With an HRA:
Money comes from employer and is owned by employer
Expenses must be substantiated and are accessed with a payment card or online portal reimbursement request
Funds are rolled over or forfeited based on employer rules
HRA (limited purpose HRA) 2023 funding limits are $1950
QSEHRA (Qualified Self-Employer HRA) 2023 funding limits are $5850/$11,800 (small-employer).
ICHRA (Individual Coverage HRA) does not have a cap limit.
HRA can be used to pay for premiums
There’s no plan restrictions—can be used with all plans
Claim Types and Appeals
No matter the reason for a denied claim, as the insured, you have the right to appeal. The following are the types of insurance claims that can be made along with how long the insurance company has to respond to an appeal made by the patient and/or provider to a claim denial.
Urgent: Type of pre-service claim that requires a quick decision because your health would be threatened if the plan took the normal time. The insurance company has to either approve or deny the claim within 72 hours and has to respond to a claim appeal also within 72 hours.
Pre-Service Claim: Requests for approval of whether a procedure or treatment is medically necessary. The insurance company has to either approve or deny the claim within 15 days and has to respond to a claim appeal within 30 days.
Post-Service Claim: These include all other claims, especially those after procedure or treatment has been provided. The insurance company has to either approve or deny the claim within 60 hours and has to respond to a claim appeal within 60 days.
Insurance Appeal Letter Sample & Template
Have you been denied insurance coverage for much needed treatment? Use this appeal letter template as a guide to help you or a loved one appeal insurance claim denials.
BioMatrix Specialty Pharmacy can also help break down barriers to care and cut red tape by:
Conducting a thorough benefits investigation on your behalf
Providing a detailed outline of coverage specific to your therapy, including whether it is covered under the medical or pharmacy benefit and if a prior authorization is required
Outlining financial responsibility for prescribed therapy and referring to appropriate financial assistance programs
Identifying specialty pharmacy service providers available under your plan
Providing support for timely prior-authorization and appeals
Financial Resource Guide
Living with a chronic condition can create additional healthcare costs while also impeding one’s ability to work. Our financial resource guide can help.
DISCLAIMER: THIS IS NOT MEDICAL ADVICE. All information, content, and material is for informational purposes only and is not intended to serve as a substitute for the consultation, diagnosis, and/or medical treatment of a qualified physician or healthcare provider. Please consult a physician or other health care professional for your specific health care and/or medical needs or concerns and never disregard professional medical advice or delay in seeking it because of something you have read here or on our website.
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