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ACA (Affordable Care Act)

The 2010 federal law that created the Marketplace for individual and family health insurance, also called Obamacare. ACA plans are major medical and cannot deny you for pre-existing conditions; households below 400% of the federal poverty level may qualify for a premium tax credit.

Affordable Choice

A budget-friendly, fixed-benefit health plan offered as an alternative to Marketplace coverage. It pays a set amount per event (such as a hospital stay) rather than a percentage of the bill, and fits healthy people who want a lower, predictable monthly cost.

Annual Enrollment Period (AEP)

The time period from October 15 to December 7 each year when Medicare beneficiaries can make changes to their Medicare Advantage and Part D plans for the following year.

Beneficiary

A person who receives benefits from an insurance policy or health plan.

Cash Value

The savings part of a permanent life policy that builds over time, grows tax-deferred, and can be borrowed against or withdrawn. Term life does not have cash value.

Coinsurance

The percentage of costs you pay for a covered health service after you've met your deductible. For example, if your plan's coinsurance is 20%, you pay 20% of the allowed amount.

Convertible

A feature on many term life policies that lets you switch to permanent coverage later without a new medical exam. Useful if you decide you want lifetime coverage after buying term.

Copayment (Copay)

A fixed amount you pay for a covered health service, usually when you receive the service. For example, a $20 copay for a doctor visit.

Creditable Coverage

Prescription drug coverage that is expected to pay, on average, at least as much as Medicare's standard prescription drug coverage. Important for avoiding Part D late enrollment penalties.

Death Benefit

The amount paid to your named beneficiaries when you pass away. Life insurance death benefits are generally tax-free to the people who receive them.

Deductible

The amount you must pay for covered health services before your insurance plan starts to pay. For example, with a $500 deductible, you pay the first $500 of covered services.

Donut Hole (Coverage Gap)

A former gap in Part D drug coverage where you paid a higher share of costs after you and your plan had spent a certain amount. The Inflation Reduction Act eliminated the donut hole starting in 2025. Part D now has a deductible phase, an initial coverage phase, and catastrophic coverage once you reach the annual out-of-pocket cap.

Dual Eligible

People who qualify for both Medicare and Medicaid. They may be eligible for Special Needs Plans (SNPs) designed to meet their specific needs.

Effective Date

The date your insurance coverage begins and you can start using your benefits.

Extra Help (Low Income Subsidy)

A Medicare program that helps people with limited income and resources pay for prescription drug coverage costs, including premiums, deductibles, and copays.

Formulary

A list of prescription drugs covered by a health plan. Drugs on the formulary are typically organized into tiers, with lower tiers having lower costs.

FSA (Flexible Spending Account)

A pre-tax account, usually offered through an employer, for out-of-pocket medical or dependent-care costs. Unlike an HSA, most of the balance does not roll over, so it follows a use-it-or-lose-it rule.

HDHP (High-Deductible Health Plan)

A health plan with a higher deductible and a lower premium that lets you pair it with a Health Savings Account. Self-employed workers often choose an HDHP to keep premiums down and save tax-free for care.

HMO (Health Maintenance Organization)

A type of health plan that requires you to use doctors and hospitals in the plan's network (except in emergencies). Usually requires referrals to see specialists.

HSA (Health Savings Account)

A tax-advantaged account for medical costs, available with a high-deductible health plan. Contributions are tax-deductible, the money grows tax-free, and withdrawals for qualified care are tax-free. Unused funds roll over year to year.

Initial Enrollment Period (IEP)

The 7-month period when you can first sign up for Medicare, starting 3 months before the month you turn 65, including your birthday month, and ending 3 months after.

IRMAA (Income-Related Monthly Adjustment Amount)

An extra amount added to Medicare Part B and Part D premiums for beneficiaries with higher incomes. Based on your modified adjusted gross income from two years prior.

MAPD (Medicare Advantage Prescription Drug)

A Medicare Advantage plan that includes prescription drug coverage. Combines Part A, Part B, and Part D benefits in one plan.

Marketplace

The website (HealthCare.gov, or your state's version) where individuals and families compare and enroll in ACA health plans. Open Enrollment usually runs November 1 to January 15 each year.

Maximum Out-of-Pocket (MOOP)

The most you'll pay during a plan year for covered services. After you reach this limit, your plan pays 100% for covered services. Medicare Advantage plans are required to have a MOOP limit.

Medical Underwriting

The health review an insurer does when you apply, using your medical history and sometimes a brief exam to set your rate. Healthier applicants get lower rates, and buying younger usually costs less.

Medicare Advantage (Part C)

A Medicare-approved plan from a private company that offers an alternative to Original Medicare. These plans must cover at least everything Original Medicare covers and often include additional benefits.

Medicare Part A

Hospital insurance that covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care services.

Medicare Part B

Medical insurance that covers doctor visits, outpatient care, preventive services, medical supplies, and some home health services.

Medicare Part D

Prescription drug coverage offered through private insurance companies. Helps cover the cost of prescription medications.

Medigap (Medicare Supplement)

Private insurance that helps pay some of the out-of-pocket costs not covered by Original Medicare, such as deductibles, copayments, and coinsurance.

Network

The doctors, hospitals, pharmacies, and other health care providers that a plan has contracted with to provide services at negotiated rates.

Open Enrollment Period

The yearly window (November 1 to January 15) when you can enroll in, switch, or drop an ACA health plan for the next year. Outside this window you need a qualifying life event to enroll.

Original Medicare

Medicare Part A and Part B coverage provided directly by the federal government. You can use any doctor or hospital that accepts Medicare.

Out-of-Pocket Costs

Your expenses for medical care that aren't reimbursed by insurance, including deductibles, coinsurance, copays, and costs for services not covered.

PPO (Preferred Provider Organization)

A type of health plan that has a network of preferred providers but also allows you to see out-of-network providers at a higher cost. Usually doesn't require referrals.

Premium

The amount you pay, usually monthly, for your health insurance coverage, whether or not you use medical services.

Premium Tax Credit

A federal subsidy that lowers your monthly ACA premium if your household income is below 400% of the federal poverty level. You can apply it up front to reduce each month's bill, or claim it when you file taxes.

Prior Authorization

Approval required from your health plan before you receive certain services, treatments, or medications. Without prior authorization, the plan may not cover the cost.

Self-Employed

Someone who works for themselves with 1099 income and no employer benefits. Self-employed people buy their own coverage and can deduct 100% of their health premiums on their tax return.

SNP (Special Needs Plan)

A type of Medicare Advantage plan designed for people with specific diseases or characteristics, such as those who are institutionalized or dual-eligible for Medicare and Medicaid.

Special Enrollment Period

A 60-day window to enroll in health coverage outside Open Enrollment after a qualifying event such as losing job-based coverage, getting married, having a baby, or moving.

Step Therapy

A coverage policy requiring you to try one or more lower-cost drugs before your plan will cover a more expensive drug for your condition.

Subsidy Cliff

The income line at 400% of the federal poverty level, about $62,600 for one person in 2025. Households above it get no ACA premium tax credit. The larger pandemic-era subsidies expired January 1, 2026, so the cliff is back in force.

Supplemental Insurance

Coverage that fills gaps left by a major medical plan, such as dental, vision, cancer, or hospital indemnity. It is sold separately and does not replace health insurance.

Term Life Insurance

Temporary life insurance for a set period, often 10, 20, or 30 years, with fixed premiums and a high payout for the cost. The most affordable way to protect your family during the working years.

Tier

A category of drugs on a formulary. Lower tiers typically have lower costs. For example, Tier 1 might be generic drugs with the lowest copay, while Tier 4 might be specialty drugs with the highest costs.

Universal Life Insurance

Permanent life insurance with flexible premiums and an adjustable death benefit, combining coverage with a cash-value component. More flexible than whole life but less guaranteed.

Whole Life Insurance

Permanent life insurance that lasts your whole life, with level premiums and cash value that grows tax-deferred. It costs more than term and is often used for legacy planning and final costs.