Before you dive into our 2025 Guide to Small Business Health Insurance, use this glossary to get more comfortable with the terms you’ll need to know.
ACA: Affordable Care Act. Sometimes called “Obamacare,” this legislation became law in 2014 and established a new standard for individual insurance. The law established exchanges to shop for health plans, and eliminated consideration of pre-existing conditions, gender identity, and pregnancy status in setting prices and terms.
ACA-compliant: Also known as a MEC plan, these plans are priced based on your location, age, and service level only, without consideration of pre-existing conditions. The base cost of the plan includes preventative coverages like baseline blood testing, annual physicals, well woman screening, cancer screening like mammograms and prostate exams, and prenatal care, and immunization. For children, they also provide dental and vision coverage.
AGI: Adjusted gross income. The amount you’re taxed on after you deduct qualified pre-tax expenses from your business, student loans, and health and retirement savings accounts.
ALE: Applicable Large Employer. This is the HR term for companies with 50 or more employees. The term is also a standard for how much of the cost of health insurance that these employers can pass on to their employees. While these requirements are unlikely to apply to you, ALE is a good reference if you’re concerned about competing for talent.
Co-pay: An amount you pay a provider directly for a service or visit, in addition to your premiums.
Co-insurance: An amount of the insurance company’s negotiated rate that you’ll pay out of pocket for medical services. Co-insurance is often related to hospital stays and major medical events
Deductible: An amount you’ll need to pay beyond your premium before insurance covers the full cost of a service.
Exchange: A state- or federally-sponsored service that summarizes the ACA-compliant plans available in your area and calculates your eligible subsidies based on income and family size. The federal exchange is healthcare.gov. Also called a marketplace.
FSA: Flexible Spending Account. An employer-sponsored pre-tax savings program that you can apply to your out of pocket expenses within your plan year. Shareholders with 2% of more ownership in a company are not eligible to participate in FSAs.
Full-time: For health insurance purposes, this is 30 hours a week. When you design your plan, you can choose whether to include part-time employees.
HDHP: High-deductible health plan. A special category of Bronze plan that has lower premiums and higher deductibles. Best for those who do not have significant planned or recurring health care needs.
HMO: Health management organization. A closed system of healthcare providers that you must use in order to be covered by your insurance policy. HMOs do not have out-of-network service options besides emergency rooms.
HSA: Health Savings Account. A tax-preferred savings account for health expenses that you can use if you choose a high-deductible health plan (HDHP).
Inflation Reduction Act: A 2022 law that extended ACA exchange subsidies through 2025, updated ALE plan affordability standards, and capped household premium costs for benchmark Marketplace plans.
In-network: A set of healthcare providers, clinics, and hospitals that have negotiated with your insurer to offer preferred rates.
Limited network: A group of local providers, clinics, and hospitals that accept an insurance plan. A limited network plan typically does not have any coverage for non-emergency, out of network services.
Marketplace: A federally or state-sponsored exchange for insurers to offer ACA-compliant health insurance plans. Find your marketplace at healthcare.gov.
MEC: Minimum Essential Coverage. A plan that meets the current minimum federal requirements for ACA compliance. Most states and pre-tax programs require employers to offer MEC-compliant plans.
Out-of-pocket: The pocket is yours. These are fees and bills you pay above and beyond premiums.
Out-of-pocket maximum: The cap on how much you can pay out-of-pocket in a year. ACA-compliant plans have an individual and family maximum. Once you reach OOP maximum, you will still pay your monthly premiums, but you will not be billed additional amounts for services, regardless of your ongoing medical needs. This is often a catastrophic limit meant to prevent medical bankruptcy.
PEO: Professional Employer Organization. A PEO is a specialized HR company that can bundle many small businesses together for insurance buying power. A PEO acts as a co-employer and provides HR services like payroll, health benefits, and retirement plans. Typically, the PEO charges a monthly fee per employee plus the cost of healthcare.
PPO: Preferred provider organization. A network of providers who have agreed to a preferred pricing structure with an insurance company, and still pays something if you choose a non-network care provider.
Premium: The monthly payment required to keep your health insurance policy in force. If you do not pay it, your insurance will be cancelled.
Preventative care: Screenings and health care services under MEC- / ACA-compliant plans, provided without an additional charge, co-pay, or deductible. These include an annual physical, well woman exam, well child exam, mammograms, colonoscopies, some diabetes care, oral birth control, condoms, and pregnancy-related care.
QSEHRA: Qualified Small Employer Health Reimbursement Arrangement. A QSEHRA (or similarly, an ICHRA) is a tax-preferred program that allows small businesses to contribute pre-tax funds to help employees pay for the insurance plan of their choice, and possibly for qualified medical expenses.
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