Health Care Reform Definitions

Health Care Reform Definitions

Adult Children

The term means children, whether natural, adopted or foster, who are older than age 18 but younger than 26 years of age.

It is important to note that adult children eligible to become enrolled on their parents’ plan do not have to be “dependents” of their parents, as defined by the IRS. Adult children eligible to be added to their parents’ health coverage may be married, living separately and/or self-supporting, but must not be eligible for other employer-sponsored health coverage.

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Determine your Subsidy with this Health Reform Calculator

Cost-Sharing Reduction

An individual eligible for a reduction in cost-sharing under a health plan must
have income between 100 and 400 percent of federal poverty, and must have enrolled in an exchange
plan. Cost-sharing is reduced on a sliding scale based upon income.


A health and welfare benefit plan established and maintained by an employer for the benefit of its employees or other eligible plan participants and beneficiaries, and that is governed by the federal Employee Retirement Income Security Act of 1974.

Essential Health Benefits

Section 1302 of the Affordable Health Care Act.
In general, essential health benefits are those that must be included in all health insurance plans

  • Ambulatory patient services.
  • Emergency services.
  • Hospitalization.
  • Maternity and newborn care.
  • Mental health and substance use disorder services, and behavioral health treatment.
  • Prescription drugs.
  • Rehabilitative and habilitative services and devices.
  • Laboratory services.
  • Preventive and wellness services and chronic disease management.
  • Pediatric services, including oral and vision care.


A state-based agency or non-profit, responsible beginning in 2014 to perform the
following functions

  • Assist in consumer and small employer education about health plan choices
  • Assist consumers in enrollment
  • Assist with financial handling of premium tax credits, cost-sharing reduction
  • Certify health plans as qualified to sell in the exchange

External Review

Also called independent medical review, external review is the opportunity a plan
participant has to obtain an outside medical opinion of the plan’s claims decision.

Free Rider Penalty

If an employer offers employer-sponsored health coverage to employees that either
(a) has an actuarial value of less than 60 percent, or
(b) requires the employee to spend more than 9.5 percent of the employee’s income on health coverage, qualifying the employee for health coverage in the exchange, the employer will be penalized $3,000 for each employee who receives exchange coverage (and premium tax credit and/or cost-sharing limitations).

Full-Time Employee

Any employee that is working 30 or more hours per week, determined on a monthly basis.


This term refers to the ability of a health plan to escape legal requirements of the act
if you maintained the exact same health plan as you had on March 23, 2010, most of the health plan provisions will be “grandfathered” and need not be altered. Grandfathering is almost exclusively limited to individual plans. Most insurance carriers business plans have stop tracking and reporting grandfathered plans.


The Health Insurance Portability and Accountability Act of 1996


The U.S. Department of Health and Human Services

Mental Health Parity

The Mental Health Parity and Addiction Equity Act of 2008 (MHPAEA) requires group health plans and health insurance issuers to ensure that financial requirements (such as co-pays, deductibles) and treatment limitations (such as visit limits) applicable to mental health or substance use disorder (MH/SUD) benefits are no more restrictive than the predominant requirements or limitations applied to substantially all medical/surgical benefits.

Premium Tax Credit

This term refers to the amount of tax credit an individual with income between 100
percent and 400 percent of federal poverty level may receive towards the cost of premium for health insurance.

Health Care Reform Preventative Care Flyer
Preventative Care Flyer

Preventive Care

The Affordable Care Act (ACA) requires non-grandfathered plans to provide coverage for “preventive care”. This coverage must be provided without cost sharing (e.g., coinsurance, deductible or copayment) for services provided in network.

Self-funded health plan

This refers to a health plan that is fully funded by monies from the employer
and is not an insurance arrangement.

Wellness program

Program to encourage healthy behaviors, such as weight loss or smoking cessation.