HEALTH INSURANCE GLOSSARY of COMMON TERMS

Benefit:

A general term referring to any service (such as an office visit, laboratory test, surgical procedure, etc.) or supply (such as prescription drugs, durable medical equipment, etc.) covered by a health insurance plan in the normal course of a patient's healthcare.

Benefit Level:

The maximum amount a health insurance company agrees to pay for a specific covered benefit.

Benefit Year:

The annual cycle in which a health insurance plan operates. At the beginning of your benefit year, the health insurance company may alter plan benefits and update rates. Some benefit years follow the calendar year, renewing in January, whereas others may renew in late summer or fall.

Co-insurance:

The amount that you are obliged to pay for covered medical services after you've satisfied any co-payment or deductible required by your health insurance plan. Coinsurance is typically expressed as a percentage of the charge or allowable charge for a service rendered by a healthcare provider. For example, if your insurance company covers 80% of the allowable charge for a specific service, you may be required to cover the remaining 20% as coinsurance.

Co-payment:

A specific, fixed amount that your health insurance plan may require that you pay for a specific medical service or supply, also referred to as a "co-pay." For example, your health insurance plan may require a $15 co-payment for an office visit or brand-name prescription drug, after which the insurance company often pays the remainder of the charges.

Deductible:

A specific dollar amount that your health insurance company may require that you pay out-of-pocket each year before your health insurance plan begins to make payments for claims. Not all health insurance plans require a deductible. As a general rule (though there are many exceptions), HMO plans typically do not require a deductible, while most Indemnity and PPO plans do. Explanation of Benefits (EOB): A statement sent from the health insurance company to a member listing services that were billed by a healthcare provider, how those charges were processed, and the total amount of patient responsibility for the claim.

Access:

The availability of medical care. The quality of one's access to medical care is determined by location, transportation options, and the type of medical care facilities available in the area, etc.

Accumulation Period:

The period of time during which an insured person incurs eligible medical expenses toward the satisfaction of a deductible.

Actual Charge:

The actual dollar amount charged by a physician or other provider for medical services rendered, as distinguished from the allowable charge.

Allowable Charge (Maximum Allowable):

Also referred to as the Allowed Amount, Approved Charge or Maximum Allowable. See also, Usual, Customary and Reasonable Charge. This is the dollar amount typically considered payment-in-full by an insurance company and an associated network of healthcare providers. The Allowable Charge is typically a discounted rate rather than the actual charge. Here’s an example: You have just visited your doctor for an earache. The total charge for the visit comes to $100. If the doctor is a member of your health insurance company's network of providers, he or she may be required to accept $80 as payment in full for the visit - this is the Allowable Charge. Your health insurance company will pay all or a portion of the remaining $80, minus any co-payment or deductible that you may owe. The remaining $20 is considered provider write-off. You cannot be billed for this provider write-off. However, if the doctor you visit is not a network provider then you may be held responsible for everything that your health insurance company will not pay, up to the full charge of $100.

Ancillary Fee:

An extra fee sometimes associated with obtaining prescription drugs which are not listed on a health insurance plan's formulary of covered medications.

Ancillary Services:

Supplemental healthcare services such as laboratory work, x-rays or physical therapy that are provided in conjunction with medical or hospital care.

Assignment of Benefits:

The payment of health insurance benefits to a healthcare provider rather than directly to the member of a health insurance plan.

Claim:

A bill for medical services rendered, typically submitted to the insurance company by a healthcare provider.

Drug Formulary:

A list of prescription medications selected for coverage under a health insurance plan. Drugs may be included on a drug formulary based upon their effectiveness, safety and cost-effectiveness. Some health insurance plans may require that patients obtain preauthorization before non-formulary drugs are covered. Other health insurance plans may require that a patient pay a greater share or all of the cost involved in obtaining a non-formulary prescription.

Durable Medical Equipment (DME):

Medical equipment used in the course of treatment or home care for everyday or extended use, including such items as crutches, knee braces, wheelchairs, hospital beds, prostheses, blood testing strips for diabetes, etc. Coverage levels for DME often differ from coverage levels for office visits and other medical services.

Employee Contribution:

The portion of the health insurance premium paid for by the employee, usually deducted from wages by the employer.

Employer Contribution:

The portion of an employee's health insurance premium paid for by the employer.

Exclusions:

Specific conditions, services or treatments for which a health insurance plan will not provide coverage.

Experimental or Investigational Procedures (Not Medically Necessary):

Any healthcare services, supplies, procedures, therapies or devices the effectiveness of which a health insurance company considers unproven. These services are generally excluded from coverage.

HMO:

HMO means "Health Maintenance Organization." HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members at a pre-negotiated rate. As a member of an HMO, you will need to choose a primary care physician ("PCP") who will provide most of your health care and refer you to HMO specialists as needed. Some HMO plans require that you fulfill a deductible before services are covered. Others only require you to make a copayment when services are rendered. Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in the case of an emergency.

HSA (Health Savings Account):

A tax advantaged savings account to be used in conjunction with certain high-deductible (low premium) health insurance plans to pay for qualifying medical expenses. Contributions may be made to the account on a tax-free basis. Funds remain in the account from year to year and may be invested at the discretion of the individual owning the account. Interest or investment returns accrue tax-free. Penalties may apply when funds are withdrawn to pay for anything other than qualifying medical expenses.

Lifetime Maximum:

Lifetime maximum or lifetime limits refers to the maximum dollar amount that a health insurance company agrees to pay on behalf of a member for covered services during the course of his or her lifetime. For plan or policy years beginning on or after Sept. 23, 2010, plans may not establish any lifetime limit on the dollar amount of benefits for any individual. All plans are required by PPACA to remove the lifetime maximum restrictions.

Managed Care:

A general term used to describe a variety of healthcare and health insurance systems that attempt to guide a member's use of benefits, typically by requiring that a member coordinate his or her healthcare through a primary care physician, or by encouraging the use of a specific network of healthcare providers. The management of healthcare is intended to keep costs and monthly premiums as low as possible. There are several different types of managed care health insurance plans, including HMO, PPO, and POS plans.

Maximum Out-Of-Pocket Costs:

An annual limitation on all cost-sharing for which patients are responsible under a health insurance plan. This limit does not apply to premiums, balance-billed charges from out of network health care providers or services that are not covered by the plan.

Medical Necessity:

A basic criterion used by health insurance companies to determine if healthcare services should be covered. A medical service is generally considered to meet the criteria of medical necessity when it is considered appropriate, consistent with general standards of medical care, consistent with a patient's diagnosis, and is the least expensive option available to provide a desired health outcome. Of course, preventive care services that may be covered under a health insurance plan are not always subject to the criteria of medical necessity.

Network:

A "Network" plan is a variation on a PPO plan. With a Network plan you'll need to get your medical care from doctors or hospitals in the insurance company's network if you want your claims paid at the highest level. You will probably not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it's up to you to make sure that the health care providers you visit participate in the network. Services rendered by out of network providers may not be covered or may be paid at a lower level.

Out-of-Network Care:

Healthcare rendered to a patient outside of the health insurance company's network of preferred providers. In many cases, the health insurance company will not pay for these services.

Out-of-Pocket Limit:

The most you pay during a policy period (usually one year) before your health insurance plan begins to pay 100% of the allowed amount, This limit never includes your premium, balance-billed charges or healthcare your insurance plan doesn’t cover. Some health insurance plans don’t count all of your co-payments, deductibles, co-insurance payments, out-of-network payments or other medical expenses toward this limit.

Plan:

A benefit your employer, union or other group sponsor provides to you to pay for your healthcare services.

Plan Type: HMO

HMO means "Health Maintenance Organization." HMO plans offer a wide range of health care services through a network of providers that contract exclusively with the HMO, or who agree to provide services to members at a pre-negotiated rate. As a member of an HMO, you will need to choose a primary care physician ("PCP") who will provide most of your health care and refer you to HMO specialists as needed. Some HMO plans require that you fulfill a deductible before services are covered. Others only require you to make a copayment when services are rendered. Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in the case of an emergency.

Plan Type: Indemnity

Also called "fee-for-service" plans, Indemnity plans typically allow you to direct your own health care and visit whatever doctors or hospitals you like. The insurance company then pays a set portion of your total charges. You may be required to pay for some services up front and then apply to the insurance company for reimbursement. Indemnity plans typically require that you fulfill an annual deductible. Because of the freedom they allow members, Indemnity plans are sometimes more expensive than other types of plans.

Plan Type: Network

A "Network" plan is a variation on a PPO plan. With a Network plan you'll need to get your medical care from doctors or hospitals in the insurance company's network if you want your claims paid at the highest level. You will probably not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it's up to you to make sure that the health care providers you visit participate in the network. Services rendered by out of network providers may not be covered or may be paid at a lower level.

Plan Type: POS

POS stands for "Point of Service." POS plans combine elements of both HMO and PPO plans. As a member of a POS plan, you may be required to choose a primary care physician who will then make referrals to specialists in the health insurance company's network of preferred providers. Care rendered by non-network providers will typically cost you more out of pocket, and may not be covered at all.

Plan Type: PPO

PPO means "Preferred Provider Organization." Like the name implies, with a PPO plan you'll need to get your medical care from doctors or hospitals on the insurance company's list of preferred providers if you want your claims paid at the highest level. You will probably not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it's up to you to make sure that the health care providers you visit participate in the PPO. Services rendered by out of network providers may not be covered or may be paid at a lower level. A broad variety of PPO plans are available, many with low monthly premiums.

Preauthorization:

Sometimes called prior authorization, prior approval or precertification, this is a decision by your health insurer or plan that a healthcare service, treatment plan, prescription drug, or durable medical equipment is medically necessary. Your plan may require preauthorization for certain services before you receive them, except in an emergency. Preauthorization is not a guarantee that your health insurance plan will cover the cost of services.

Premium:

The total amount paid to the insurance company for health insurance coverage. This is typically a monthly charge. Within the context of group health insurance coverage, the premium is paid in whole or in part by the employer on behalf of the employee or the employee's dependents.

Preventive Care:

Medical care rendered not for a specific complaint but focused on prevention and early-detection of disease. This type of care is best exemplified by routine examinations and immunizations. Some health insurance plans limit coverage for preventive care services, while others encourage such services. Note that well-baby care, immunizations, periodic prostate exams, pap smears and mammograms, though considered preventive care, may be covered even if your health insurance plan limits coverage for other preventive care services.

Usual, Customary and Reasonable (UCR) Charge:

This refers to the standard or most common charge for a particular medical service when rendered in a particular geographic area. It is often used in determining Medicare payment amounts and to determine the allowed amount.

Waiting Period:

A waiting period refers to the time an insured must wait before some or all of their coverage comes into effect. Only when the waiting period has passed can the insured have a right to file a claim for the benefits of the insurance policy. Health insurance generally imposes three types of waiting periods. An employer waiting period requires an employee to wait a certain period of time, such as three months, before they can receive covered health services. This is to discourage an employee from filing a major claim and leaving the company shortly thereafter. Second, affiliation periods refer to exclusion periods that HMOs impose. The Health Insurance Portability and Accountability Act (HIPAA) regulates this and does not allow it to exceed three months. Lastly, some group plans may have pre-existing condition (PEC) waiting periods, as these plans are the only ones now required to provide insurance to those with a PEC. The waiting period may be reduced or waived based on any prior health care coverage you had before applying for your new health insurance plan.