Health Insurance Terms

Health insurance terms and definitions

We have had people ask for a place to quickly look up certain health insurance terms.  Below is a quick list of common terms used.  If you should have any questions or would like to see a specific term added, please contact us.

Health Insurance Terms/Glossary

A

Ancillary Services — Services, other than those provided by your physician or hospital, that are related

to your care, like lab work, x-rays and anesthesia.

C

Calendar Year — The period beginning January 1 of any year through December 31 of the same year.

Certificate of Coverage — A document given to you that describes the benefits, limitations and

exclusions of coverage provided by an insurance company.

Claim — Information a doctor, hospital or you submit to an insurance company to request payment for

medical services provided.

Coinsurance — Coinsurance is the percentage of covered expense you are responsible for after you

meet your deductible. For example, you can choose 20% coinsurance of $5,000 (which equals $1,000).

That means you’ll pay 20% and the insurance company pays 80% of the first $5,000 (which equals

$4,000) of covered expenses. After that, the insurance company pays 100% of covered charges for the

remainder of the year, up to the policy maximum.

Coordination of Benefits (COB) — A provision in the health insurance contract that applies when you

are covered under more than one medical plan. It requires that payment of benefits be coordinated by all

plans to eliminate the duplication of payment.

Copayment — The set amount or flat fee that you pay for a specific service, such as $25 for an office

visit. You are usually responsible for payment at the time of service.

Covered Person — An individual who meets eligibility requirements and for whom premium payments

are paid for specific benefits in the health insurance contract.

D

Deductible — The amount you pay each calendar year before insurance benefits are provided for

covered medical expenses.

Dependent — A covered person who relies on another person for support or obtains health coverage

through a spouse, parent or grandparent who is the covered person under a plan.

Disability insurance—Pays benefits if you are injured or become seriously ill and are no longer able to

work.

E

Effective Date — The date your insurance coverage begins.

Eligible Dependent — A dependent of a covered person (spouse, child, or other dependent) who meets

all requirements specified in the contract to qualify for coverage and for whom premium payment is

made.

Eligible Expenses — Either the reasonable and customary charges or the agreed-upon fee for health

services and supplies covered under a health plan.

Exclusions—Services that are not covered by a plan. Sometimes called limitations. These exclusions

and limitations must be clearly spelled out in plan literature.

Explanation of Benefits (EOB) — The statement sent to you by the insurance company that lists

services provided, amount billed, eligible expenses and payment made by the company.

F

Fee-for-service insurance—Traditional (indemnity) health insurance where you and your plan each pay

a portion of your health expenses, usually after you meet a yearly deductible. In most cases, you can

choose any physician, hospital, or other provider (non-network based coverage).

Flexible spending arrangements—Employees use pre-tax dollars to set up these accounts and draw

down on them to pay qualified medical expenses during the year. Unused amounts are forfeited at the

end of the year.

Formulary—An insurance company’s list of covered drugs.

G

Group insurance—Health plans offered to a group of individuals by an employer, association, union,

or other entity.

H

Health maintenance organization (HMO)—A form of managed care in which you receive all of your

care from participating providers. You usually must obtain a referral from your primary care physician

before you can see a specialist.

Health reimbursement arrangement—An account established by an employer to pay an employee’s

medical expenses. Only the employer can contribute to a health reimbursement account.

Health savings account—An account established by an employer or an individual to save money

toward medical expenses on a tax-free basis. Any balance remaining at the end of the year “rolls over” to

the next year.

High-deductible health plan—A plan that provides comprehensive coverage for high-cost medical

events. It features a high deductible and a limit on annual out-of-pocket expenses. This type of plan is

usually coupled with a health savings account or a health spending account.

High-risk pool—A State-operated program that offers coverage for individuals who cannot get health

insurance.

I

Indemnity insurance—Traditional, fee-for-service health insurance that does not limit where a covered

individual can get care.

Individual health insurance—Coverage purchased independently (not as part of a group), usually

directly from an insurance company.

Insured — A person who has obtained health insurance coverage under a health insurance plan.

L

Lifetime Maximum — The maximum amount a plan will pay while you are insured.

Long-term care insurance—Coverage that pays for all or part of the cost of home health care services

or care in a nursing home or assisted living facility.

M

Managed care—An organized way of getting health care services and paying for care. Managed care

plans feature a network of physicians, hospitals, and other providers who participate in the plan. In some

plans, covered individuals must see an in-network provider; in other plans, covered individuals may go

outside of the network, but they will pay a larger share of the cost.

Medicaid—A Federal program administered by the States to provide health care for certain poor and

low-income individuals and families. Eligibility and other features vary from State to State.

Medicare—A Federal insurance program that provides health care coverage to individuals aged 65 and

older and certain disabled people, such as those with end-stage renal disease.

N

Network – A group of physicians, hospitals, and other providers who participate in a particular managed

care plan.

O

Open enrollment—A set time of year when you can enroll in health insurance or change from one plan

to another without benefit of a qualifying event (e.g., marriage, divorce, birth of a child/adoption, or

death of a spouse). Open enrollment usually occurs late in the calendar year, although this may differ

from one plan to another.

Out-of-Pocket Maximum — The total payments that must be paid by you (like your deductible and

coinsurance) as defined by your contract. Once this limit is reached, covered health services are paid at

100%.

P

Participating Provider — A doctor, hospital or other medical facility that’s made an arrangement with

the insurance company to provide medical services or supplies to you at a pre-negotiated fee.

Point-of-service plan—A form of managed care plan in which primary care physicians coordinate

patient care but there is more flexibility in choosing doctors and hospitals than in an HMO.

Preexisting condition — A medical condition that existed before an insurance policy was purchased.

Depending on the policy, a preexisting condition may be defined based on when it originated, when

symptoms first appeared, or when treatment was first sought. A preexisting condition clause excludes

coverage for preexisting conditions for possibly as long as 12 months after the effective date of

coverage. This clause may differ considerably from one plan to another; we recommend that you

familiarize yourself with the policy’s provision.

Preferred Provider Organization (PPO) — An arrangement that offers you access to participating

providers at reduced costs. Insurers provide you with incentives, such as lower deductibles and

copayments, to use providers in the network. Network providers agree to negotiated fees in exchange for

their preferred provider status.

Premium—The amount you pay to belong to a health plan. If you have employer-sponsored health

insurance, your share of premiums usually are deducted from your pay.

Primary care physician—Usually a family practice doctor, internist, obstetrician-gynecologist, or

pediatrician. He or she is your first point of contact with the health care system, particularly if you are in

a managed care plan.

Provider — A physician, hospital, health professional and other entity or institutional health care

provider that provides a health care service.

R

Reasonable and Customary — A term used to refer to the amount that’s commonly charged for a

particular service within a geographic area. A fee is generally considered to be reasonable if it falls

within the parameters of the average or commonly charged fee for a particular service within a specific

community.

U

Underwriting — The process an insurance company uses to review and evaluate a potential customer

for risk assessment and appropriate premium.

W

Waiting period

A waiting period is the length of time an insured may have to wait before being eligible for a particular

benefit. Incidents which occur during this time are not claimable. Waiting period may also refer to the

time between the making of a claim and the payment of it.

 

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