Health Insurance Glossary and Definitions of common health insurance terms
This page contains glossary of terms for health insurance consumers. When you are purchasing health insurance plan it is good to know the terms and understand your policy.
Terms and phrases used by those in the health insurance industry.
Actuary: A mathematician working for a health insurance company
responsible for determining what premiums the company needs to charge based in
large part on claims paid verses amounts of premium generated. Their job is to
make sure a block of business is priced to be profitable.
Admitting Privileges: The right granted to a doctor to admit patients to
a particular hospital.
Benefit: Amount payable by the insurance company to a claimant, assignee,
or beneficiary when the insured suffers a loss.Brand-name drug: Prescription drugs marketed with a specific brand
name by the company that manufactures it, usually the company which develops and
patents it. When patents run out, generic versions of many popular drugs are
marketed at lower cost by other companies. Check your insurance plan to see if
coverage differs between name-brand and their generic twins.Broker: Licensed insurance salesperson who obtains quotes and plan
from multiple sources information for clients.
Capitation: Capitation represents a set dollar limit that you or your
employer pay to a health maintenance organization (HMO), regardless of how much
you use (or don’t use) the services offered by the health maintenance
providers. (Providers is a term used for health professionals who provide care.
Usually providers refer to doctors or hospitals. Sometimes the term also refers
to nurse practitioners, chiropractors and other health professionals who offer
specialized services.)Carrier: The insurance company or HMO offering a health plan.Case Management: Case management is a system embraced by employers and
insurance companies to ensure that individuals receive appropriate, reasonable
health care services.
Certificate of Insurance: The printed description of the benefits and
coverage provisions forming the contract between the carrier and the customer.
Discloses what it covered, what is not, and dollar limits.
Claim: A request by an individual (or his or her provider) to an
individual’s insurance company for the insurance company to pay for services
obtained from a health care professional.
COBRA: Federal legislation that lets you, if you work for an insured
employer group of 20 or more employees, continue to purchase health insurance
for up to 18 months if you lose your job or your coverage is otherwise
terminated. For
more information, visit the Department of Labor.
Co-Insurance: Co-insurance refers to money that an individual is
required to pay for services, after a deductible has been paid. In some health
care plans, co-insurance is called “co-payment.” Co-insurance is often
specified by a percentage. For example, the employee pays 20 percent toward the
charges for a service and the employer or insurance company pays 80 percent.
Co-Payment: Co-payment is a predetermined (flat) fee that an
individual pays for health care services, in addition to what the insurance
covers. For example, some HMOs require a $10 “co-payment” for each office
visit, regardless of the type or level of services provided during the visit.
Co-payments are not usually specified by percentages.
Credit for Prior Coverage: This is something that may or may not apply
when you switch employers or insurance plans. A pre-existing condition waiting
period met under while you were under an employer’s (qualifying) coverage can
be honored by your new plan, if any interruption in the coverage between the two
plans meets state guidelines.
Deductible: The amount an individual must pay for health care expenses
before insurance (or a self-insured company) covers the costs. Often, insurance
plans are based on yearly deductible amounts.Denial Of Claim: Refusal by an insurance company to honor a request by
an individual (or his or her provider) to pay for health care services obtained
from a health care professional.Dependents: Spouse and/or unmarried children (whether natural, adopted
or step) of an insured.
Dependent Worker: A worker in a family in which someone else has
greater personal income.
Effective Date: The date your insurance is to actually begin. You are not
covered until the policies effective date.Employee Assistance Programs (EAPs): Mental health counseling services
that are sometimes offered by insurance companies or employers. Typically,
individuals or employers do not have to directly pay for services provided
through an employee assistance program.Exclusions: Medical services that are not covered by an individual’s
insurance policy.
Explanation of Benefits: The insurance company’s written explanation
to a claim, showing what they paid and what the client must pay. Sometimes
accompanied by a benefits check.
Generic Drug: A “twin” to a “brand name drug” once the brand name
company’s patent has run out and other drug companies are allowed to sell a
duplicate of the original. Generic drugs are cheaper, and most prescription and
health plans reward clients for choosing generics.Group Insurance: Group
medical coverage through an employer or other entity that covers all
individuals in the group.
Health Care Decision Counseling: Services, sometimes provided by
insurance companies or employers, that help individuals weigh the benefits,
risks and costs of medical tests and treatments. Unlike case management, health
care decision counseling is non-judgmental. The goal of health care decision
counseling is to help individuals make more informed choices about their health
and medical care needs, and to help them make decisions that are right for the
individual’s unique set of circumstances.Health Maintenance Organizations (HMOs): Health Maintenance
Organizations represent “pre-paid” or “capitated” insurance plans in
which individuals or their employers pay a fixed monthly fee for services,
instead of a separate charge for each visit or service. The monthly fees remain
the same, regardless of types or levels of services provided, Services are
provided by physicians who are employed by, or under contract with, the HMO.
HMOs vary in design. Depending on the type of the HMO, services may be provided
in a central facility, or in a physician’s own office (as with IPAs.)HIPAA: A Federal law passed in 1996 that allows persons to qualify
immediately for comparable health insurance coverage when they change their
employment or relationships. It also creates the authority to mandate the use of
standards for the electronic exchange of health care data; to specify what
medical and administrative code sets should be used within those standards; to
require the use of national identification systems for health care patients,
providers, payers (or plans), and employers (or sponsors); and to specify the
types of measures required to protect the security and privacy of personally
identifiable health care. Full name is “The Health Insurance Portability and
Accountability Act of 1996.”
I Definition of “Individual Health Insurance”: Health insurance
coverage on an individual, not group, basis. The premium is usually higher for
an individual health insurance plan than for a group policy, but you may not
qualify for a group plan.Indemnity Health Plan: Indemnity health insurance plans are also
called “fee-for-service.” These are the types of plans that primarily
existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the
individual pays a pre-determined percentage of the cost of health care services,
and the insurance company (or self-insured employer) pays the other percentage.
For example, an individual might pay 20 percent for services and the insurance
company pays 80 percent. The fees for services are defined by the providers and
vary from physician to physician. Indemnity health plans offer individuals the
freedom to choose their health care professionals.Independent Practice Associations: IPAs are similar to HMOs, except
that individuals receive care in a physician’s own office, rather than in an
HMO facility.
Individual Health Insurance: Health insurance coverage on an
individual, not group, basis. The premium is usually higher for individual
health insurance than for a group policy, but you may not qualify for a
group plan.
In-network: Providers or health care facilities which are part of a
health plan’s network of providers with which it has negoiated a discount.
Insured individuals usually pay less when using an in-network provider, because
those networks provide services at lower cost to the insurance companies with
which they have contracts.
Lifetime Maximum Benefit (or Maximum Lifetime Benefit): the maximum
amount a health plan will pay in benefits to an insured individual during that
individual’s lifetime.
Limitations: a limit on the amount of benefits paid out for a particular
covered expense, as disclosed on the Certificate of Insurance.Long-Term Care Policy: Insurance policies that cover specified
services for a specified period of time. Long-term care policies (and their
prices) vary significantly. Covered services often include nursing care, home
health care services, and custodial care.Long-term Disability Insurance: Pays an insured a percentage of their
monthly earnings if they become disabled.
LOS: LOS refers to the length of stay. It is a term used by insurance
companies, case managers and/or employers to describe the amount of time an
individual stays in a hospital or in-patient facility.
Managed Care: A medical delivery system that attempts to manage the
quality and cost of medical services that individuals receive. Most managed care
systems offer HMOs and PPOs that individuals are encouraged to use for their
health care services. Some managed care plans attempt to improve health quality,
by emphasizing prevention of disease.Maximum Dollar Limit: The maximum amount of money that an insurance
company (or self-insured company) will pay for claims within a specific time
period. Maximum dollar limits vary greatly. They may be based on or specified in
terms of types of illnesses or types of services. Sometimes they are specified
in terms of lifetime, sometimes for a year.Medigap Insurance Policies: Medigap insurance is offered by private
insurance companies, not the government. It is not the same as Medicare or
Medicaid. These policies are designed to pay for some of the costs that Medicare
does not cover.
Multiple Employer Trust (MET): A trust consisting of multiple small
employers in the same industry, formed for the purpose of purchasing group
health insurance or establishing a self-funded plan at a lower cost than would
be available to each of the employers individually.
Network: A group of doctors, hospitals and other health care providers
contracted to provide services to insurance companies customers for less than
their usual fees. Provider networks can cover a large geographic market or a
wide range of health care services. Insured individuals typically pay less for
using a network provider.
Open-ended HMOs: HMOs which allow enrolled individuals to use out-of-plan
providers and still receive partial or full coverage and payment for the
professional’s services under a traditional indemnity plan.Out-of-Plan (Out-of-Network): This phrase usually refers to
physicians, hospitals or other health care providers who are considered
nonparticipants in an insurance plan (usually an HMO or PPO). Depending on an
individual’s health insurance plan, expenses incurred by services provided by
out-of-plan health professionals may not be covered, or covered only in part by
an individual’s insurance company.Out-Of-Pocket Maximum: A predetermined limited amount of money that an
individual must pay out of their own savings, before an insurance company or
(self-insured employer) will pay 100 percent for an individual’s health care
expenses.
Outpatient: An individual (patient) who receives health care services
(such as surgery) on an outpatient basis, meaning they do not stay overnight in
a hospital or inpatient facility. Many insurance companies have identified a
list of tests and procedures (including surgery) that will not be covered (paid
for) unless they are performed on an outpatient basis. The term outpatient is
also used synonymously with ambulatory to describe health care facilities where
procedures are performed.
Plan Administration: Supervising the details and routine activities of
installing and running a health plan, such as answering questions, enrolling
individuals, billing and collecting premiums, and similar duties.Pre-Admission Certification: Also called pre-certification review, or
pre-admission review. Approval by a case manager or insurance company
representative (usually a nurse) for a person to be admitted to a hospital or
in-patient facility, granted prior to the admittance. Pre-admission
certification often must be obtained by the individual. Sometimes, however,
physicians will contact the appropriate individual. The goal of pre-admission
certification is to ensure that individuals are not exposed to inappropriate
health care services (services that are medically unnecessary).Pre-Admission Review: A review of an individual’s health care status
or condition, prior to an individual being admitted to an inpatient health care
facility, such as a hospital. Pre-admission reviews are often conducted by case
managers or insurance company representatives (usually nurses) in cooperation
with the individual, his or her physician or health care provider, and
hospitals.
Preadmission Testing: Medical tests that are completed for an
individual prior to being admitted to a hospital or inpatient health care
facility.
Pre-existing Conditions: A medical condition that is excluded from
coverage by an insurance company, because the condition was believed to exist
prior to the individual obtaining a policy from the particular insurance
company.
Preferred Provider Organizations (PPOs): You or your employer receive
discounted rates if you use doctors from a pre-selected group. If you use a
physician outside the PPO plan, you must pay more for the medical care.
Primary Care Provider (PCP): A health care professional (usually a
physician) who is responsible for monitoring an individual’s overall health
care needs. Typically, a PCP serves as a “quarterback” for an individual’s
medical care, referring the individual to more specialized physicians for
specialist care.
Provider: Provider is a term used for health professionals who provide
health care services. Sometimes, the term refers only to physicians. Often,
however, the term also refers to other health care professionals such as
hospitals, nurse practitioners, chiropractors, physical therapists, and others
offering specialized health care services.
Reasonable and Customary Fees: The average fee charged by a particular
type of health care practitioner within a geographic area. The term is often
used by medical plans as the amount of money they will approve for a specific
test or procedure. If the fees are higher than the approved amount, the
individual receiving the service is responsible for paying the difference.
Sometimes, however, if an individual questions his or her physician about the
fee, the provider will reduce the charge to the amount that the insurance
company has defined as reasonable and customary.Rider: A modification
made to a Certificate of Insurance regarding the clauses and provisions of a
policy (usually adding or excluding coverage).Risk: The chance of loss, the degree of probability of loss or the
amount of possible loss to the insuring company. For an individual, risk
represents such probabilities as the likelihood of surgical complications,
medications’ side effects, exposure to infection, or the chance of suffering a
medical problem because of a lifestyle or other choice. For example, an
individual increases his or her risk of getting cancer if he or she chooses to
smoke cigarettes.
Second Opinion: It is a medical opinion provided by a second physician or
medical expert, when one physician provides a diagnosis or recommends surgery to
an individual. Individuals are encouraged to obtain second opinions whenever a
physician recommends surgery or presents an individual with a serious medical
diagnosis.Second Surgical Opinion: These are now standard benefits in many
health insurance plans. It is an opinion provided by a second physician, when
one physician recommends surgery to an individual.Short-Term Disability: An injury or illness that keeps a person from
working for a short time. The definition of short-term disability (and the time
period over which coverage extends) differs among insurance companies and
employers. Short-term disability insurance coverage is designed to protect an
individual’s full or partial wages during a time of injury or illness (that is
not work-related) that would prohibit the individual from working.
Short-Term Medical: Temporary
coverage for an individual for a short period of time, usually from 30 days
to six months.
Small Employer Group: Generally means groups with 1 - 99 employees.
The definition may vary between states.
State Mandated Benefits: When a state passes laws requiring that
health insurance plans include specific benefits.
Stop-loss: The dollar amount of claims filed for eligible expenses at
which which point you’ve paid 100 percent of your out-of-pocket and the
insurance begins to pay at 100%. Stop-loss is reached when an insured individual
has paid the deductible and reached the out-of-pocket maximum amount of
co-insurance.
Triple-Option: Insurance plans that offer three options from which an
individual may choose. Usually, the three options are: traditional indemnity, an
HMO, and a PPO.
Underwriter: The company that assumes responsibility for the risk, issues
insurance policies and receives premiums.Usual, Customary and Reasonable (UCR) or Covered Expenses: An amount
customarily charged for or covered for similar services and supplies which are
medically necessary, recommended by a doctor, or required for treatment.
Waiting Period: A period of time when you are not covered by insurance
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