When you know more about health insurance, you're in a better position to understand your health coverage options. Here are some common health insurance definition terms to help you better understand your plan or even choose a new one.
Your ability to receive medical care which can be affected by certain factors. Factors that impact access include your location and the kind of providers/facilities in your area. The provider network the insurance company offers impacts access – a particular doctor may not be in the network (using an out-of-network provider usually comes with a penalty, i.e., reduction in what the plan will pay). Your plan may limit access by requiring you to receive a referral from a primary care physician before you can see a specialist..
An unexpected or unintended bodily injury is considered an accident.
Accumulation period is the time period when your eligible medical expenses count toward satisfying your health insurance deductible. See Calendar-Year Deductible.
Actual charge is the amount charged by a physician or other provider for medical services. The actual charge may differ from the allowable charge. See Allowable Charge.
Actuary is a person who works to calculate risk using statistics and mathematics. Actuaries help determine the premiums you pay. They calculate the dollars a company needs to pay claims.
Acute care is considered as a short term medical treatment, usually in a hospital, for patients having an acute illness or injury or recovering from surgery.
Date on which a person becomes one year older is an age change. Age is often one factor used to determine premium rates. Premium usually increases with age, reflecting normally increasing medical costs as an individual grows older.
These are the minimum and maximum ages when individuals are eligible to apply for health coverage or eligible for coverage.
Age/gender factor is a statistic used to determine premium rates. Your age and gender, in part, are used to compute the premiums you pay.
The maximum amount a third party or an insurance company will reimburse a provider for a specific service.
The manner of providing dental or medical services in another way other than the traditional way is considered alternate delivery system.
Therapeutic or preventive health care practices that do not follow accepted medical practices, including acupuncture, chiropractic, herbal medicine, homeopathy, and naturopathy are considered alternative medicine. Alternative medicine may not be covered by a health insurance plan.
Outpatient health care is ambulatory care. The services may include diagnosis, treatment, surgery, and rehabilitation.
Insurance products such as vision or dental coverage that can be added to a medical insurance plan. You’ll usually pay an extra premium for ancillary products.
Health care services such as laboratory work, X-rays, and physical therapy that are provided as part of other medical or hospital care are ancillary services.
An application fee is a one-time fee for processing an application.
A medical facility or health care program approved by the insurance plan to provide specified services for select conditions. The facility or program is often organized through a hospital or clinic.
Patient authorizes the insurer to pay the provider directly for covered medical expenses.
Physician’s statement, requested by the insurance company, explaining a patient’s medical condition. An APS is often requested during underwriting process.
The practice of billing a patient for the difference between the actual charge and the allowable charge is balance billing. This amount could be in addition to copayments, deductibles, and coinsurance. Balance billing is usually prohibited by managed care plans and in some cases by law.
A benefit is a service or supply that is covered under a health insurance plan. This might include office visits, lab tests, and procedures during the course of treatment.
Benefit level is the maximum amount an insurance plan allows to be paid for a given benefit.
Benefit package is the list of health care services and supplies a health insurance plan covers.
The benefit year is the 12-month cycle during which the health care expenses that you incur, and that are covered by the insurance plan, count toward your annual or calendar-year deductible.
This indicates that a physician has completed training or an evaluation process approved by the American Board of Medical Specialties. The process might include exams to test the knowledge, skills, and experience needed to deliver quality care in a specific specialty.
During a calendar year (January – December), amount that an insured (member) is responsible for before the insurance starts paying covered expenses, excluding copays, coinsurance, and noncovered expenses. The process of meeting the deductible, before insurance pays, starts over each January 1.
Capitation is when an insurance company pays providers a flat fee per patient rather than a fee per service. HMOs often use the capitation approach.
A carrier is an insurer, group hospital plan, or managed care organization that offers health insurance plans.
Some health insurance plans allow a covered person to carry over into the next year expenses paid for care received in the last three months of the year. These expenses can be applied to the next year’s deductible.
When a covered person needs a lot of medical care, a case manager may be assigned by the health insurance company which is then considered as case management. The case manager will work with the covered person’s providers to coordinate care. The manager also makes sure the covered person’s plan is being properly and fully utilized.
Certificate of coverage is a document from the insurance company that describes a covered person’s coverage benefits, limitations, and exclusions.
A condition is considered chronic when it’s permanent, recurring, or long lasting.
A claim is a request to an insurer for payment for medical services provided. With managed care plans, providers commonly submit claims to the insurance company. See Managed Care.
COBRA is a federal law that allows most laid off workers to maintain their employer-sponsored health plan. The terminated employee is responsible for the full insurance premium (includes the portion paid by former employer). COBRA coverage is temporary – normally 18 months. There are exceptions, but generally COBRA covers workers in firms with at least 20 employees. COBRA applies to terminated (voluntary and involuntary) workers for reasons other than gross misconduct and those impacted by a reduction in hours of employment.
Coinsurance is the amount that you are obligated to pay for covered medical services after you’ve satisfied any required deductible. Coinsurance is typically expressed as a percentage of the covered amount for a service rendered by a health care provider.
The Coinsurance out-of-pocket maximum is the limit on the amount you pay for covered health services (during the calendar year for most plans), after you have paid your deductible and excluding any copays. Plans generally pay all covered costs (except copays) for the rest of the year after you reach this limit. This limit includes only amounts paid for covered services. For example, out-of-network reductions or claims for cosmetic treatment do not count toward the coinsurance out-of-pocket maximum. Amounts in excess of the non-network reimbursement amount also do not apply to the coinsurance out-of-pocket maximum.
Severe conditions due to pregnancy, labor and delivery that require medical care to prevent serious harm to the health of the mother or the fetus. Morning sickness and elective caesarean section aren’t complications of pregnancy.
Coordination of benefits is the method of integrating benefits payable under more than one health insurance plan, so that the insured’s benefits from all sources do not exceed 100 percent of allowable medical expenses.
Copayment is often referred to as “copay”, a fixed-dollar amount an insured is required to pay to receive services, e.g., $35 for a doctor’s visit, $15 for a prescription. Normally, doctor visit services subject to a copayment are not subject to a deductible (check your plan for details). Prescription drug copays may first require a deductible to be met.
Covered amount is the amount remaining after subtracting any discount and/or non covered amounts. This amount is used for calculating benefits (subject to deductible, copay and coinsurance percentage).
Covered expense is an expense that will be applied to the deductible or reimbursed according to the terms of the insurance plan.
Critical Illness insurance is a type of insurance designed to pay a policyholder a single cash payment when the person or their spouse is diagnosed with a major illness. The money can be used for both living and medical expenses.
The date when a heath care service was provided is the date of service.
The amount of covered expenses that the insured must pay before the insurance pays anything is the deductible. See Family Deductible.
The deductible carryover is when a portion of the calendar-year deductible is satisfied, some of that amount may be eligible to count toward the next year’s deductible.
Dental insurance is a type of insurance designated to pay portions of qualified medical costs of dental care.
A dependent is an individual who obtains health coverage through a spouse, parent, or grandparent who is a plan member. Age requirements and other conditions may need to be met to qualify as a dependent under a health insurance plan.
Diagnosis is the identification of a disease or medical condition through clinical analysis and professional examination.
Drug formulary is a list of brand-name drugs and generic drugs that will be covered at a set level. See Formulary.
Drug maintenance list is a listing of commonly prescribed drugs that are intended to be used long term.
Drug utilization review is when health insurance companies review the use of prescription drugs to assure they’re appropriate in the treatment of patients.
Durable medical equipment is equipment that can withstand repeated use and is used primarily to serve a medical purpose. DME generally is appropriate for use in home and is not useful in the absence of an illness or injury. Examples include hospital beds, wheelchairs, and oxygen equipment.
The effective date is the date an insurance plan starts covering a member.
Electronic funds transfer is the use of online or bank computer systems to withdraw funds to pay a health insurance premium.
Eligibility date is the date when a person becomes eligible for insurance benefits.
Eligibility requirements is a set of conditions that must be met for an individual to be considered eligible for insurance benefits.
Eligible dependent is usually the spouse or child (of a covered person) who is eligible for insurance benefits.
See Covered Expense. Billed, allowable charges are considered eligible expenses. It refers to the set of services allowed under the covered person’s health insurance plan.
A medical condition manifesting itself by acute symptoms of sufficient severity (including severe pain) such that a prudent layperson, who possesses an average knowledge of health and medicine, could reasonably expect the absence of immediate medical attention to result in:
Placing the health of the covered person (or, with respect to a pregnant woman, the health of the woman or her unborn child) in serious jeopardy;
Serious impairment to bodily functions; or
Serious dysfunction of any bodily organ or part.
A medical examination may be performed as part of a health insurance application.
An exclusion is a restriction contained in an insurance contract under which an expense is not covered and no benefits are payable.
Health care services, procedures, therapies, devices, or supplies that the insurance company considers medically unproven are considered experimental or investigational procedures. Such treatments are typically excluded from coverage.
Explanation of benefits is a listing, provided to a covered person, of the provided medical service, drug, or item, the actual charge, the allowable amount, reimbursement amount, deductible, coinsurance, and the net amount owed by the member.
One deductible for the entire family. Expenses from all members of the family count toward a single deductible, rather than a separate deductible for each covered person. No one individual needs to satisfy the deductible before the plan starts paying for covered expenses.
Fee for service is a reimbursement method where payment is made based on the charges for services. This is unlike capitation where payment is a flat fee per patient. See Capitation.
Formulary is a list of brand-name drugs and generic drugs that will be covered at a set level. See Drug Formulary.
A generic drug is a drug that no longer has patent protection and can be manufactured by a company other than the developer. Usually, less expensive than the name brand or patented version (due to the loss of the monopoly the patent provided) but chemically identical. Generic drugs must meet the same U.S. Food and Drug Administration (FDA) standards for safety, purity and effectiveness.
A grace period is a period of time after a premium payment due date when insurance coverage remains in effect. The policyholder can make a payment without penalty.
This process allows a covered person or health care provider to file a complaint with a health insurance company. The process provides for remedies.
Insurance that is directly related to employment or an employer group is considered group insurance.
This is coverage that must be issued regardless of health status. Group health insurance plans are often considered guaranteed issue. Some states have provisions for health plans marketed in those states to be guaranteed issue.
Guaranteed renewable is a plan that generally remains in force as long as premiums are paid in a timely manner. Some plans provide for guaranteed renewability up to a specified age.
Health insurance marketplaces (also known as "exchanges") are a way for people to purchase a health plan. There are two kinds of marketplaces: the individual marketplace (for families and individuals) and SHOP (where small employers can buy health insurance).
Health Maintenance Organization (HMO) is a network of physicians and other health care professionals that provide and coordinate an individual’s health care services. Physicians in the HMO are usually reimbursed on a flat rate based on capitation models. Individuals pay a specific copayment based on the benefit plan design.
HSAs are tax-advantaged savings accounts used with a qualifying high deductible health insurance plan. The account can be used to pay for qualifying medical expenses. You may make tax deductible contributions to an HSA. The funds are yours and stay in the account from year to year. Interest and investment income accumulates tax-deferred, and may be tax-free if used to pay qualified medical expenses.
HIPAA is a federal law intended to improve the availability and continuity of health insurance coverage.
Home health agency is a certified health care agency that provides health care service in the user’s home.
Care provided to terminally ill patients as inpatients or in the home is considered hospice care. Hospice care focuses on the management of pain along with emotional support for patient and family. Hospice is sometimes called palliative or supportive care.
Benefits paid by a plan for hospital room and board along with other charges that result from hospitalization are considered hospital benefits.
This includes services related to a stay in the hospital for a scheduled procedure, treatment for an accidental injury, or treatment for a medical emergency.
Hospitalization service provides coverage for hospitalization. It may provide benefits for room and board along with other expenses.
In-area services are health care services provided within a health insurance plan’s coverage area.
An indemnity plan is a health insurance plan that reimburses the covered person for incurred medical expenses. Indemnity plans often include a deductible that must be satisfied before claims can be paid. Covered persons can usually see any qualified provider without a change in benefits. Indemnity plans are sometimes called fee-for-service plans.
Insurance that is not directly related to employment or an employer group is considered individual and/or family health insurance. The individual owns the policy. In most states, the applicants’ medical records are reviewed to determine insurability. A health insurance company may decline coverage or increase premiums due to certain medical histories or conditions.
Infertility refers to the inability to conceive or become pregnant due to biological causes.
In-network care is health care received from a provider that has a contract with the insurance plan or provider network. In-network care usually comes with a discount – a reduction in the provider’s actual charge.
Inpatient describes services provided in a hospital to a patient who typically is admitted for at least 24 hours. The term can apply to the patient or the services provided by the hospital.
Intermediate care is the level of nursing care that is not as intensive as skilled nursing care but may still be provided in a skilled nursing facility.
Lab/X-ray refers to laboratory tests or X-rays performed to diagnose and/or treat medical conditions. Lab tests typically include blood panels and urinalysis. X-ray services may include ultrasound, MRI, and CT scans. Screenings for prostate cancer, mammograms, and pap smears may be covered by a lab/X-ray benefit.
Lapse is when health insurance ends because the premium was not paid within a specified time.
The number of days a patient stays in a health care facility such as a hospital is the length of stay.
Lifetime maximum is the maximum amount of medical charges a health plan agrees to pay on behalf of a covered person over his or her lifetime.
Limitation is a restriction contained in a plan or insurance contract that places a limit on the covered amount, benefits payable or number of visits.
Long-term care is care provided to an individual who is chronically ill or disabled. May be provided at home or in a medical facility.
Major-medical insurance is a health insurance plan that provides coverage for a broad range of health care service.
Managed care refers to a system of health care delivery that influences utilization, quality of care, cost of services, and measures performance of the health care system. The goal is a system that delivers value by providing access to quality, cost-effective health care. Managed care plans include Preferred Provider Organizations (PPO), Health Maintenance Organizations (HMO), and Point of Service (POS) plans. See Preferred Provider Organizations (PPO), Health Maintenance Organizations (HMO), and Point of Service (POS).
The MIB is a nonprofit organization that stores individual health information which is then available to be reviewed, by underwriting personnel, when a person applies for coverage. The data is gathered when an individual applies for coverage from an MIB member company. MIB is supported by member insurers that offer individual and family health plans.
Also called the coinsurance out-of-pocket maximum, this limit is the most you pay in coinsurance toward costs covered in the plan each term. Your out-of-pocket maximum may not include certain copays and does not include your premium or service charges not covered by your plan. Be sure to check your plan documents for more information on what's covered.
A health insurance plan that allows the covered person to choose to receive care from a network or out-of-network provider is a POS plan. The benefit levels may vary depending on whether the provider is in the network or not. Covered persons are sometimes required to select a primary care provider (PCP). The highest level of benefits is available when the covered person receives care from the PCP.
With a PPO, a health insurance plan or network contracts with providers to offer services to covered persons at pre negotiated fee levels. A covered person may have lower out-of-pocket costs when medical services are received from a network provider. A covered person may visit any provider, but may receive a higher level of benefits when a network provider is seen.
Premium is the amount paid for health insurance coverage for a specific period of time.
Prescription drug coverage is the level of coverage for prescription medications. Some health insurance plans pay a percentage of the costs after a deductible is met. Some health insurance plans offer a copayment per prescription drug. In some cases, the copayment may be less when a generic drug is purchased.
Prescription medication is a drug that can only be legally obtained with a doctor’s prescription. Prescription drugs need Food and Drug Administration approval.
Preventive care is wellness visits, including routine physicals. A service intended to diagnose or treat an existing injury or illness is not preventive care.
If an individual is covered by more than one health insurance plan, primary coverage will be provided by the plan that is first to pay claims. See Coordination of Benefits.
Qualifying event is the termination of employment, divorce, or death of a covered employee in an employer-sponsored group plan. A qualifying event can result in the covered persons being eligible for COBRA coverage. See COBRA.
Referral is when a primary care physician authorizes a covered person to see a specialist for diagnosis or treatment of a medical condition.
A renewable health plan is an insurance plan intended for a longer period, usually a year or more. Coverage continues as long as the premium is paid on time. It’s not often, but under certain circumstances, an insurer can decide not to renew ALL coverage like yours in the state you are currently living, and there are other reasons why a plan might not be continued in force.
Renewal occurs when a covered person opts to continue coverage under a health insurance plan. Renewal usually occurs once a year. Payment of premium is usually accepted by the health insurance company as a request to renew.
Renewal date is the date when a covered person’s health insurance plan renews for another year.
Repriced amount is the negotiated fee that a network provider has agreed to accept as the amount charged for the service.
An amendment or change to an insurance contract is a rider.
Health insurance plans may require a second opinion about the appropriateness of a surgery before providing coverage for the procedure. The opinion will be requested from a qualified physician.
Secondary care is medical care provided by a specialist rather than a primary care physician.
Service area is the geographic region where a health insurance plan’s benefits are available. Some plans limit or exclude coverage outside of the service area.
Short term health insurance is temporary coverage designed to fill gaps in coverage. Short term health insurance plans provide you with coverage for a limited period of time, and may be an ideal solution for those between jobs, waiting for other health insurance to start, college grads coming off their parent’s health plan, or retired early and waiting for Medicare eligibility. Typically, short term plans offer coverage up to six months, although some plans may offer coverage up to 11 months.
Skilled nursing care is care that’s provided at the order of a physician in a hospital or skilled nursing facility. The care is usually provided by a registered nurse or a licensed practical nurse.
A specialist is a physician who is not a primary care physician. A specialist usually provides secondary care in a specific medical specialty. See Secondary Care.
State variation is the change a state requires in a health insurance plan that another state does not require. Since individual and family (personal) health insurance is regulated state by state, variations can be significant. Along with covered expenses, exclusions and limitations, it’s important to read the variations for your state.
Subrogation is the right of the insurer to be put in the position of the insured in order to pursue recovery from third parties legally responsible for a loss paid by the insurer.
Supplemental accident is an optional benefit that may be available to include with a health plan – an upfront payment for treatment of an injury. This is an addition to regular benefits that the base health plan covers and pays, and usually requires an additional premium.
Temporary partial disability describes a medical condition that prevents a covered person from working at full capacity. The person may still be able to work at reduced effectiveness and is expected to recover fully.
Temporary total disability describes a medical condition that prevents a covered person from working. The person is expected to recover fully.
Underwriting is the process the health insurance company uses to review an application to determine the insurability of the applicant(s).
UB-92 is a federal directive requiring hospitals to follow specific billing procedures that itemize the services provided.
Utilization refers to how often a covered person uses benefits under a heath insurance plan.
Vision care coverage is coverage that provides benefits for routine eye examinations and, depending on the plan and provider, frames, lenses, and/or contact lenses.
Waiting period is a time period after you start a health insurance plan when coverage may not be available for some medical conditions. Waiting periods may run from a few weeks to 12 months or more depending on the condition.
Occasionally, in the case of permanent or total disability, a health insurance plan may allow a covered person to keep coverage in force without payment which is a waiver of premium.
Well-baby/well-child care is routine medical care provided to babies and children up to a specific age. It includes preventive care services and immunizations. Different plans have different provisions for well-baby and well-child care.
Well-woman care refers to preventive care for women such as mammograms and pap smears.