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Glossary

A

Actuary: A statistician employed by a health insurance company to determine the premiums the company needs to charge based on the risks involoved in the specified coverage. Their job is to ensure that premiums are set at a point that is profitable for the health insurance company.

Admitting Privileges: The right granted to a doctor to admit patients to a particular hospital.

Allowed Amount: The amount of the bill the insurance company must pay based on the terms of the specific plan.  If your bill is for greater than the allowed amount, you may be responsible for the balance.

Ancillary Services: The name given to extra services that are not included in the basic doctor or hospital services.  Examples include laboratory tests and X-rays.

Assignment of BenefitsA form signed by a patient (or a patient’s guardian) so that the doctor, hospital or other care providers can bill and receive the insurance payment directly.

Association: A group. An association may be able to offer health insurance plans to its members. 

AuthorizationA required approval by a health plan before they agree to pay for the service.    Usually, the doctor’s office or hospital’s business office has to call the health plan or submit a form describing the situation and wait to receive an authorization before they treat the patient for certain conditions.   Most health plans require prior authorization for surgeries, medical equipment, referrals to specialists, and some drugs.

B

Benefit: Amount payable by the insurance company to a policy’s beneficiary when the insured suffers a loss.

Benefit Penalty: The reduction of the payment on a claim when the patient or medical provider does not follow the rules of the health plan.

Brand-name drug: Prescription drugs marketed with a specific brand name. When a popular drug’s patent expires, generic versions are often manufactured and marketed at lower cost by other companies.

C

Capitation: A set fee received by a provider (usually, a doctor or hospital) regardless of how much you use (or don’t use) the services offered by the provider.  This is the payment method usually used by health maintenance organizations (HMOs). (Provider is a term used for health professionals who provide care, usually doctors or hospitals.)  Capitation fees are usually paid on a per patient per month basis.  Most capitation plans require that you first see a primary care doctor and allow you to see a specialist only if the primary care doctor gives you a referral.

Carrier: The insurance company or HMO offering a health plan.

Case Management: Management of all of the procedures for care of an individual through a nurse or other health care professional. This is a system used by employers and insurance companies in order to control costs.

Certificate of Insurance: The formal printed description of what is covered by a specific insurance policy and what is not. This also shows the dollar limits of the policy.

Claim: A request for payment for a given medical service by an individual (or his or her provider) to an individual’s insurance company.

Co-Insurance: Co-insurance refers to the amount that an individual is responsible to pay for health care services, after a deductible has been paid.  Co-insurance is often specified by a percentage.  For example, if a policy has a 30% co-insurance, and you undergo a procedure which costs $100, the policy will cover $70, and you will be responsible for $30.   

Co-Payment: Co-payment is a 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.

COBRA: The Consolidated Omnibus Budget Reconciliation Act.  If you lose your job or your coverage is otherwise terminated, this federal statute may let you continue to purchase health insurance through your former employer for up to 18 months if you worked for an insured employer group of 20 or more employees. For more information, see our article, “COBRA-What you Need to Know”.

Covered ExpenseA medical procedure or item that is covered by the insurance plan.   See “Usual, Customary and Reasonable (UCR)”.

Credit for Prior Coverage: This is something that may or may not apply when you switch employers or insurance plans. If you met the waiting period for a pre-existing condition while you were under a previous employer’s (qualifying) coverage, it may be honored by your new plan, if any interruption in the coverage between the two plans meets state guidelines.  It is important to check with your employer’s benefits department and/or insurance plan about this as soon as possible.  It can save you both money and time later to sort it out.

D

Deductible: The amount an individual must pay for health care expenses within a set time period before insurance (or a self-insured company) will begin making payments on claims. Insurance plans usually require a yearly deductible.

Denial Of Claim: Refusal by an insurance company to to make payment on a claim to pay for health care services.

Dependents: Spouse and/or unmarried children (whether natural, adopted or step) of an insured, subject to the plan’s age restrictions for children.

E

Effective Date: The date your insurance policy goes into effect.  You are not covered until the policy’s effective date.

Employee Assistance Programs (EAPs): Mental health counseling services that are sometimes offered by insurance companies or employers. Often, individuals or employers do not have to directly pay for services provided through an employee assistance program.

Exclusions: Items or medical services that are not covered by an individual’s insurance policy or health plan.

Explanation of Benefits: The insurance company’s written explanation of its response to a claim.  The explanation of benefits shows what the insurance company has paid and what the patient is responsible for.

F

Fee for Service:  A method of payment in which payment is made for each medical service separately.  In fee for service health plans, doctors and other health care providers receive a separate fee for each service rendered, such as an office visit, test, procedure or other service.  Fee for service plans typically allow patients to see the providers – primary care physicians or specialists – of their choosing, but also requires higher copayments and deductibles. 

Fee Schedule:  A list of dollar amounts that an insurance company agrees to pay for a particular medical service.

Formulary:  The list of presciption drugs covered by a particular drug benefit plans.  Formularies also include the copayments required in connection with a particular prescription drug.

G

Generic Drug: Once a brand name drug’s patent has run out, other drug companies are allowed to sell duplicates of the original which are known as “generic drugs.”  Generic drugs are usually much cheaper than the brand name originals and are subject to the same stringent manufacturing standards as the brand name original.

Group Insurance: Insurance Coverage through an employer or other entity that covers all individuals in the group.

H

HCFA 1500: The standard claim format used by health plans to consider payments to medical providers.

Health Maintenance Organizations (HMOs): “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. Services are provided by physicians who are employed by, or under contract with, the HMO.

HIPAA: The Health Insurance Portability and Accountability Act of 1996.  HIPAA allows you to qualify immediately for comparable health insurance coverage when you change your employment or relationships (for example, if you divorce). Title II of HIPAA also addresses the security and privacy of health records and data and creates standards for the use and dissemination of health care information.

HMO:  See “Health Maintenance Organizations”.

I

ICD-9 (International Classification of Diseases 9th Edition): A standard three digit code which identifies an illness, injury or disease.

In-network: Providers (usually, doctors or hospitals) who are members of a health plan’s contracted network of providers. 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.

Indemnity Health Plan: Health plans in which members are reimbursed (“indemnified”) for medical services on a percentage basis.  With indemnity plans, the insurance company (or self-insured employer) pays a pre-determined percentage of the fee for a medical service, and the patient is responsible for the rest. 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 (IPA): An organization of physicians who are contracted with an HMO plan.

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.

Insurance Agent: Licensed salespersons who represent one or more insurance companies and presents their products to consumers.

Insurance Broker: Licensed insurance salesperson who obtains quotes and plan designs from multiple sources to provide information to clients.

IPA:  See “Independent Practice Association”.

L

Lifetime Maximum Benefit (or Maximum Lifetime Benefit): The maximum amount a health plan will pay in benefits to an insured during the lifetime of the coverage.

Limitations: The limit on the amount of benefits paid out for a particular covered expense.

Long-Term Care Policy: Insurance policies that cover long-term care services. 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: Length of Stay. The amount of time an individual stays in a hospital or in-patient facility.

M

Managed Care: Any system that manages the delivery of healthcare with the intention of controlling and reducing costs. Examples of managed care programs include HMOs, PPOs, IPAs and POSs.

Maximum Dollar Limit: The maximum amount payable by the insurance company for the insured and each covered dependent.  Plans can have a yearly and/or a lifetime maximum dollar limit.

Maximum Lifetime Benefit (or Lifetime Maximum Benefit): The maximum amount a health plan will pay in benefits to an insured during the lifetime of the coverage.

Medical Necessity: A medical procedure or service that must be performed in order to treat an accident, injury or illness and is not considered experimental, investigational or cosmetic.

Medigap Insurance Policies: These policies offered by private insurance companies that are designed to pay for some of the costs that Medicare does not cover.

Multiple Employer Group Health Plan:  A group health plan that is sponsored by two or more employers or by employers and employee organizations.

N

Network: A group of doctors, hospitals and other health care providers that have agreed to provide services to insurance companies customers for discounted fees. Insured individuals typically pay less for using a network provider.

O

Off-label Use: Prescribing a medication for use not approved by the FDA (the Federal Drug Administration).

Out of Pocket Expense: The amount the patient must pay themselves and not reimbursed by the insurance plan.

Open-ended HMOs: A type of managed care which covers care obtained both in and outside of a network of health care providers. Generally, patients receive a higher level of benefits (i.e. reimbursement money) for in-network care and the care obtained in the network must be coordinated through a primary care physician. These plans are also called point-of-service (POS) plans.

Out-of-Plan (Out-of-Network): This usually means physicians, hospitals or other health care providers who are not members of a health plan’s network. Depending on an individual’s health insurance plan, services provided by out-of-plan health professionals may not be covered, or only partially covered by an individual’s insurance company.

Out-Of-Pocket Maximum: The annual out-of-pocket maximum is the maximum amount your insurer will require you to contribute out of your own money towards the cost of your care. This is sometimes referred to as “stop-loss”.

Outpatient: An individual (patient) who receives health care services (such as surgery) that does not require an overnight stay in a hospital, clinic or other health care facility.

P

Participating Provider: A physician or other medical provider who has agreed to accept a set fee for services provided to members of a specific health plan.  They are ”in-network providers.”

PCP: See “Primary Care Physician or Primary Care Provider”. 

Point of Service Plan (POS):  See “Open-ended HMOs”.

POS (Point of Service):  See “Open-ended HMOs”.

Pre-Admission Certification: Also called pre-certification review, or pre-admission review. Review and approval process that needs to be completed before a patient’s admission to the hospital. The review process may include a review of the physician’s proposed treatment and fees. The pre-admission review process may also include an administrative confirmation of the patient’s health insurance coverage..

Pre-existing Condition: A medical condition that is not coverage by an individual’s insurance policy, because the condition was believed to exist prior to the individual obtaining a policy from the particular insurance company.  Many health plans require a waiting period before you will can be covered for a disease or injury you had prior to purchasing the insurance policy.

Preadmission Testing: Medical tests that are completed for an individual prior to being admitted to a hospital or inpatient health care facility.

Preferred Provider Organizations (PPOs): Agreements by hospitals, physicians, employers, insurance companies, or third-party administrators to provide health care services to subscribers at a negotiated, often discounted, price.  If you use a physician outside the PPO plan, you must pay more for the medical care. Unlike an HMO, patients are given the flexibility to seek specialty treatment without referral from a primary care physician (PCP).

Primary Care Physician or Primary Care Provider:  A health care professional who takes care of 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.  While a PCP typically has been a physician, nurse practitioners and physician assistants are more and more taking on PCP responsibilities.

Provider: A health professional who provides health care services such as a doctor or other health care professional such as a hospital, nurse practitioner, chiropractor, physical therapist, or others offering specialized health care services.

R

Reasonable and Customary Fees: The amount calculated by a plan of what is the appropriate fee for a specified procedure or service within a specific geographic area. If your doctor charges more than the “reasonable & customary fee”, you may be responsible for paying the additional amount out of your own pocket.

Rider: A modification made to a Certificate of Insurance regarding the clauses and provisions of a policy (usually adding or excluding coverage).

S

Second Opinion: A medical opinion provided by a second physician or medical expert, when one physician provides a diagnosis or recommends surgery to an individual.   Many health insurance plans include coverage for a second opinion as a standard benefit when a first physician recommends surgery.

Short-Term Disability: A temporary injury or illness that prevents a person from working for a short time. Insurance companies and employers may differ regarding the definition of short-term disability.  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: Coverage for a short time period, often 60 or 90 days. This type of coverage is not usually expensive and is intended to provide coverage during transition periods between jobs or during other periods when traditional group coverage may be unavailable.

Small Employer Group: Generally means groups with 1-99 employees. The definition may vary between states.

State Mandated Benefits: Specific benefits that a state may require for inclusion in health insurance plans. 

Stop-loss: The point at which you’ve paid 100 percent of your out-of-pocket limit 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.

T

Triple-Option: An insurance plan that permits the patient to choose from three benefit options at the time of need, usually indemnity, HMO and PPO.  Triple option plans usually have a higher co-insurance for wider choice of doctors and hospitals.

U

Underwriter: The insurance company that assumes responsibility for the risk, issues insurance policies and sets premiums.

Usual, Customary and Reasonable (UCR) or Covered Expenses: The amount calculated by a plan of what is the appropriate fee for a specified procedure or service within a specific geographic area.  

W

Waiting Period: A period of time prior to coverage when you are not covered by insurance for a particular problem.