Glossary of Health Insurance Terminology
Acute care is care received in an inpatient hospital setting.
Annual out-of-pocket maximum is the “cap” on the amount of money you will have to spend for specified covered health services in a calendar year. The amount varies depending on the type of insurance plan you have. It is usually shown on a summary of benefits, which you can often access online through your insurance company’s member web portal
Balance billing is when an insured receives services from a healthcare provider who does not participate in the member’s insurer network. In that case, the healthcare provider is not obligated to accept the insurance company’s payment as payment in full and may bill the patient for unpaid amount.
Calendar year is the time period beginning January 1 and ending December 31. (Important: Not all insurance policies start and end on a calendar year basis!)
Certificate of creditable coverage is a document you may need to show proof you had prior medical coverage. You may need to furnish this certificate to another insurance carrier to obtain medical coverage in the future.
Coinsurance is usually a percentage of the total cost of care that you may need to pay when you have a covered service. The plan pays the rest of the cost of the service. This is different from a copayment.
Condition is a state of health that is diminished in some fashion due to illness or injury, and which may require professional treatment or services.
Copayment is a fixed dollar amount you pay for a covered service at the time the care is provided. This is different from coinsurance.
Cosmetic treatment is a medical or surgical treatment performed primarily to improve the insured’s appearance or self-esteem.
Custodial care is services or supplies that usually do not require the skill and training of a licensed nurse. Generally, this type of care is needed to assist a patient with performing activities of daily living or personal grooming and are not intended to treat an illness, disease or condition.
Deductible is the amount of money an insured individual must pay out-of-pocket for medical services before the health plan begins paying for medical expenses. Deductibles can be per person, per family or per calendar year. For example, an individual may have a $200 deductible whereas a family may have a $400 deductible.
Dependent is a person who was more than 50% supported by the insured or the insured’s spouse during the most recent calendar year. Usually, a child will be considered a dependent if an insured or insured spouse are required to provide medical care to a child under a qualified medical child support order, which is defined by federal law.
Durable medical equipment(DME) is equipment that is generally used for a medical purpose and is not useful in the absence of illness or injury. DME items are supposed to withstand continued or repeated use and are generally considered to be safe and effective for the purpose intended. Examples include items such as oxygen tanks, wheelchairs, walkers and other medically necessary equipment required for the treatment of a particular illness or injury.
Emergency is a medical condition that presents itself through symptoms that are sufficiently severe that a reasonably prudent layperson who possesses an average person’s knowledge of health would be reasonable in thinking that failure to obtain immediate care would place someone’s health in serious jeopardy.
Employer group refers to the organization whose employees are covered by a particular insurance or self-insured health plan.
ERISA (the Employee Retirement Income Security Act of 1974) is a comprehensive and complex statute that federalizes the law of employee benefits. ERISA applies to most kinds of employee benefit plans, including plans covering healthcare benefits, which are called employee welfare benefit plans.
External review is the review of a health plan’s determination that a requested or provided healthcare service or treatment is not or was not medically necessary by a person or entity with no affiliation or connection to the health plan.
Family practice physician is a licensed physician trained to diagnose and provide healthcare to patients of all ages. Usually, a family practice doctor is trained to provide routine gynecological care (including the annual gynecological exam) and some also provide obstetric care.
Formulary is the list of drugs that are fully or partially covered by a health plan.
Grandfathered plan is a health plan that an individual was enrolled in prior to March 23, 2010. Grandfathered plans are exempt from many of the changes required by PPACA.
Internal review is a review of a health plan’s determination that a requested or provided healthcare service or treatment is not or was not medically necessary by an individual(s) associated with the health plan.
Managed care plans are health insurance plans that contract with healthcare providers and medical facilities to provide care for plan members at reduced costs. The group of providers make up the plan’s “provider network.” There are three basic types of managed care plans:
- HMO (Health Maintenance Organization) is a type of insurance plan that usually only pays for care within the network. The member chooses a primary care doctor who coordinates the care and acts as a “gatekeeper” for other care types.
- PPO (Preferred Provider Organization) is type of insurance plan that usually has higher premiums because it has greater flexibility than an HMO. For instance, in most PPO plans a member can pay less if they get care within the network, but they will pay more if they seek care from outside the plan.
- Point of Service (POS) is a type of insurance plan that usually lets you choose from the widest selection of providers compared with either an HMO or PPO.
Medically necessary is a term that will be defined differently depending on the health insurer and/or specific contract. In general terms, “medically necessary” refers to treatment that is required to treat or care for symptoms of an illness or injury or to diagnose an illness or condition. Medically necessary services or supplies are usually required to meet several elements including:
- Appropriate as to place or level of care in amount, duration, and frequency for the treatment of the condition
- Not provided primarily for convenience of the member or the health care practitioner
- Appropriate and in accordance with widely-accepted standards of practice in the community
- Likely to stabilize or improve a member’s medical condition
Nearly all insurers will include language to the effect that the fact that services are provided, prescribed or approved by a physician or provider does not in and of itself mean that the services are medically necessary
Medicare is a federal government program that provides healthcare coverage for all eligible individuals age 65 or older or under age 65 with a disability, regardless of income or assets. Eligible individuals can receive coverage for hospital services (Medicare Part A), medical services (Medicare Part B), and prescription drugs (Medicare Part D). Together, Medicare Part A and B are known as Original Medicare. Benefits can also be provided through a Medicare Advantage plan (Medicare Part C).
Medicare Advantage, also known as Medicare Part C, is an option Medicare beneficiaries can choose to receive most or all of their Medicare benefits through a private insurance company. Plans contract with the federal government and are required to offer at least the same benefits as original Medicare, but may follow different rules and offer additional benefits. Unlike original Medicare, enrollees may not be covered at any healthcare provider that accepts Medicare, and may be required to pay higher costs if they choose an out-of-network provider or one outside of the plan’s service area.
Members are those persons who are eligible to be covered by the health plan.
Open enrollment period is a specified period during which individuals may enroll in a health insurance plan each year. In certain situations, such as if one has had a birth, death or divorce in their family, individuals may be allowed to enroll in a plan outside of the open enrollment period.
Patient Protection and Affordable Care Act (PPACA) is federal legislation (Public Law 111-148) signed into law by President Obama on March 23, 2010. PPACA is also commonly referred to as the “health care reform law.”
Participating provider is a physician, other allied healthcare provider, hospital, or other type of medical facility that has signed a provider agreement with an insurance company, self-insured plan or other type of provider network arrangement.
Pre-existing condition exclusion is the period of time that an individual receives no benefits under a health benefit plan for an illness or medical condition for which an individual received medical advice, diagnosis, care or treatment within a specified period of time prior to the date of enrollment in the health benefit plan.
Premium is the periodic payment required to keep a policy in force.
Preventive care services are routine services such as screenings and immunizations offered for the purpose of health maintenance or the early detection of an illness, conditions or disease.
Prior authorization is a process required by a health plan which requires a member and/or the member’s healthcare provider to seek approval or benefit confirmation from the plan before a particular service, treatment or supply will be covered by the plan.
Riders are usually additional benefits that can be purchased by a group such as an employer, union, etc. for an additional premium. Common examples of coverage that is often offered through a rider include vision, alternative care or chiropractic treatment. In many cases, coverage for weight loss surgery may not be part of a healthcare plan’s standard benefit plan but may be offered for an additional premium as part of a rider.
Self-insured: Group health plans may be self-insured or fully insured. A plan is self-insured (or self-funded), when the employer assumes the financial risk for providing healthcare benefits to its employees. A plan is fully insured when all benefits are guaranteed under a contract of insurance that transfers that risk to an insurer.
Subscriber is usually the employee or member of the particular group whose employment or membership in the group establishes eligibility for themselves as well as his or her dependents.
Summary Plan Description (SPD) refers to an outline of an employee benefit plan provided under the Employment Retirement Income Security Act (ERISA). An SPD contains information such as the identity of the plan administrator, the requirements for eligibility and participation in the plan, circumstances that may result in disqualification or denial of benefits, and the identity of any insurers responsible for financing or administering the plan. Health insurance benefits are often part of a standard employee benefit plan and therefore the SPD is an important document to know what is/is not covered.
Usual, customary and reasonable (UCR) is the term used to describe what a healthcare plan believes is the amount that is commonly charged for a particular service or supply. Most frequently, UCR is substantially less than the charged amount reflected on a provider’s statement.
Waiting period is the period of time that an individual must wait either after becoming employed or submitting an application for a health insurance plan before coverage becomes effective and claims may be paid. Premiums are not collected during this period.