Health Insurance Glossary

Annual Benefit Cap: Maximum amount paid per year for specific or total medical services.

Beneficiary: An individual designated by a policy holder to receive the benefits of an insurance policy.

Benefit: Amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss.

Capitation: Capitation represents a set dollar limit that an individual or an individual's employer pays to a health maintenance organization (HMO), regardless of how much the individual uses (or don't use) the services offered by the health maintenance providers.

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

Certificate of Insurance: The printed description of the benefits and coverage provisions forming the contract between the carrier and the customer. Discloses what is covered, what is not, and dollar limits.

Claim: A request by an individual (or his or her provider) to the individual's insurance company for the insurance company to pay for services obtained from a health care professional.

Claimant: An individual who submits a claim as a policy holder.

COBRA (Consolidated Omnibus Budget Reconciliation Act): Federal legislation that lets an individual, who worked for an insured employer group of 20 or more employees, continue to purchase health insurance for up to 18 months (longer under certain circumstances) after employment or coverage is terminated.

Coinsurance: The amount an insured individual must pay toward a medical expense after the deductible has been met, usually stated as a percentage. For example, you pay 20% of the approved amount and your health plan pays 80%. Coinsurance rates may vary for in-network versus out-of-network charges and may also differ depending on the type of service.

Copayment: A copayment is a predetermined fee an insured individual pays for health care services. For example, you may pay $10 each time you visit a doctor. Copayment amounts can vary, depending on the health service being administered.

Deductible: The amount an insured individual must pay toward their medical expenses before their health insurance begins to pay. Most plans have a yearly deductible.

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.

Exclusions: Services that are not covered by an individual's plan. Sometimes exclusions are called limitations and both must be clearly defined in the plan documents.

Explanation of Benefits (EOB): A health plan's written explanation of what is paid toward a medical expense and what the insured individual owes. A check for the amount the plan owes for the service may be attached.

Flexible Savings Account (FSA): An FSA allows an employee to set aside a portion of his or her earnings to pay for qualified medical expenses. Money deducted from an employee's pay into an FSA is not subject to payroll taxes. FSA accounts can be used to by for deductibles, copayments, and coinsurance for the employee's health plan, but may also include expenses not covered by the health plan, such as dental and vision expenses and over-the-counter drugs.

Formulary: List of preferred pharmaceutical products to be used by a managed care plan's network physicians.

Fully-Insured Plan: A health plan under which an employer purchases health insurance from a company that pays for employees' medical expenses and charges the employer a fee that covers both the medical expenses and administrative costs such as customer service and claims processing.

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

Health Savings Accounts: A part of a high-deductible health plan, into which deposits can be made by the employer or the employee. These funds can then be used to pay for a variety of the individual's medial expenses, such as insurance co-pays and deductibles, as well as over-the-counter medicine.

High-Deductible Health Plan: A plan that provides comprehensive coverage for high-cost medical events. It features a high deductible, low premiums, and a limit on annual out-of-pocket expenses, and may include a health savings account.

High-risk pool: A state operated program that offers coverage for individuals who cannot get health insurance from another source due to a serious illness (such as cancer).

Health Maintenance Organization: A form of managed care in which individuals receive all of their care from participating providers. They usually must obtain a referral from their primary care physician before they can see a specialist.

HIPAA (Health Insurance Portability and Accountability Act of 1996): Title I of HIPAA protects health insurance coverage for workers and their families when they change or lose their jobs. Title I also limits restrictions that a group health plan can place on benefits for preexisting conditions. Title II of HIPAA, known as the Administrative Simplification (AS) provisions, requires the establishment of national standards for electronic health care transactions and national identifiers for providers, health insurance plans, and employers.

Indemnity Plan (Fee-for-Service Insurance): Traditional health insurance for which individuals or their each pay a portion of their health expenses, usually after a yearly deductible is met. In most cases, individuals can choose any physician, hospital, or other provider.

Individual Health Insurance: Coverage purchased independently (not as a group), usually directly from an insurance company.

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. This amount can range on average from $250,000 to $2 million.

Managed Care: A medical delivery system that attempts to manage the quality and cost of medical services the individual receives. Managed care plans feature a network of physicians, hospitals, and other providers who participate in the plan.

Maximum Out-of-Pocket Expense: The maximum dollar amount an insured individual is required to pay out of pocket during a year. Until this maximum is met, the plan and insured individual share in the cost of covered expenses. After the maximum is reached, the insurer pays all covered expenses, often up to a lifetime maximum.

Maximum Plan Dollar Limit: The maximum amount payable by the insurer for covered expenses for the insured and each covered dependent while covered under the health plan. Plans can have a yearly and/or a lifetime maximum dollar limit.

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 by State.

Medicare Advantage: A version of traditional Medicare that allows participants to receive their Medicare benefits through private health insurance plans. Medicare Advantage health plans encourage preventive care and wellness and closely coordinate patient care.

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.

Medicare-Approved Amount: Medicare has a fee schedule that list the dollar amount that Medicare considers to be the reasonable charge for the services provided by a doctor that Medicare approves for a covered service provided by a doctor is the lesser of the Medicare fee schedule amount for a particular service or the amount charged by the doctor.

Medicare Part A (Hospital Insurance): Helps pay for medically necessary inpatient care in a hospital, skilled nursing facility or psychiatric hospital, and for hospice and home health care.

Medicare Part B (Medical Insurance): Helps pay for medically necessary physician services and many other medical services and supplies not covered by Part A.

Medicare-Qualified Providers: Providers who have been approved by Medicare.

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.

Network: A group of physicians, hospitals, and other health care providers contracted to provide services to participants in a health plan. Insured individuals typically have higher coverage and lower out-of-pocket costs when using network providers.

Out-of-network: Refers to physicians, hospitals, or other health care providers that do not have contracts with an individual's health plan. Depending on the plan, expenses incurred for services provided out-of-network may not be covered at all, or may require the insured individual to pay a higher coinsurance or copayment rate.

Out-of-Pocket Expenses: Those health care costs that must be borne by the insured.

Out-of-Pocket Maximum: The maximum amount that an insured is required to pay under a plan or insurance contract.

Participating Provider: A provider who has agreed to contract with a managed care program to provide eligible services to covered persons.

Point-of-Service Plan (POS): A form of managed care in which primary care physicians coordinate patient care, but there is more flexibility in choosing doctors and hospitals than in an HMO.

Preauthorization: Previous approval required for referral to a specialist or non-emergency health care services.

Precertification: Utilization management program that requires the individual or provider to notify the insurer before hospitalization or surgical procedure. Notification allows the insurer to authorize payment and to recommend alternate courses of action.

Preexisting Condition: A medical condition that is excluded from coverage because the condition existed prior to the individual obtaining a policy from the particular insurance company. Pre-existing condition exclusions usually do not apply with employer-based and other group health insurance plans.

Preferred Provider Organization (PPO): A form of managed care in which individuals have more flexibility in choosing physicians and other providers than in an HMO. Individuals can see both participating and non-participating providers, but the out-of-pocket expenses will be lower if they see a provider within their plan.

Premium: The amount an individual or an individual's employer pays to belong to a health plan.

Preventive Medicine: Wellness and health promotion services that are part of the basic benefits package of a managed health care plan.

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 refers the individual to more specialized physicians for specialist care.

Provider: May refer to physicians, hospitals, and other suppliers of health care services.

Reasonable and Customary (RC): The maximum amount a plan or insurance contract will consider eligible for reimbursement, based upon prevailing fees in a geographic area.

Referral: Primary care physician-directed transfer of a patient to a specialty physician or specialty care.

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

Self-Funded (Self-Insured) Plans: A health plan under which an employer or other group sponsor, rather than an managed care organization or insurance company, is financially responsible for paying plan expenses, including claims made by group plan members. Also known as a self-insured plan.

Usual, Customary, and Reasonable Charges (UCR): The prevailing cost of a particular medical service in a given geographical area. If individuals use a non-participating physician, they may be responsible for their copayment and/or coinsurance plus the difference between the amount charged and the usual and customary amount paid by their plan.