American Health Group Healthcare Insurance Terminology

Disclaimer: This article is intended to inform members about the basic terminology of health insurance plans.

Understanding terminology pertaining to health insurance is the first step to obtaining cost-effective coverage. Below is a list of the most common terms utilized in a health plan.

Advocacy: Any activity done to help a person or group to get something the person or group needs or wants.

Affordable Care Act (ACA): This a US federal statute signed into law on March 23, 2010. It represents the most significant government and expansion of the US Healthcare system since Medicare and Medicaid in 1965. It’s aimed at increasing the affordability and rate of health insurance coverage for Americans and in reducing the overall costs of health care for individuals and the government. The ACA requires insurance companies to cover all applicants within new minimum standards and offer the same rates regardless of pre-existing conditions or sex. Additional reforms aim to improve healthcare outcomes and streamline the delivery of health care.

Ambulatory Care: Medical care on an out-patient basis, such as hospital outpatient clinics, emergency departments, physician’s office and home health care.

Ancillary Services: Professional health care services such as laboratory tests, radiology examinations, and other diagnostic services.

Assignment of Benefits: The patient or guardian signs the Assignment of Benefits form so that the physician or provider will receive the insurance payment directly.

Association: A group. Often, associations can offer individual health insurance plans specially designed for their members.

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

Benefit Penalty: A method used by the insurance company to reduce payment on a claim when the patient or medical provider does not fulfill the rules of the health plan, ie. Obtain a prior authorization.

Benefit Plan Exclusion: Medical services that are not covered by an individual's insurance policy.

Birthday Rule: An informal procedure that the health insurance industry has adopted for the coordination of benefits when children are listed as dependents on two parents' group health plans. The health plan of the parent whose birthday comes first in the calendar year is designated as the primary plan.

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.

Carve Out: Medical services that are separated from a contract and paid under a different arrangement. i.e. Behavioral health.

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.

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. Related terms: co-payment; deductible.

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. Related terms: co-insurance; deductible.

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 employer-sponsored coverage is otherwise terminated. For more information, visit the Department of Labor. If during the time a patient has COBRA and becomes eligible for Social Security Disability (SSD), they will be able to receive an additional 11 months of COBRA.

Concurrent Review: A review of the medical necessity of inpatient or other health facility admissions, upon or within a short time following an admission, and periodic review of services provided during the course of treatment. Facilitates discharge and transitional planning. Also known as utilization review.

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 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 plan 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. Related terms: co-insurance; co-payment.

Deductible: The set dollar amount which must be satisfied within a specific time frame before the health plan begins making payments on claims.

Denial of Claim: Refusal by an insurance company or carrier 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.

Disease Management: a system that seeks to manage the chronic conditions of high-risk, high-cost members that are part of an insurance plan.

Effective Date: The date your insurance is to actually begin. You are not covered until the policy's effective date.

Employee Assistance Programs (EAPs): Mental or behavioral 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.

Employer-Sponsored Health Insurance: Of Americans who have health coverage, nearly 60 percent secure that coverage through an employer-sponsored plan, often called group health insurance. Millions take advantage of the coverage for reasons as obvious as employer responsibility for a significant portion of the health care expenses. Group health plans are also guaranteed issue, meaning that a carrier must cover all applicants whose employment qualifies them for coverage. In addition, employer-sponsored plans typically are able to include a range of plan options from HMO and PPO plans to additional coverage such as dental, life, short- and long-term disability.

Exclusions: Those items or medical services that are not covered by the health plan.

Exclusive Provider Organization (EPO): A managed-care program in which participants will be reimbursed only when care is received from in-network providers. There are usually provisions for out of network emergency services and when there are no in-network providers to treat a certain condition.

Explanation of Benefits (EOB): The insurance company's written explanation to a claim, showing what was billed, what was paid, and what the member must pay.

FDA: The Food and Drug Administration, an agency within the U.S. Public Health Service, which is a part of the Department of Health and Human Services. The FDA requires that drugs, both prescription and over-the-counter, can be proven safe and effective. In deciding whether to approve new drugs, FDA does not itself do research, but rather examines the results of studies done by the manufacturer. The FDA must determine that the new drug produces the benefits it's supposed to without causing side effects that would outweigh those benefits. These are classified and regulated by the FDA according to their degree of risk to the public. Devices that are life-supporting, life-sustaining, or implanted, such as pacemakers, must receive agency approval before they can be marketed.

Formulary: A listing of pharmaceuticals the health plan will pay for. If a drug is not on the formulary, it will not be paid for, unless the health plan has a prior authorization process in place and the physician can demonstrate failure on other lower-cost drugs.

Fully Insured: An employer purchases insurance coverage from a licensed insurance company and the insurance company assures all of the risks.

Generic Drug: The chemical name of a drug. A “twin” to a brand name drug. Once the brand name company’s patent has run out, other drug companies are allowed to sell a duplicate of the original. Generic drugs are cheaper, and most prescription and health plans financially reward members for choosing generics.

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.)

High-Deductible Health Plan (HDHP): This is a benefit design that allows for high deductibles to encourage ownership of medical care. It assumes that the consumer will shop around to obtain the least expensive and medically necessary medical care.

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."

In-Network: Providers or health care facilities that are part of a health plan's network of providers with which it has negotiated a discount. Insured individuals usually pay less when using an in-network provider, because those networks provide services at a lower cost to the insurance companies with which they have contracts.

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.

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. Read more about individual health insurance. Read recent news articles about individual health insurance.

Integrated Delivery System: An organization that combines hospital, physician, and other medical services as part of a larger health care system.

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.

Major Medical Insurance: Health insurance that covers most serious medical expenses up to a maximum limit, usually after a deductible and coinsurance has been met.

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 the prevention of disease.

Maximum Dollar Limit: The maximum amount of money that an insurance company (or a 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.

Medical Audit: A detailed review and evaluation of selected clinical records by qualified professional personnel for evaluating medical necessity, quality of medical care, and related charges.

Medical Necessity: A medical procedure or service must be performed only for the treatment of an accident, injury, or illness and is not considered experimental, investigational, or cosmetic in nature. This is a process that health utilization management companies perform and they are based on Medical Review Criteria.

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.

Off Label: In the United States, the regulations of the Food and Drug Administration (FDA) permit physicians to prescribe approved medications for other than their intended indications. This practice is known as off-label use.

Orphan Drug: A pharmaceutical developed to treat a disease that afflicts relatively few people.

Out of Network or Out-of-Plan: This phrase usually refers to physicians, hospitals or other health care providers who are considered non-participants 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.

Pharmacy Benefit Manager (PBM): A company under contract with managed care organizations, self-insured companies, and government programs to manage pharmacy network management, drug utilization review, outcomes management, and disease management. They also develop the drug formulary. The aim is to save money. A pharmacy benefit manager may, for example, fill drug prescriptions by mail order as part of a corporate health insurance plan.

Plan Document: Formal, written, legal statement listing the provisions of an Employee Benefit Insurance Plan.

Pre-Admission Certification: Also called pre-certification review or pre-admission review. Approval by the medical management department of an insurance company for a member to be admitted to a hospital (elective or emergency), outpatient services, or other services determined by the insurance company or employer group. The goal of preadmission certification is to ensure that individuals are not exposed to inappropriate health care services that are not medically necessary.

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. These are elective admissions or procedures.

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.

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): You or your employer receives 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 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. PCPs usually specializes in general practice, family practice, internal medicine, and pediatrics.

Private Health Insurance: Private health insurance are insurance plans marketed by the private health insurance industry, currently dominates the U.S. health care landscape, with approximately two-thirds of the non-elderly population covered by private health insurance. Coverage includes policies obtained through employer-sponsored insurance, with approximately 62 percent of non-elderly Americans receiving insurance provided as a benefit of employment. Another 5 percent of the non-elderly group bought coverage outside of the workplace on the individual health insurance market.

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.

Referral: A written document from one provider to another, ie. A family physician refers to a specialist.

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 Health Insurance: Temporary coverage for an individual for a short period of time, usually from 30 days to six months. This is defined by the insurance company or employer health group.

State Mandated Benefits: When a state passes laws requiring that health insurance plans include specific benefits.

Student Health Insurance: In recent years, many colleges have begun requiring proof of health insurance for students. Coverage options include insurance through family policies and coverage through school-sponsored student health plans, now offered by more than 80 percent of public four-year colleges. Students may also seek coverage through an employer's plan if they're employed full time, or they can purchase their own individual health insurance plan from a licensed health insurance provider. And, depending on the state in which a student resides, the student may also be eligible for coverage by a state-sponsored risk pool, a program that provides coverage for individuals denied insurance by private insurers because of their health condition. Read more about student health insurance. Read recent news articles about student health insurance.

Untimely Submission: A medical claim must be submitted within the time frame given by the insurance company or the claim will be denied.

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

Wrap Network: A health care provider network used as a second option to a primary and more preferred health care provider. These are used for many reasons, such as, filling in gaps for traveling members and members who reside out of the primary network area, and provide a more comprehensive network while directly members to a more cost-effective network.

* many of these definitions were cited from The Health Insurance Resource Center: http://www.healthinsurance.org/glossary/

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