I-surance Integrity is Our Policy

Inside the tabs is a glossary of some common terms used in the health care insurance industry.  We have tried to provide consumers with some simple definitions to better understand their policies and other terminology used in the industry. Please contact us if you have any suggestions, corrections or additions.

actuary An actuary is a health insurance carrier number cruncher responsible for determining what premiums the company needs to charge based in large part on claims paid versus amounts of premium generated. Their job is to make sure a block of business is priced to be profitable.

 

advance directive An advance directive indicates the person designated to make medical decisions for you if you are unable physically or mentally to make those decisions yourself.

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

affordable care act (aca) The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act or ACA – is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will “continue to be rolled out over the next four years.” Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing conditions.

agent Licensed salespersons who represent one or more health insurance companies and presents their products to consumers.

association Associations can offer a type of group health insurance plans specially designed for their members and that give their members purchasing power because of the groups larger pool of enrollees.

beneficiary The beneficiary is enrolled in a health insurance plan and receives benefits through those policies.

benefit Benefit refers to the amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss.

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.

broker Licensed insurance salesperson who obtains quotes and plan from multiple sources information for clients and work for the client, not the insurance companies.

capitation Capitation represents a set dollar limit that you or your employer pay to a health maintenance organization (HMO), regardless of how much you use (or don’t use) the services offered by the health maintenance provider.

carrier The insurance company or HMO offering a health plan.

certificate of insurance The certificate of insurance is a printed description of the benefits and coverage provisions forming the contract between the carrier and the customer. It discloses what is covered, what is not, and dollar limits.

claim A claim is 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. A claim is also an application for benefits provided by your health plan. You must file a claim before funds will be reimbursed to your medical provider. A claim may be denied based on the carrier’s assessment of the circumstance.

cobra COBRA is the Consolidated Omnibus Budget Reconciliation Act of 1985, federal legislation that allows you – if you work for an insured employer group of 20 or more employees – to continue to purchase health insurance for up to 18 months if you lose your job, or your employer-sponsored coverage is otherwise terminated. Related terms: employer-sponsored health insurance

coinsurance Coinsurance 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 “copayment.” Coinsurance is often specified by a percentage. For example, the customer pays 20 percent toward the charges for a service and the insurance company pays 80 percent. Related terms: copayment, deductible

copayment Copayment is a predetermined (flat) fee that an individual pays for health care services, in addition to what the insurance covers. For example, some PPOs require a $35 copayment for each office visit, regardless of the type or level of services provided during the visit. Copayments are not usually specified by percentages. Related terms: co-insurance, deductible

credit for prior coverage Credit for coverage may or may not apply when you switch employers or insurance plans. A pre-existing condition waiting period met under 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 plans meets your state's guidelines

deductible The deductible is 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: coinsurance, copayment

denial of claim Denial of claim is the refusal of 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.

dependent A dependent is a person or persons relying on the policy holder for support may include the spouse and/or unmarried children (whether natural, adopted or step) of an insured.

drug formulary A list of drugs that an insurer will pay for. Drugs that are not on the formulary ("off-formulary") are sometimes covered but are more expensive. To you, the cheapest drugs are generic drugs that are on the formulary, and the most expensive drugs are name-brand drugs that are off-formulary.

effective date The effective date is the date your insurance coverage commences.

electronic health record An electronic health record is a long-term aggregate of a patient’s health information and may be a record of a variety of providers and types of medical care. This record is sometimes confused with an electronic medical record, which is a record of a patient’s health maintained by a physician as a record primarily of the physician’s care of the patient.

electronic medical record An electronic medical record is a record of patient health maintained by the patient’s physician as a record of that physician’s care of the patient. This record is often confused with an electronic health record, which is a more comprehensive, long-term aggregate of a patient’s health information and may be a record of a variety of providers and types of medical care.

employer mandate The new health reform legislation requires employers with 50 or more employees to provide health coverage to those employees and sets a minimum baseline of coverage and employer contributions. Employers who do not comply will face annual penalties based on the number of employees in the firm.

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 plan to additional coverage such as dental, life, short- and long-term disability. Related terms: group health insurance, private health insurance, individual health insurance

exchange A health insurance exchange mechanism is a key provision of the Affordable Care Act, established to provide a selection of competing providers, each offering different qualified plans. All qualified plans must meet standards established and enforced by the Health Choices Administration. For instance, participating plans will not be allowed to discriminate against applicants based on health history (pre-existing conditions) or future risk. Competition between the plan providers would, in theory, encourage the providers to improve the quality and pricing of offered plans.

exclusions and/or limitations Conditions or circumstances spelled out in an insurance policy which limit or exclude coverage benefits. It is important to read all exclusion, limitation, and reduction clauses in your health insurance policy or certificate of coverage to determine which expenses are not covered.

explanation of benefits An explanation of benefits is the insurance company’s written explanation regarding a claim, showing what they paid and what the client must pay. The document is sometimes accompanied by a benefits check.

fee for service Fee-for-service is a system of health insurance payment in which a doctor or other health care provider is paid a fee for each particular service rendered.

generic drug Once a company’s patent on a brand-name prescription drug has expired, other drug companies are allowed to sell the same drug under a generic label. Generic drugs are less expensive, and most prescription and health plans reward clients for choosing generic drugs.

group health insurance Coverage through an employer or other entity that covers all individuals in the group. Related terms: employer-sponsored health insurance, private health insurance, individual health insurance

grace period A specified period immediately following the premium due date during which a payment can be made to continue a policy in force without interruption. This applies only to Life and Health policies. Check your policy to be sure that a grace period is offered and how many days, if any, are allowed.

guaranteed issue Guaranteed issue refers to health insurance coverage that is guaranteed to be issued to applicants regardless of their health status, age, or income – and guarantees that the policy will be renewed as long as the policy holder continues to pay the policy premium.

health choices administration Health reform legislation called for the creation of the Health Choices Administration, a federal agency that would oversee its provisions, including the establishment of health plan benefit standards, establishment and operation of the health insurance exchanges, and administration of individual affordability credits or subsidies. The commission’s additional responsibilities would include prevention of abuses within the Health Insurance Exchange system.

health insurance exchange A health insurance exchange mechanism is a key provision of health reform legislation, established to provide a selection of competing providers, each offering different qualified plans. All qualified plans must meet standards established and enforced by the Health Choices Administration. For instance, participating plans will not be allowed to discriminate against applicants based on health history (pre-existing conditions) or future risk. Competition between the plan providers would, in theory, encourage the providers to improve the quality and pricing of offered plans.

health insurance portability and accountability act of 1996 (hipaa) The Health Insurance Portability and Accountability Act of 1996 (HIPAA) 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.

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.

in-network In-network refers to 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 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.

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length of stay (los) LOS refers to the length of stay. It is a term used by insurance companies, case managers and/or employers to describe the amount of time an individual stays in a hospital or in-patient facility.

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.

managed care Managed care generally emphasizes cost control and may provide coverage for preventive medicine. There are restrictions on the types of procedures that can be used for each medical condition. The amounts that can be charged for the procedures are described by the terms and conditions of the plan.

major medical plan A high-limit, high deductible plan to cover catastrophic illness or injury. Major medical may also be called "catastrophic insurance."

maximum dollar limit The maximum amount of money that an insurance 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.

medicaid Medicaid is a health insurance program for low-income individuals who can not otherwise afford Medicare or other commercial health insurance plans. Medicaid is funded in part by the federal government and by the state where the enrollee lives.

medical underwriting Medical underwriting is a process used by insurance companies to evaluate whether to accept an applicant for health coverage and/or to determine the premium rate for the policy.

medically necessary A drug, device, procedure, treatment plan, or other therapy that is covered under your health insurance policy and that your doctor, hospital, or provider has determined essential for your medical well-being, specific illness, or underlying condition.

medicare Medicare is the federal health insurance program created to provide health coverage for Americans aged 65 and older and later expanded to cover younger people who have permanent disabilities or who have been diagnosed with end-stage renal disease or amyotrophic lateral sclerosis (ALS).

medigap insurance policies Medigap plans offer supplemental benefits sold by private companies to extend traditional Medicare. Plans offer varying combinations of benefits, ranging from coverage of copayments and deductibles to coverage of foreign travel emergency expenses, at-home care and preventive care.

name-brand drug A drug sold under a name-brand, and covered by original patents (for example, the name brand for hydrocodone is "Vicodin®"). Name-brand drugs are more expensive than generic drugs, and you usually have a higher co-pay for them than generics (see "generic drug").

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.

open enrollment The time (usually a preset two-week or one-month period annually) when you can change health plans under your employer's group plan. May also apply to Medicare policies or individual child only plans.

over-the-counter drug You don't need a prescription to obtain over-the-counter drugs.

out-of-pocket The amount of money you pay for medical services after insurance has paid its contribution.

out-of-pocket maximum The most you will have to pay in a year for deductibles and coinsurance for covered benefits.

patient protection and affordable care act (ppaca) The Patient Protection and Affordable Care Act (PPACA) – also known as the Affordable Care Act or ACA – is the health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will continue to be rolled out through 2014.

policy The written contract between an individual or group policyholder and an insurance company. The policy outlines the duties, obligations, and responsibilities of both the policyholder and the insurance company. A policy may include any application, endorsement, certificate, or any other document that can describe, limit, or exclude coverage benefits under the policy.

pre-admission certification Also called pre-certification review, or pre-admission review. Approval by a case manager or insurance company representative (usually a nurse) for a person to be admitted to a hospital or in-patient facility, granted prior to the admittance. The goal of pre-admission certification is to ensure that individuals are not exposed to inappropriate health care services (services that are medically unnecessary).

pre-existing condition A pre-existing condition is 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.

premium The money you pay for health insurance.

preferred provider organization (ppo) A preferred provider organization (PPO) is a managed care organization of health providers who contract with an insurer or third-party administrator (TPA) to provide health insurance coverage to policy holders represented by the insurer or TPA. Policy holders receive substantial discounts from health care providers who are partnered with the PPO. If policy holders use a physician outside the PPO plan, they typically pay more for the medical care.

preventive medicine Health care designed to prevent disease or discover and treat disease in the early stage. Examples: Annual physical exam, PAP Smear, cholesterol screening, mammography, infant vaccination, etc.

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.

private health insurance Private health insurance – 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.

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.

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rating factors Health insurance premiums are calculated using many rating factors. Rating factors have much more influence on individual policy premiums than on group polices. Rating factors can include:
• Age: the older you are, the more you might pay.
• Health: the poorer your health, the more you might pay.
• Chronic conditions: having one or more chronic or existing conditions can increase your premium.
• Smoking/alcohol use: some companies charge more if you use tobacco or alcohol.
• Gender: some insurance plans charge more depending upon your gender.
• Geographic region: companies break-down coverage areas into 6-8 regions. Which region you live in can affect your premium.

reasonable and customary fees The average fee charged by a particular type of health care practitioner within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test or procedure. If the fees are higher than the approved amount, the individual receiving the service is responsible for paying the difference. Sometimes, however, if an individual questions his or her physician about the fee, the provider will reduce the charge to the amount that the insurance company has defined as reasonable and customary.

rescission Rescission is an insurance industry practice in which an insurer takes action retroactively to cancel a policy holder’s coverage by citing omissions or errors in the customer’s application, even if the policy holder has been keeping their policy current. As of September 2010, rescission is no longer allowed except where fraud is proven.

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

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 Short-term major medical health insurance policies were designed to provide coverage for individuals who need temporary health insurance coverage for a short period of time, usually from 30 days to six months. The policies – offered by private health insurance companies – are intended to provide a safety net in the event of a health crisis that might otherwise cause a serious financial hardship.

small employer group Generally means groups with 1-99 employees. The definition may vary between states.

stop-loss The dollar amount of claims filed for eligible expenses at which point you’ve paid 100 percent of your out-of-pocket and the insurance begins to pay at 100 percent. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.

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.

third-party payer Anyone who pays for health care other than you; usually your insurance company. When an insurer contracts with an entity to pay on their behalf.

underwriter The company that assumes responsibility for the risk, issues insurance policies and receives premiums.

usual, customary and reasonable (ucr) or covered expenses An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.

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