Health Insurance Terms
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UPDATED: Mar 13, 2020
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Below is a list of health insurance terms you may come across during your search for health insurance coverage.
Many of these terms are very important in distinguishing what type of coverage you will ultimately receive, and at what price. Review them carefully and consider speaking to an independent agent to compare differerent health insurance plans.
Brand Name Prescription – Prescription drugs marketed under a specific name by the companies that manufacture them. For example, Celebrex is a brand name drug. The specific formulas for these drugs are patented. When the patent runs out, generic drugs are often created using the same ingredients, but sold for a much cheaper price.
Co-Insurance – The amount of out-of-pocket money an individual will have to pay for healthcare services after the deductible is met. Often times, it is expressed as a percentage dollar amount. A common co-insurance percentage is 20%.
Co-Payment – Similar to co-insurance, this is a flat out-of-pocket fee the insured is required to pay for a specific medical service. For example, you may have a $15 co-pay for an office visit or to fill a prescription.
COBRA Insurance – A federal insurance program that enables you to continue your health insurance, albeit at a high cost, for up to 20 months in the event you lose your job. Your company must have 20 or more employees in order to qualify.
Dependents – Your spouse or any children you have under a certain age, usually 18 or 19, or older if full-time students.
Employer-Sponsored Healthcare – Healthcare plans offered by companies to their employees. Benefits include a lower insurance premium, because the employer pays part of the cost, and the inability for an insurance company to deny you coverage if you fit the pre-determined qualifications as an “employee.” Examples of these types of plans may include HMO and PPO plans, which are often referred to as group health insurance.
Explanation of Benefits – A written document an insured would receive from their insurer describing the financial resolution of a claim, including what the insurance company has/will pay and how much money you are responsible for paying.
Generic Drug – Drugs that contain the exact same ingredients as a brand-name drug. They usually cost much less and are just as effective as taking the brand-name drug.
Group Health Insurance – A healthcare plan that covers all individuals in a specific group. This type of coverage may be an employer-sponsored plan, but can be any group for which an insurer will provide coverage. Examples may be an HMO or PPO plan.
Health Maintenance Organization – More commonly referred to as an HMO, these are group insurance plans in which a predetermined group of physicians provide medical care, under a contract and at reduced cost, to a group in exchange for a specified monthly fee.
Health Insurance Portability and Accountability Act – Also known as HIPPA, this legislation basically ensures insurance companies provide similar benefits to individuals who change jobs, regardless of whether or not the same insurance company is used by the new employer. It is meant to protect individuals from being denied coverage for a pre-existing condition when they change jobs.
In-Network – Medical personnel who provide services to your specific group (HMO or PPO). Normally, in-network providers are less expensive to visit because they have existing contracts with your group to provide medical care at a discounted rate.
Independent Practice Association – Also known as an IPA, these group benefits providers work out of their own offices rather than a building where a group of network doctors perform medical services.
Individual Health Insurance – Healthcare coverage obtained on your own versus being part of a group healthcare plan or through an employer-sponsored program.
Lifetime Maximum Benefit – The maximum dollar amount an insurer will pay out to an insured within their lifetime.
Long-Term Care Policy – A type of healthcare insurance that provides benefits for a specified type of care over a specified period of time. An example of this type of policy would be a home nursing policy.
Long-Term Disability – A type of insurance coverage that will pay an individual a certain percentage of their income for a specified period of time if they become disabled for any reason.
Managed Care Plan – A healthcare plan that attempts to decrease the overall costs of insurance to its members by emphasizing the prevention of disease. Normally, members are part of an HMO or PPO
Maximum Dollar Limit – This is the total dollar amount an insurer will pay for a specific type of illness or medical service over a specified period of time.
Medigap Insurance – A type of healthcare coverage provided by private insurers in the open market, designed to cover some of the expenses Medicare does not. It is recommended you purchase this type of insurance as a compliment to your Medicare coverage if you can afford to do so. Medigap insurance is often confused as a type of coverage provided by the federal government, which is not the case.
Open-Ended HMO – A type of HMO that will allow its members to use out-of-network medical service providers and still pay a portion, either a flat rate or a percentage, of the cost of care.
Out-of-Network – Any doctor, not contractually obligated by your group health plan, that provides you medical service. Typically, when you visit an out of network physician, you incur higher costs than if you stayed “in network.”
Out-of-Pocket Maximum – The maximum dollar amount you may be responsible for paying for medical services within a year. This amount may or may not include your deductible, co-pay, or co-insurance.
Outpatient – When you are provided medical services, but do not stay overnight in a hospital. You will likely benefit financially by having outpatient services, as hospital stays are expensive. Additionally, your healthcare provider often encourages this type of service by not covering the additional expense for inpatient services if the option is available.
Pre-Existing Condition – Any medical condition you had prior to applying for or being accepted into an insurance plan. Often times, you may be denied coverage for a pre-existing condition or required to undergo a 12-18 month waiting period before you insurer will pay for claims resulting from care associated with the condition. Obtaining coverage with a pre-existing condition is often much more expensive than doing so without.
Preferred Provider Organization – More commonly referred to as a PPO, a group healthcare program that allows you to visit any doctor you choose, whether “in network” or “out of network.” You are typically not required to have a Primary Care Provider when you belong to a PPO.
Primary Care Provider (Physician) – Typically necessary when you belong to an HMO, a physician who manages your overall health. You normally have to visit your primary care physician in order to be referred to a specialist.
Private Health Insurance – Insurance purchased in the open market instead of through a group plan. It is typically more expensive than group care. Purchasing private healthcare insurance is similar to purchasing auto or homeowner’s insurance, where you obtain it yourself rather than as part of a group.
Provider (Healthcare Provider) – An individual doctor or a healthcare group, such as Blue Cross Blue Shield, who is responsible for providing or managing your healthcare needs.
Reasonable and Customary Fees – What a healthcare provider considers a fair price for any medical service you may receive. Typically, this is the maximum dollar amount a provider will pay for a specified service. You may have the option of obtaining more expensive care, a surgery for example, however your insurance company will not pay the additional cost.
Rider – The equivalent of an endorsement on a property and casualty insurance policy that describes any change in coverage to the initial contract or policy.
Short-Term Health Insurance – A type of healthcare insurance policy designed to cover an individual or family for a short period of time. Typically, these types of policies will not exceed six months and can be as short as 30 days. You may desire this policy if you are between jobs and do not elect to purchase COBRA insurance.
Stop-Loss – The point at which you have paid your entire out-of-pocket maximum for an insurance policy. When this happens, your insurance company will pay all additional costs.
Usual, Customary and Reasonable Expenses – Similar to reasonable and customary fees, this is the dollar amount a healthcare service provider determines is the common cost for any medical services provided to you.
Waiting Period – The amount of time you are not covered by an insurance policy after it is active. For example, you may have to undergo a waiting period when you obtain an insurance policy and have a pre-existing condition.
If you feel we are missing any specific health insurance terms, please feel free to contact us.
Read more: Why do I need health insurance?