Health Insurance Definitions to Help You Better Understand Your Coverage Options
The health care system in the United States
can be complex and confusing. In order to get the most out of your health care
benefits, you need to understand the health insurance terms used by insurance companies, health
plans and health care providers. This way, you can make better decisions – ultimately
receiving better care. Use the list of health insurance terms below to better understand your coverage options:
Ambulatory Care – Health care services that do not require a
hospital stay, such as those delivered in a doctor’s office, clinic or day
Assignment of Benefits – This means signing a document that allows your
hospital or doctor to collect your health insurance benefits directly from your
health carrier. Otherwise, you pay for treatment and the insurance company
Benefits – The amount of money payable by an insurance company to a claimant
under the insurance policy.
Capitation – Represents a set dollar limit that a health maintenance organization
(HMO) pays to your primary care physician for providing medical treatment to
you and your dependents. The fee is usually paid to the physician on a monthly
basis. The physician gets no more or less than this set fee, no matter how much
or how little you use his or her services.
Case Management – A technique that insurance companies and
HMOs use to ensure that individuals receive appropriate, timely and reasonable
health care services.
Claim – A request by an individual (or his or her provider) for the insurance
company to pay for services obtained.
Coinsurance – The money that an individual is required to pay for services, after a
deductible has been paid. It is often a specified percentage of the charges.
For example, the employee pays 20 percent of the charges while the health insurance plan
pays 80 percent.
Copayment – An arrangement where an individual pays a specified amount for various
health care services and the health insurance company or plan pays the
remainder. The individual usually must pay his or her share when services are
rendered. The concept is similar to coinsurance, except that copayments are
usually a set dollar amount (such as $20 per office visit), rather than a
percentage of the charges.
Deductible – A set dollar amount that a person must pay before insurance coverage
for medical expenses can begin. They are usually charged on an annual basis.
Denial of claim – Refusal by an insurance company to pay a
submitted request for health care services obtained.
Employee Assistance Program (EAP) – Mental health counseling services that are
sometimes offered by insurance companies or employers. Typically, individuals
or employers do not have to pay directly for EAP services provided.
Exclusions and Limitations – Specific conditions or circumstances for
which a health insurance policy or plan will not provide coverage (exclusions), or for
which coverage is specifically limited (limitations.)
Health Maintenance Organization (HMO) – Prepaid, or capitated, health insurance plans in
which individuals pay a small monthly fee to be a member of the HMO, as well as
small fees or copayments for specified health care services. Services are
provided by physicians and allied health care personnel who are employed by or
under contract with the HMO. HMOs are available to both individuals and
Indemnity Plans – Also known as “fee-for-service” plans, these
existed primarily before the rise of HMOs and PPOs. The individual pays a predetermined percentage of the cost of health care services,
and the insurance company (or self-insured employer) pays the other remaining
charges. Fees for services are determined by individual providers, and
therefore vary from physician to physician. Indemnity health insurance plans allow
individuals to choose their own health care professionals – there are no
provider networks from which to choose.
Independent Practice Association (IPA) – A group of independent practicing
physicians who band together for the purpose of contracting with HMOs, PPOs and
insurance companies for their services.
In-Network –Typically refers to physicians, hospitals or other health care
providers who contract with the health insurance plan (usually an HMO or PPO) to
provide services to its members. Coverage for services received from in-network
providers will typically be greater than for services received from
out-of-network providers, depending on the plan.
Long-Term Care Insurance – Insurance policies that cover the costs of
providing nursing care, home health care services, and custodial care for the
aged and infirm.
Managed Care – A system of health care delivery that is characterized by arrangements
with selected providers, ongoing quality control and utilization review
programs, and financial incentives for members to use providers and procedures
covered by the plan.
Maximum Benefit – The maximum dollar amount that an insurance
company will pay for claims, either for a specific service or procedure, or
during a specified period of time.
Medically Necessary – A term used to describe the supplies and
services needed to diagnose and treat a medical condition in accordance with
the standards of good medical practice. Many health insurance plans will only pay for
treatment deemed medically necessary. For example, most plans will not cover
elective cosmetic surgery.
Out-of-Network – Typically refers to physicians, hospitals
or other health care providers who do not contract with the insurance plan
(usually an HMO or PPO) to provide services to its members. Depending upon the
insurance plan, expenses incurred for services provided by out-of-network
providers might not be covered, or coverage may be less than for in-network
Out-of-Pocket Maximum – The total amount paid each year by the
member for the deductible and coinsurance. After reaching the out-of-pocket
maximum, the plan pays 100 percent of the allowable charges for covered
services the rest of that calendar year.
Point-of-Service Plan (POS) – A type of HMO that allows the patient to
see either in-network or out-of-network providers. However, the patient pays
more out of pocket when using an out-of-network provider.
Pre-Admission Certification – Also called “precertification” or
“pre-admission review.” Approval granted by a case manager or insurance company
representative (usually a nurse) for a person to be admitted to a hospital or
inpatient facility before admittance. The goal is to ensure that individuals
are not exposed to inappropriate health care services, or services that are not
Pre-Existing Condition –Any medical condition that was diagnosed or
treated within a specified period immediately before a health insurance policy
became effective. These conditions may not be covered for a specified period of
time under the new policy.
Preferred Provider Organization (PPO) – A type of managed care plan in which
doctors and hospitals agree to provide discounted rates to plan members.
Patients are typically reimbursed 80 to 100 percent for treatment received
within the network, versus 50 to 70 percent outside the network.
Primary Care Physician (PCP) – A health care professional who is
responsible for monitoring an individual’s overall health care needs.
Typically, a PCP serves as a gatekeeper for an individual’s medical care,
referring him or her to specialists and admitting him or her to hospitals when
Reasonable and Customary Charges – The commonly charged or prevailing fees for
health services within a geographic area. If charges are higher than what an
insurance carrier considers reasonable and customary, the carrier will not pay
the full amount and instead will pay what is deemed appropriate for the
particular service. The remaining charges then are the responsibility of the
Self-Insured – A health benefits plan in which the employer is responsible for the
cost of its employees’ health care. Typically, a third party provides
administrative services for the plan to the employer group.
Waiting Period – A period of time in which your health insurance plan
does not provide coverage for a particular pre-existing condition.
Waiver – A rider or amendment to a policy that restricts benefits by excluding
certain medical conditions from coverage.
Health insurance is a highly-debated topic in today's society, and understanding the many health insurance terms is half the battle. Familiarizing yourself with these definitions is the first step to better understanding health insurance and your coverage options.
At Eaton & Berube, we are always available to discuss your health insurance options with you, and help you find the best rate for your family or business. To receive a free health insurance quote, please fill out our Online Insurance Quote Request Form.