Glossary of Health Insurance Terms


Health Insurance and Health Reform Dictionary/Glossary

Use this glossary to give you an idea of what is usually meant when you find these terms used in connection with medical care and medical insurance. (This glossary should not be considered as the only or final legal definition of the terms and should not be relied upon as legal advice. Each insurance company has their own glossary of terms which should also be reviewed.)


Actual Charge | Approved Charge | Beneficiary | Benefit Maximum | Board Certified | Certificate Holder | Charge | Chronic Condition | Claim | COBRA | Conditionally Renewable | Coordination of Benefits (COB) | Co-insurance | Co-payment (co-insurance) | Covered Period | Covered Person | Covered Service | Deductible | Dental Insurance | Disability Insurance | Discount Plan | Exclusion | Experimental/Investigational | Explanation of Benefits (EOB) | Free Look Period | Grace Period | Guaranteed Renewable | Health Maintenance Organization (HMO) | Health Savings Account (HSA) | Health Savings Account Plan | Fixed Indemnity Contract | Flexible Spending Account (FSA) | Health Insurance | In-Network | Individual Health Care Coverage | Inpatient | Insured | Life Insurance | Lifetime Maximum | Major Medical Insurance | Managed Care | Maximum Amount | Medically Necessary | Noncancelable | Open Enrollment Period | Out-of-Network | Out-of-Pocket Costs (OOP) | Outpatient | PPACA or Patient Protection and Affordable Care Act | Personal Risk | Personal Risk Benefits | Preauthorization | Pre-existing Condition | Pre-certification/Pre-authorization | Preferred Provider Organization (PPO) | PPO Health Insurance Plan | PPO Network | Preventive Care | Premiums | Primary Care Physician (PCP) | Property Risk | Provider | Qualified High Deductible Health Insurance (QHDHI or QHDP) | Referral | Rider | Risk | Specific Disease Policy | Total Overall Risk | Underwriting | Usual, Customary and Reasonable (UCR) | Vision Insurance | Waiting Period | Worksite or Voluntary Benefits

Actual Charge
The dollar amount a health care provider bills to a patient for a particular medical service or procedure.
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Approved Charge
The dollar amount on which a health carrier bases its payments and your co-payments. This may be less than the actual charge.
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Beneficiary
The person or entity that receives a benefit from an insurance contract.
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Benefit Maximum
The most a health insurance policy will pay for a specified loss or covered service. The benefit can be expressed as a period of time, a dollar amount or a percentage of the approved amount. Benefits may be paid to the policyholder or a third party.
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Board Certified
Term that describes a physician or other health professional who has passed an examination given by a professional specialty board and has been certified by that board as a specialist in that subject.
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Certificate Holder
An employee or other insured named under a health insurance policy.
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Charge
Dollar amount charged by a hospital, physician, or other health care provider for a unit of service, such as a stay in an inpatient unit or a specific medical or dental procedure.
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Chronic Condition
A continuous or prolonged illness or condition for which continued medical treatment or medication is received. Examples: asthma, diabetes, varicose veins, COPD.
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Claim
A request for payment for services. That means any request for payment for services rendered related to care and treatment of a disease or injury that is received from a beneficiary, a beneficiary’s representative, or an in-network or out-of-network provider.
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COBRA
Federal law requiring that workers who end employment for specified reasons have the option of purchasing group insurance through the employer for a limited period of coverage (usually 18 months, but in some cases 29 months or 36 months).
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Conditionally Renewable
An insurance policy that the company will renew with each premium payment, as long as you meet certain conditions.
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Coordination of Benefits (COB)
Provisions and procedures used by health carriers to avoid duplicate payments when a person is covered by more than one policy/contract. For example, when considering medical claims due to an automobile accident the health insurance carrier and the auto insurance carrier may do “Coordination of Benefits”.
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Co-insurance
A provision in a member’s coverage that limits the amount of coverage by the plan to a certain percentage, commonly 80%. Any additional costs are paid by the member out of pocket.
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Co-payment (co-insurance)
A specified dollar amount or percentage of covered expenses which a health care policy/ contract or Medicare requires a covered person to pay toward eligible medical bills. This is the portion of a claim or medical expense that an individual must pay out of pocket. Usually this is a fixed amount. For example a plan may have a $40 Co-Pay for doctor visits, a $150 co pay for Emergency Room visits and a $20 Co pay for prescriptions drugs.
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Covered Period
The time period for which covered services will be paid.
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Covered Person
A person who receives benefits of a health care policy/contract.
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Covered Service
This term refers to all of the medical services the enrollee may receive at no additional charge, or with an incidental co-payment under the terms of the prepaid health care contract. Simply, services for which a health care policy/contract will pay.
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Deductible
That portion of a subscriber’s (or member’s) health care expenses that must be paid out of pocket before any insurance coverage applies, or before a health care policy/contract will pay.
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Dental Insurance
An insurance policy or a fixed indemnity contract that helps to pay the costs of dental care. This is sometimes added as a “rider” to your health insurance policy. Most health insurance policies do not include dental services as eligible covered charges.
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Disability Insurance
Also known as Income Protection Insurance or Paycheck Insurance; this is an insurance contract that pays benefits intended to replace a portion of your income / paycheck when you are partially or totally disabled due to sickness or injury and are unable to work.
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Discount Plan
An arrangement where discounts on medical, dental, vision and other services is provided from specified providers of service in exchange for a monthly cost, typically called a “membership fee”. Discount Plans are NOT insurance contracts and should not be relied upon as such.
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Exclusion
A procedure, service, or condition which a health care policy/contract does not cover. It is important to look at the “Exclusions” listing in each insurance contract so you will know what is NOT Covered.
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Experimental/Investigational
Medical treatment/procedures that are not generally accepted as the standard of care in the medical profession. Health care policies/contracts often do not cover these treatments/procedures. Often there is disagreement between doctors and health carriers whether a specific treatment/procedure is experimental/investigational.
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Explanation of Benefits (EOB)
A statement from a health carrier showing payments or denials for claims for health care services.
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Free Look Period
The time period, during which you may reconsider the purchase of an insurance policy, cancel and get a full refund of premiums paid. Health policies have a free look of at least 10 days; Medicare supplement and long-term care policies have 30-day free look periods. The free-look period typically begins the date the policy is delivered to the insured or contract-holder.
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Grace Period
A specified period, usually 30 days, for the payment of a renewal premium after the original premium due date. The coverage remains in effect during the grace period if the premium is paid before the grace period expires.
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Guaranteed Renewable
An insurance policy in which the insurer is required to renew the policy for a specified amount of time regardless of changes to the health of the insured. The agreement requires that premiums are paid on time and that the insurer makes no changes except if a premium change is made for an entire class of policyholders.
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Health Maintenance Organization (HMO)
Organization that has management responsibility for providing comprehensive health care services on a prepayment basis to voluntarily enrolled persons within a designated population.
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Health Savings Account (HSA)
A tax-qualified savings account (think Medical IRA) that receives tax-deductible deposits from the owner of the account, and/or the owner’s employer. Money accumulated on the HSA account may be spent Tax-Free on medical, dental and vision services (213(D) Expenses) for the benefit of the account owner and the owner’s immediate family members. HSA accounts must be partnered with Qualified High Deductible Health Insurance (QHDHI)
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Health Savings Account Plan
A coordinated “health plan” that includes a Qualified High Deductible Health Insurance Plan with a Tax Advantaged Health Savings Account (HSA).
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Fixed Indemnity Contract
This is generally NOT an insurance policy but is a reimbursement contract. Pays a fixed dollar amount for each day you are in the hospital, regardless of actual medical bills. Contracts will often pay a fixed benefit for a wide assortment of medical service events out of the hospital as well. These contracts typically pay YOU rather than the provider and are sometimes used to fill gaps in coverage when partnered with a standard health insurance plan.
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Flexible Spending Account (FSA)
A benefit offered to an employee by an employer which allows a fixed amount of pre-tax wages to be set aside for qualified expenses. Qualified expenses may include child care or uncovered medical, dental and vision expenses. The amount set aside must be determined in advance and employees may lose any unused dollars in the account at year-end. Sometimes referred to as a “Cafeteria Plan”, these plans usually allow people to reimburse themselves on a pre-tax basis for all health related services listed on the IRS 213(d) medical list. www.irs.gov publication 502
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Health Insurance
An insurance contact that helps to pay for a wide assortment of medical services and medical care and prescription drug costs.
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In-Network
Refers to providers and services that cost less or for which higher benefits are provided because the insured used a service provider that has agreed to PPO terms and conditions.
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Individual Health Care Coverage
A policy/contract between a health carrier and a covered person or family. Individual coverage is usually purchased personally and not in association with an employer or employer plan.
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Inpatient
Services received for treatment or diagnosis of sickness or injury when admitted to or staying overnight in a hospital or related medical facility.
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Insured
An individual or organization protected by an insurance policy.
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Life Insurance
An Insurance policy that pays a specific benefit at your death to a specified (named in the contract) beneficiary. Typically used to provide large cash benefits for family support, business support and charitable giving at the insured’s death. Basic contract types include Term Insurance, Whole Life Insurance, Universal Life Insurance and Variable Life Insurance.
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Lifetime Maximum
The total amount a policy/contract will pay during the covered person’s lifetime. (With the passage of the The Patient Protection and Affordable Care Act (PPACA) March 23, 2010 new plans purchased after 9/23/2010 may have lifetime limits removed and provide for “unlimited lifetime coverage maximums”.
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Major Medical Insurance
Insurance that covers catastrophic illness and injury. Also called, in conjunction with HSA Plans, High Deductible Health Insurance/Plan (HDHP)
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Managed Care
System in which the patient’s health care is managed by a single provider or group of providers. Primary care managers act as patient advocates, monitoring all care, avoiding needless care and referring patients to economical care sources. Such systems negotiate discount fees with providers, and stress keeping people healthy through health promotion and preventive medicine.
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Maximum Amount
The most a health carrier will pay for a specified loss or covered service. The amount can be expressed as a period of time, a dollar amount or a percentage of the approved amount. Payment may be made to the covered person or the provider.
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Medically Necessary
The level of services and supplies (that is, frequency, extent, and kinds) required for the proper diagnosis and treatment of illness or injury (including maternity care). Medically necessary includes the concept of essential medical care. Or simply, the treatments or services a health care policy/contract will pay for as defined in the contract. Each policy/contract should define medically necessary.
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Noncancelable
A Noncancelable policy is a policy of insurance containing provisions which limit the right of the insurer to cancel the policy. It is mainly a policy of health and accident insurance restricting cancelation after an illness or accident occurring to the insured
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Open Enrollment Period
The period when an employee may change health plans; usually occurs once per year. Also the term used by HMO plans to describe their enrollment period for individuals (non-group) wanting to enroll in a State Mandated Insurance Contract (SMIC), typically this is one time per year.
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Out-of-Network
Refers to providers and services that cost more or for which lower benefits and higher out-of-pocket costs are provided because the insured used a service provider that HAS NOT agreed to PPO terms and conditions.
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Out-of-Pocket Costs (OOP)
Typically refers to Deductibles, co-pays and co-insurance costs that are not paid by the insurance company under the chosen insurance plan. Out-of-Pocket costs are the responsibility of the insured or contract holder.

Outpatient
Services received for treatment or diagnosis of sickness or injury at a hospital or related medical facility without being admitted for an overnight stay. Outpatient care also refers to care or services provided in other locations such as outpatient clinics, physician offices, laboratory, radiology and pathology departments. Unless you have been admitted to the hospital for an overnight stay, the majority of health care services you may receive are considered as “outpatient services”.
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PPACA or Patient Protection and Affordable Care Act
Also known as the Affordable Care Act (ACA) and sometimes referred to as Healthcare Reform, Health Insurance Reform or Obamacare. This law passed on March 23, 2010 is intended to be rolled out over 4+ years. The act is complicated and contains many provisions intended to expand coverage to more Americans and end rescission and denial of coverage due to pre-existing conditions. Please see our section on PPACA for further info.
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Personal Risk
There are many types of risks we all have in life. Basic risks include, living too long, dying too soon and getting sick or hurt along the way. Personal Risk Benefits are insurance contracts and other arrangements that help people to manage, reduce and transfer to someone else the potential cost of their Personal Risk.
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Personal Risk Benefits
Personal Risk Benefits are insurance contracts and other arrangements that help people to manage, reduce and transfer to someone else the potential cost of their Personal Risk. Included under this category are, health, dental and vision insurance; disability income insurance, life insurance, long-term care (nursing and home health care) insurance and other arrangements that help people manage personal risk.
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Preauthorization
Authorization given prior to the provision of health care that allows reimbursement for inpatient care, designated outpatient procedures, or specialized care. This authorization is based on the determination that the care or procedure being considered is medically necessary, and the proposed location for delivery of that care is appropriate.
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Pre-existing Condition
A health condition or problem that existed before a given health care policy/contract was effective and for which medical advice, diagnosis, care, or treatment was recommended. Each policy/contract will define pre-existing condition and sate the applicable time periods. (With the passage of The Patient Protection and Affordable Care Act (PPACA) March 23, 2010 children under age 19 may not be declined coverage due to pre-existing conditions and adult pre-existing condition denials and waivers are expected to be eliminated in most plans by 2014.)
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Pre-certification/Pre-authorization
requirements that you obtain the health carrier’s approval before a medical service is provided or before services by an out-of-network provider are received. Pre-certification/Pre-authorization is not a guarantee of claim payment however; failure to obtain pre-certification/pre-authorization may result in denial of the claim or reduction in payment of the claim.
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Preferred Provider Organization (PPO)
Term applied to a variety of direct contractual relationships between hospitals, physicians, insurers, employers, or third-party administrators in which providers negotiate with group purchasers to provide health services for a defined population, and which typically share three characteristics: a negotiated system for payment for services that may include discounts from usual charges or ceilings imposed on a charge, per diem, or per discharge basis; financial incentives for individual subscribers (insured) to use contracting providers, usually in the form of reduced copayments and deductibles, broader coverage of services, or simplified claims processing; and an extensive utilization review program.
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PPO Health Insurance Plan
A health insurance plan that provides higher benefits for services provided by providers that are IN the PPO Network and provide less benefits (and higher out-of-pocket cost or risk to the insured) for services provided by OUT of the PPO Network.
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PPO Network
The prearranged group of health care service providers (doctors, hospitals, facilities, laboratories etc) that have agreed to provide services at a discounted cost to member insureds. Different insurance carriers will typically have agreements with a specific named PPO Network that is used by other insurance companies as well (for example Cofinity) or may have their own proprietory network of providers (for example Blue Care Network).
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Preventive Care
Typically a specified list of medical screenings, immunizations and services that are intended to help the patient/insured stay healthy, understand their current health status and catch sickness and disease in its earliest stages so that appropriate treatment and lifestyle changes can occur. With the enactment of the (PPACA)in the majority of plans, Preventive Care services are to be covered at 100% with no deductible or co-pay applied, however a specific list of services.
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Premiums
The monthly cost paid to the insurance company for the insurance coverage chosen. Premiums are typically set for a 1 year period (unless stated otherwise) and are adjusted annually at the renewal of the contract.
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Primary Care Physician (PCP)
Generally applies to internists, pediatricians, family physicians, and general practitioners and occasionally to obstetrician/gynecologists.
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Property Risk
includes risks due to home, land, property and equipment use or ownership. Coverages that help manage Property Risk may include auto, homeowners, renters, fire and personal liability insurance as well as commercial insurance for business property risks.
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Provider
A person or organization that provides medical services, such as a doctor, hospital, x-ray company, home health agency, pharmacy, etc.
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Qualified High Deductible Health Insurance (QHDHI or QHDP)
A health insurance contract that meets the federal criteria for partnering with a Health Savings Account (HSA). The insurance plan must have a high deductible (typically $1,250 – $10,000) with all services going first to the deductible. No doctor visit co pays or Rx co pays are allowed prior to the deductible being satisfied except in the case of Preventive Care services which may be covered at 100% and not subject to deductible. Other criteria apply.
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Referral
Practice of sending a patient to another program or practitioner for services or advice that the referring source is not prepared or qualified to provide.
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Rider
An additional optional coverage that can be added to your basic health insurance contract and may be offered by the health insurer at an additional premium cost. Examples include, dental, vision, maternity and accidental injury riders. Also known as Ancillary or Additional Coverage.
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Risk
Typically refers to any out-of-pocket costs you may incur under an insurance policy and includes, Deductibles, Co-Insurance, Co-pays and excluded (not covered) services in the contract. See also Total Overall Risk and Personal Risk Management.
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Specific Disease Policy
A health insurance policy that covers the expenses incurred only for a specific disease named in the policy. The most common type is Cancer Insurance. Also known as Dread Disease or Critical Illness policy.
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Total Overall Risk
For the purposes of health insurance this is the overall cost to be considered and includes Deductibles, co-insurance, co-pays, excluded charges and monthly Premiums all added together so you can compare your options based on the likely annual costs of any plan in a worst case scenario.
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Underwriting
The process by which a health carrier determines whether or not and on what basis it will accept an application for coverage. Typically includes a medical health history questionnaire as well as other eligibility requirements.
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Usual, Customary and Reasonable (UCR)
The dollar amount a health carrier has determined to be appropriate for a particular medical service. This amount is often less than the actual charge. Each carrier determines its own UCR amount and not all health carriers use this method for determining payments.
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Vision Insurance
An insurance policy or a fixed indemnity contract that helps to pay the costs of vision care and often includes glasses and contact lenses. This is sometimes added as a “rider” to your health insurance policy. Most health insurance policies do not include vision services as eligible covered charges.
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Waiting Period
The time that must pass after coverage begins and before the policy/contract will pay claims for a pre-existing condition. It may also refer to the time you must wait before obtaining health care coverage from a new employer group health care plan. For example, some individual plans have a 90 day wait once you have come on the policy before they will pay for preventive care visits.
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Worksite or Voluntary Benefits
A variety of benefits offered through an employer group to employees. In these plans employees are offered an opportunity to purchase benefits that fit their needs and they pay for the full cost of the benefits purchased through payroll deduction.
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