Half the battle in understanding health insurance is figuring out the lingo and keeping all the terms straight. Here’s a glossary with the most commonly-used terms. The following glossary defines key terms related to health insurance. Definitions for terms were either taken from the coveringtheuninsured.org, www.insurance.com, or www.healthinsurance.com.
What is health insurance?
A health insurance policy is a contract between an insurer and an individual or group, in which the insurer agrees to provide specified health insurance at an agreed-upon price (the premium). Depending on your policy, your premium may be payable either in a lump sum or in installments. Health insurance usually provides either direct payment to the hospital or physician, or reimbursement to the individual for expenses associated with illnesses and injuries. Basic insurance includes hospital, surgical, and physicians’ expense coverage. In addition, major medical coverage is necessary in case of a catastrophic accident or illness. The cost and range of protection provided by your health insurance will depend on your insurance provider and the particular policy you purchase. If an employer does not offer a health insurance plan, individuals can purchase health insurance on their own.
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.
Co-Payment: 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 doctor’s office visit, regardless of the type or level of services provided during the visit.
Covered Expenses: What the insurance company will consider paying for as defined in the contract. For example, under some plans generic prescriptions are covered expenses, while brand name prescriptions may be covered at a different reimbursement rate or not at all.
Deductible: The amount an individual must pay for health care expenses (typically $100, $250 or $500) before benefits are paid by the insurance plan. Often, insurance plans are based on yearly deductible amounts.
Dependents: Spouse and/or unmarried children (whether natural, adopted or step) of an insured person.
Group Insurance: Coverage through an employer or other entity that covers all individuals in the group.
Health Maintenance Organizations (HMOs): “pre-paid” 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.
Indemnity Health Plan: 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 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.
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. Usually in the millions.
Out-Of-Pocket Maximum: The most money you can expect to pay for covered expenses. The maximum limit varies from plan to plan. Some companies count deductibles, co-insurance, or co-payments toward the limit, others don’t. Once the maximum out-of-pocket has been met, many health plans pay 100% of certain covered expenses.
Open Enrollment: A specified period of time in which employees may change insurance plans and medical groups offered by their employer, without proof of insurability. Open enrollment usually occurs once a year.
Pre-existing Condition: Unfortunately, there’s no clear-cut definition of this term; each insurance company has a different way of looking at it. Generally speaking, it’s a medical condition that was first treated or has manifested itself prior to your enrollment in a plan. Some plans completely exclude pre-existing conditions from coverage; others may have a waiting period of six months to a year. You should check the plan carefully or talk to your insurance agent if you think you may have such a condition.
Preferred Provider Organizations (PPOs): You or your employer receive discounted rates if you use doctors from a pre-selected group, or “in-network”. If you use a physician outside the PPO plan, you must pay more for the medical care.
Premium: The money paid to an insurance company for coverage. Premiums area typically paid monthly, or semi-annually.
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.
Types of Health Insurance
Individual Health Plan: Health policies for people not connected to an employer or other group. This term also refers to coverage purchased by self-employed persons who have no other employees.
Group Insurance: Health insurance offered through business, union trusts or other groups and associations. This system of health insurance is the most common in the United States.
Private Insurance: Health insurance that is provided by private insurance companies such as commercial insurers and Blue Cross plans; self funded plans sponsored by employers; and insurance provided through commercial health plans such as Health Maintenance Organizations and other private managed care arrangements.
Fee-for-service or Indemnity Insurance: With this traditional plan, you can make an appointment with almost any medical provider. After your visit, you or your provider sends your claim to the insurance company. If you have met your deductible for the year, then the Fee-for-Service plan will pay a percentage of the bill – usually 80%. You pay for the other 20%, known as coinsurance.
Managed Care Plan: All managed care plans involve an arrangement between the insurer and a selected network of health care providers (doctors, hospitals, etc.). All offer policyholders significant financial incentives to use the providers in that network. There are usually specific standards for selecting providers and formal steps to ensure that quality care is delivered. Three types of managed care include:
- Health Maintenance Organization (HMO): A health plan, either for-profit or not-for-profit, that provides comprehensive medical services to its members for a fixed, prepaid premium. Members must use participating providers and are enrolled for a fixed period of time.
- Preferred Provider Organization (PPO): A managed care plan that contracts with networks or panels of providers, which furnish services and are paid according to a negotiated fee schedule. Enrollees are offered a financial incentive to use providers on the preferred list, but may use non-network providers as well.
Medicaid: The federal-state program for certain categories of low-income people that covers 36 million Americans, including children, the aged, blind, disabled, and people who are eligible to receive federally assisted income maintenance payments.
Medicare: The federal health insurance program for people age 65 and older, the disabled, and people with end-stage renal disease, with about 39 million beneficiaries.
Permanent Insurance: The policy for the person in question will not be cancelled as long as they can pay the premiums, therefore the urgency level for them is lower. Sure, they might want to get a better deal, and that’s cool, but there is no impending risk.
Short term Insurance: is usually acqured by individuals who are in between permanent policies. means that it’s only a matter of time before these folks are uninsured, so they should be considered as such. If they *become* uninsurable during the course of the term, they *will not* be able to get affordable coverage ever again. So they may have a false sense of security.