Glossary of Common Health Insurance Terms

Allowed Amount

A limit on the amount your health plan will pay. Also called the "recognized charge." If you choose to go out of network, your provider may not accept this amount as payment in full and may bill you for the rest. This is in addition to your plan's required co-pays and deductibles.
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Beneficiary

A beneficiary in the broadest sense is a natural person or other legal entity who receives money or other benefits from a benefactor. For example: The beneficiary of a life insurance policy is the person who receives the payment of the amount of insurance after the death of the insured.
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Beneficiary (Medicare)

This refers to medical services covered by your health plan. This word is also used to describe your health plan in general. It can also mean payment received under a plan.
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Brand-Name Drug

A brand-name drug is a drug that has a trade name and is protected by a patent (can be produced and sold only by the company holding the patent) as opposed to a generic drug (when the patent protection for a brand-name drug expires generic versions of the drug can be offered for sale if the FDA agrees and are usually cheaper than brand-name drugs).
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Centers for Medicare & Medicaid Services (CMS)

This is a federal agency. It runs the Medicare program. It also works with states to run the Medicaid program.
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Certificate of Coverage

This details the benefits provided by your health plan. It lists what is covered and what is not covered. You will get this document after you sign up for a plan.
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Claim

This is a request to be paid by a health plan for health services given. An example would be the claim your doctor sends to your health plan for an office visit. It is also a request for payment under a disability or life insurance plan.
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COBRA (Consolidated Omnibus Budget Reconciliation Act of 1986)

This law allows you to continue your health plan coverage for a limited time. It is often used after people lose their job or become divorced. If you choose this option, you will pay the cost of coverage. Small employers with less than 20 workers are not subject to this law.
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Coinsurance

Coinsurance is sometimes used synonymously with copayment, but is defined differently – a copay is typically fixed while the coinsurance is a percentage that the insured pays after the insurance policy's deductible is exceeded up to the policy's stop loss. It is expressed as a pair of percentages with the insurer's portion stated first. The maximum percentage the insured will be responsible for is generally no more than 50%. Once the insured's out-of-pocket expenses equal the stop loss the insurer will assume responsibility for 100% of any additional costs. 70-30, 80-20, and 90-10 insurer-insured coinsurance schemes are common, with stop loss limits of $1,000 to $3,000 after which the insurer covers all expenses.
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Coordination of Benefits (COB)

These rules are used to decide which plan pays first for people who have more than one plan. This helps coordinate coverage and allows claim information to be shared by the plans. This way, the plans can avoid duplicate payments.
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Copay

This is the dollar amount you pay for health care expenses. In most plans, you pay this after you meet your deductible limit. For example, you pay a set dollar amount to your doctor for an office visit. So, if your copay is $25, you pay that amount when you go to your doctor. Copays are also used for some hospital outpatient care services in the Original Medicare plan.
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Customary and Reasonable Fees

A limit on the amount your health plan will pay. Also called "usual, customary and reasonable (UCR)," "reasonable" or "prevailing" charge. The limit is based on data received by insurance plans. The data is based on what doctors' charge for the health care service.
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Deductible

The amount you pay for covered services before your health plan begins to pay.
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Deductible (Medicare)

This is what you must pay for health care before the Medicare plan begins to pay. This amount can change each year.
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Effective Date

This is the date your health plan becomes active. Your coverage starts on this day.
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Employee Assistance Programs (EAPs)

This can help people balance work and life issues. It gives support and counseling to help people deal with stress, family issues and more. The program is for employees, their dependents and household members. Employers buy it. Workers do not pay to use an EAP.
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Employer-Sponsored Health Insurance

Nearly 60% of Americans secure health insurance 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.
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Exclusions

These are conditions or services that the health plan does not cover.
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Explanation of Benefits (EOB)

This is a statement a health plan sends to a health plan member. It shows charges, payments and any balances owed. It may be sent by mail or e-mail.
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Generic Drug

A generic drug is a copy of a brand-name drug that no longer has a patent. The cost is usually less than the brand-name drug.
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Group Health Insurance

Nearly 60% of Americans secure health insurance 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.
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Health Insurance

Health Insurance provides a way to pay for medical expenses. A health insurance policy is a contract between an insurance provider (e.g. an insurance company or a government) and an individual or his sponsor (e.g. an employer or a community organization). The contract can be renewable (e.g. annually, monthly) or lifelong in the case of private insurance, or be mandatory for all citizens in the case of national plans. The type and amount of health care costs that will be covered by the health insurance provider are specified in writing, in a member contract or "Evidence of Coverage" booklet for private insurance, or in a national health policy for public insurance.
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Health Insurance Carrier

This is a company that provides health insurance plans.
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Health Insurance Portability and Accountability Act (HIPAA)

This is a federal law. It limits rules a group health plan can place on benefits for pre-existing health problems. It was passed to give people access to quality health care coverage when they switch jobs. This law does not let group health plans charge higher rates because of a person’s prior health status. It can also limit rules on some individual health plans. The law also helps protect private health information. It sets national standards for handling private health records.
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Health Maintenance Organization (HMO)

It is a health plan that arranges health care services for its members. In most HMO plans, members choose a primary care physician (PCP). The PCP is from the health plan’s provider network. The PCP gives routine care and refers members to network doctors if special care is needed.
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Health Maintenance Organization (HMO) (Medicare)

This is a type of health plan. The plan has a network of doctors and hospitals that help coordinate your care. This lets you get more benefits than you would with the Original Medicare Plan. It also gives you more benefits than many Medicare supplemental plans.
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Health Savings Account (HSA)

This is a part of a health plan. You can put money into this account. You can use it to pay for covered health care costs. Or, you can save money in it for future health care costs. The account grows interest. You can take your account with you if you leave your job. You must be covered by a high-deductible health plan to qualify for an HSA.
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High-Deductible Health Plan (HDHP)

This health plan has to meet federal rules. This is so members can put money into a health savings account or health reimbursement arrangement. These funds can help pay for health care. The plan deductible is higher than a standard health plan. Premiums are lower.
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Individual Health Insurance

This is a health plan bought by a person who cannot get benefits through a group plan. Self-employed people often have to buy this type of plan, as do people who cannot get health benefits from their employer or other group.
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In Network

This means that the insurance provider has a contract with that doctor or other health care provider. They negotiate reduced rates with them to help you save money. Your out of pocket costs are lower when you stay in network. There are other benefits to using doctors in network. They won’t bill you for the difference between their standard rates and the rate they’ve agreed to with the insurance companies. All you have to pay is your coinsurance or copay, along with any deductible. And network doctors will handle any precertification your plan requires.
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Life Insurance

Life insurance is a contract between the policy holder and the insurer, where the insurer promises to pay a designated beneficiary a sum of money (the "benefits") upon the death of the insured person. Depending on the contract, other events such as terminal illness or critical illness may also trigger payment. In return, the policy holder agrees to pay a stipulated amount (the "premium") at regular intervals or in lump sums. In some countries, death expenses such as funerals are included in the premium; however, in the United States the predominant form simply specifies a lump sum to be paid on the insured's demise. The value for the policy owner is the 'peace of mind' in knowing that the death of the insured person will not result in financial hardship. Life policies are legal contracts and the terms of the contract describe the limitations of the insured events. Specific exclusions are often written into the contract to limit the liability of the insurer; common examples are claims relating to suicide, fraud, war, riot and civil commotion.
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Limitations

These are restrictions that health plans place on coverage. They say what your plan does not cover.
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Managed Care

This is a type of health plan. It signs an agreement with doctors and hospitals to form a network. Members may get a higher level of benefits if they use doctors or hospitals in this network. Costs are often higher when people go out of the network for care. The plan may also require preapproval of some services.
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Network

A network is a group of health care providers. It includes doctors, dentists and hospitals. The health care providers in the network sign a contract with a health plan to provide services. Usually, the network provides services at a special rate. With some health plans, people get more coverage when they get care in the network.
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Out-of-Pocket Maximum

This is a limit on the costs a health plan member must pay for covered services. The limit can be yearly or a dollar amount.
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Pre-Existing Conditions

This is a health condition. It was diagnosed or treated before the date a health plan’s coverage began.
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Preferred Provider Organizations (PPOs)

This is a type of health benefits plan. Members can choose any doctor. They do not have to name a primary care physician. No referrals are needed. Members who go to network providers usually get more coverage. They may pay less for services.
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Primary Care Physician (PCP)

This is a doctor who is part of a health plan's network. He or she is a patient’s main contact for care. PCPs give referrals for other care. They coordinate care their patients get from specialists or other care facilities. In some health plans, a person must choose a PCP to coordinate care.
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Provider

This term is used often by health plans. It means a licensed person or place that delivers health care services. Some examples are doctors, dentists, hospitals and more. Confusingly, the term may also refer to the health plan as an insurance provider as well.
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Renewal

This is when an insurance policy continues, but with changed terms, like new rates.
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Rescission

Health insurance companies, in an effort to contain costs, may decide to drop coverage for an insured patient whose care is more expensive than they want to pay. That is called health insurance policy rescission.
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Stop-Loss Coverage

This protects employers who take on most of the risk of a health plan. An employer can buy this to avoid having to pay for large health claims. If health care costs go over the amount listed in the contract, the plan will pay the rest.
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Subscriber

This is a person who signs up for a health plan. If the plan is a family health plan, the person can add people to it as dependents. Those people must be eligible to be added. Some health plans also use the word “enrollee” for this term.
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Waiting Period

A health plan waiting period is a restriction as to what your plan will cover for a limited amount of time.
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Note: The sources for these definitions include www.aetna.com, www.wikipedia.com, www.thefreedictionary.com, www.investopedia.com, www.healthinsurance.org and www.about.com.