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Insurance Glossary
When dealing with insurance issues, you may hear or read words you don’t understand. This can be very confusing and frustrating. The following definitions of commonly used insurance terms may help you.
Glossary of Health Care Terms
Age limits
Annual deductible
Approved provider
Assignment of benefits
Average wholesale price (AWP)
Basic benefits
Beneficiary
Benefits
Claim
COBRA
Coinsurance (see also Copayment)
Comprehensive health insurance programs (CHIPS)
Comprehensive major medical insurance
Conversion privilege
Copayment
Covered expenses
Deductible
Disability
Effective date
Eligibility date
Exclusions
Exclusive provider organization (EPO)
Explanation of benefits (EOB)
Grace period
Health insurance
Health maintenance organization (HMO)
Individual health insurance
In-network
Insured
Lifetime maximum
Limited policy
Major medical insurance
Managed care
Maximums
Medicaid
Medicare
Medigap
Nonparticipating physician
Open enrollment
Out-of-pocket
Participating physician
Point-of-service plans
Policy
Policyholder
Preauthorization
Precertification
Predetermination
Preexisting condition
Preferred provider organization (PPO)
Premium
Provider
Release of information
Remittance advice
Rider
Schedule of allowances
Secondary carrier
Stop loss
Subscriber
Usual, customary, and reasonable (UCR)
Waiting period
Waiver
Waiver of premium
Age limits
Specific ages below and above which the company will not accept applications or may not renew policies.
Annual deductible
The dollar amount of medical bills you must pay each year before your insurance policy starts paying.
Approved provider
A person or company (for example, a doctor, HMO, hospital, or clinic) that has an agreement with an employer or payer (whoever pays the medical bills; for example, an insurance company, the federal government, or an HMO) to provide medical services.
Assignment of benefits
An arrangement made by you, directing your insurance company to pay your doctor or other health care provider directly, instead of issuing payments to you.
Average wholesale price (AWP)
Generally, the manufacturer's suggested retail price of a drug. Payers might use the AWP to decide how much to pay for a treatment.
Basic benefits
The part of the insurance policy that usually covers inpatient services (services rendered to you in the hospital).
Beneficiary
A person who receives payment (coverage) from a health care plan.
Benefits
The amount of money the insurance company pays.
Claim
A request by you (the insured person) for payment of benefits under a policy. In other words, you fill out a form asking the insurance company to pay the doctor or hospital bill.
COBRA
A federal law that requires employers of 20 or more employees to offer a temporary extension of health coverage.
Coinsurance (see also Copayment)
The amount of money you must pay. It is usually a percent of the total cost (for example, 10%, 15%, or 20% of the bill).
Comprehensive health insurance programs (CHIPS)
State-monitored programs that provide health insurance to people who have been denied coverage because of their medical conditions.
Comprehensive major medical insurance
A policy that offers both basic and major medical health insurance coverage.
Conversion privilege
The ability to change to a different insurance plan providing proof of insurability (for example, to change to an individual policy when group coverage ends).
Copayment
A flat amount you must pay for services (for example, $10 per office visit).
Covered expenses
Hospital, medical, and other health care expenses that may be paid under a health insurance policy.
Deductible
See Annual deductible.
Disability
Physical or mental problem resulting from sickness or injury. It may be partial or total.
Effective date
The date policy benefits begin.
Eligibility date
The date on which you, as an individual member of a specified group, can apply for insurance under the plan.
Exclusions
Specific conditions or circumstances listed in the policy that are not covered.
Exclusive provider organization (EPO)
People who belong to an EPO must receive their care from approved providers (for example, certain doctors, hospitals, etc.). If a patient sees a doctor who is not on the list of approved caregivers, the insurance company either (1) will not pay the bill or (2) will make the patient pay a larger part of the bill than usual.
Explanation of benefits (EOB)
A form included with a check from the insurance company that explains charges and dates they were paid and/or charges that were rejected.
Grace period
A specified period after a premium payment is due in which you can pay for your insurance, and during which the protection of the policy continues. For example, if your payment is due on June 1, the company might give you until June 15 to pay.
Health insurance
Protection that helps pay the bills for treatment of a sickness or injury.
Health maintenance organization (HMO)
A prepaid health care plan. The HMO provides a complete set of basic and supplemental health services, including physicians, specialists, inpatient facilities, outpatient facilities and, often, prescription drugs. Subscribers voluntarily enroll and prepay a fixed amount of money at regular intervals.
Individual health insurance
Policies that provide protection to the policyholder and/or his or her family. Sometimes called Personal Insurance as distinct from group and blanket insurance.
In-network
See Approved provider.
Insured
The person who represents the family unit in relation to the insurance program, usually the employee whose employment makes this coverage possible. For example, if the father works and gets medical insurance from his company for himself and his wife and his children, the father is called the insured.
Lifetime maximum
The total amount that the insurance company will pay for medical expenses. This amount may be listed as the maximum amount for each illness or condition, or as total costs paid from a portion of a policy (for example, inpatient versus outpatient expenses).
Limited policy
A contract that covers only certain specified diseases or accidents.
Major medical insurance
Health insurance to cover the cost of major illness and injury. It usually (1) has a benefit maximum up to $219,000 or no limit after an initial deductible, (2) pays a large part of all charges for hospital, doctors, private nurses, medical appliances, prescribed out-of-hospital treatment, drugs, and medicines. For example, you may have to pay 20% of the bills, while the insurance company pays 80%.
Managed care
A system for delivering health care that combines the monitoring and management of services to obtain better results for the patient at lower cost. In managed care, administrators and managers work with doctors and nurses to help see that you—the patient—get good care at the lowest possible cost. When talking about managed care, most people are referring to health maintenance organizations (HMOs) and preferred provider organizations (PPOs).
Maximums
The most an insurance company will pay for a specific benefit or policy during a specified time period.
Medicaid
A state medical assistance program. Each state has its own rules on who will get help, but usually only financially needy people who don’t have any other type of insurance are eligible.
Medicare
A federal program providing hospital and supplementary medical insurance for people who are 65 years of age or older, or who are blind or permanently disabled.
Medigap
A term sometimes applied to private insurance plans to supplement their Medicare insurance benefits.
Nonparticipating physician
A doctor who has not signed a contract to provide services under the terms of a specific insurance plan. This usually means the doctor is not part of an HMO or PPO.
Open enrollment
A time when a person with a preexisting condition can get insurance coverage or change insurance companies without a penalty clause. This opportunity may be available from some employers once a year.
Out-of-pocket
The amount of money you—the insured—are responsible for in payment of medical bills.
Participating physician
A doctor who has signed a contract and agreed to provide services under the terms of a specific plan such as an HMO or PPO. This is a doctor to whom a member of the HMO or PPO can go without paying a penalty.
Point-of-service plans
Often known as open-ended HMOs or PPOs, these plans let you see doctors outside the plan, but encourage you to use network doctors. Typically, it costs more to see a doctor who is outside the plan.
Policy
The legal document issued by the insurance company to the policyholder that outlines the conditions and terms of the insurance; also called the policy contract or the contract.
Policyholder
See Insured.
Preauthorization
This means you must ask permission from the payer before your doctor performs certain treatments.
Precertification
See Preauthorization.
Predetermination
The process of obtaining an estimate of what an insurance company will pay for service(s) before the service(s) is performed.
Preexisting condition
Any medical condition you had when your plan coverage became effective. If your plan contains a preexisting condition clause, there is usually a defined waiting period beyond the effective date of coverage before the plan will make payment for treatment of the medical condition.
Preferred provider organization (PPO)
An arrangement whereby a payer contracts with a group of health care providers (for example, doctors, nurses, lab people) to provide services at lower than usual cost. In return, the insurance company promises to pay these people quickly and make sure they get a certain number of patients.
Premium
The amount of money you pay—or your employer pays—for insurance.
Provider
The person or institution—doctor, nurse, therapist, hospital, etc.—that cares for the patient.
Release of information
Usually a preprinted form a health care provider gives the patient to sign to permit the provider to share the patient's medical information with another provider, or to an insurer to settle an insurance claim.
Remittance advice
See Explanation of benefits.
Rider
A document that adds new information to the policy or certificate. It may increase or decrease benefits, waive the condition of coverage, or in any other way change the original contract.
Schedule of allowances
A list of specific amounts the insurance company will pay toward the cost of medical services provided.
Secondary carrier
The insurance company that is second in responsibility for paying the costs of services rendered. For example, the husband's insurance company may pay most of the bills (primary carrier) while the wife's company pays the remaining bills (secondary carrier).
Stop loss
The amount of out-of-pocket expenses after which the insurer will pay 100% of eligible expenses.
Subscriber
See Insured.
Usual, customary, and reasonable (UCR)
A method of deciding benefits by comparing the doctor's charges to those of other doctors in the same community and specialty.
Waiting period
The length of time an employee must wait from his/her date of employment or application for coverage to the date his/her insurance is effective.
Waiver
An agreement attached to a policy that exempts from coverage certain disabilities or injuries that are normally covered by the policy. In other words, the insurance company will not pay bills for the illness or condition mentioned in the waiver.
Waiver of premium
A special agreement in an insurance policy that says if you are totally disabled so that you cannot earn a salary, you do not have to pay for your insurance until you are well.
Remember, no one source can answer all your questions or replace the information provided by your doctors and nurses. This Web site is not intended to replace ongoing communication between you and your health care team.
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