Understanding Health Insurance Terms

In addition to the various types of health care coverage health insurance has its own unique terminology which can be very difficult to understand.

I will try to explain some of the terminology to make it easier to understand your policies.

Coinsurance
This is the amount you are required to pay for medical care in a fee-for-service plan after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if your health insurance company pays 80 percent of the claim, you pay 20 percent.

Coordination of Benefits
This is a system to eliminate duplication of benefits when you are covered under more than one group plan. For example if a husband and wife have family coverage at work they can not bill both polices for the full fee and receive additional funds in excess of the charge. Benefits under the two plans usually are limited to no more than 100 percent of the claim.

Co-payment
This is another way of sharing medical costs in addition to the insurance covered by your employer or under a basic policy. You pay a flat fee every time you receive a medical service (for example, $5 for every visit to the doctor). The health insurance company pays the rest.

Covered Expenses
Most health insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the health insurance policy.

Customary Fee
Most health insurance plans will pay only what they call a reasonable and customary fee for a particular service. If your doctor charges $1,000 for a hernia repair while most doctors in your area charge only $600, you will be billed for the $400 difference. This is in addition to the deductible and coinsurance you would be expected to pay. To avoid this additional cost, ask your doctor to accept your health insurance company's payment as full payment. Or shop around to find a doctor who will. Otherwise you will have to pay the rest yourself.

Deductible
The amount of money you must pay each year to cover your medical care expenses before your health insurance policy starts paying for covered eligible expenses.

Dependant
A person for whom the insured has some legal obligation to. For most plans, it is the insured's spouse and/or children. Some plans also allow non-traditional spousal relationships (significant other, life-partner, etc.) to be considered a dependent with some additional certifying paperwork.

Exclusions
Specific conditions or circumstances for which the policy will not provide benefits.

Maximum Out-of-Pocket Expenses
The most money you will be required pay a year for deductibles and coinsurance. It is a stated dollar amount set by the health insurance company, in addition to regular premiums.

Non-cancelable Policy
A policy that guarantees you can receive health insurance, as long as you pay the premium. It is also called a guaranteed renewable policy.

Premium
The amount you or your employer pays in exchange for health insurance coverage.

Provider
Any person (doctor, nurse, dentist) or institution (hospital or clinic) that provides medical care.

Third-Party Payer
Any payer for health care services other than you. This can be an insurance company, an HMO, a PPO, or the Federal Government.

Claim
This is a request for payment for medical services under the terms of an insurance policy.

Exclusions and Limitations
Conditions, situations and services that are not covered by the health plan.

Health Care Provider
This is anyone who delivers medical or health-related care such as a doctor, hospital, laboratory, or nurse.

Health Savings Account HAS
The newest choice in health insurance for the self-employed, also called Medical Savings Accounts (MSAs) allow you to build up a tax-free savings account to pay for routine medical expenses You must have a high deductible medical plan (catastrophic health plan) that includes a tax deferred savings account. A HDHP is an inexpensive health insurance plan that generally doesn’t pay for the first several thousand dollars of health care expenses but will generally cover you after that. Your HSA is available to help you pay for the expenses your plan does not cover. The money from the HAS savings account can be used to help meet the deductible, help pay early hospitalization/medical expenses or used towards personal retirement savings.

Indemnity plan
This is also called a fee-for-service plan. It is a health insurance plan that allows the insured to use any medical provider that he or she chooses. As such, there are no networks to utilize.

Insured
This is the person whose health is insured under an insurance policy. This person may also be referred to as a member.

Major Medical Insurance Plan
This is a type of traditional medical expense coverage that provides substantial benefits for hospital surgical expenses and physicians' fees.

Network
A group of doctors, hospitals and other health-care providers contracting with a health plan, usually to provide care at special rates and to handle paperwork with the health plan.

Out-of-Network
Health care services received outside the group of health –care providers affiliated with the HMO, POS or PPO network.

Out-of-Pocket expense
This is any medical care costs that is not covered by insurance or which must be paid by the insured.

Preferred Provider Organization PPO
This is an organization where providers are under contract to an insurance company or health plan to provide care at a discounted or negotiated rate. Typically, you can see any doctor in the PPO network without requiring special approval, and you usually do not need to choose a primary care physician. Most PPOs will also allow you to seek care outside of the PPO network; however, the benefits are usually reduced and the insured has a greater out-of-pocket expense.

Pre-admission certification
This is a component of utilization review under which the utilization review organization determines whether an insured's proposed non-emergency hospital stay or some other type of care is most appropriate and what the length of an approved hospital stay may be.

Pre-existing Condition
According to most individual health insurance policies, this is an injury that occurred or a illness that first appeared or manifested itself before the policy was issued and that was not disclosed on the application for insurance. According to most group health insurance policies, this is a condition for which an individual received medical care during the three months immediately prior to the effective date of his coverage.

Short-term Disability
This type of coverage pays a percentage of your salary if you become temporarily disabled, meaning that you are not able to work for a short period of time due to sickness or injury (excluding on-the-job injuries, which are covered by workers compensation). The per-week amount is usually 50, 60 or 66 2/3 percent of your weekly salary, and lasts for a period of time specified by the plan.

Usual, Customary and Reasonable Fee
This is the maximum dollar amount of a covered expense that is considered eligible for reimbursement under a major medical policy. In other words if the average cost for a doctor’s visit across the country is $ 50. If your doctor charges $100 per visit only $ 50 is covered as the usual, customary and reasonable fee.