Glossary of Insurance Terms

document with "insurance coverage info" printed on it, with eyeglasses on the top

Allowed Amount: The total amount an insurance policy will cover for a particular service.

Annual Limit: The total dollar amount that your insurance company will pay over the course of a benefit period.

Appeal: A request for your health insurance company to review their decision, normally when a claim is denied.

Benefit Period: When you will be covered under the terms of your current plan, which is normally one calendar year for health insurance plans. During this same calendar year is when your benefits maximums, deductibles, and co-pays add up.

Claims: Formal, written requests to an insurance company to pay for services received.

COBRA: Named for the Consolidated Omnibus Budget Reconciliation Act, COBRA offers former employees and their dependents a temporary extension of their health care coverage at the group rates.

Co-Insurance: The amount you will need to pay for covered services, after you have met your deductible, during each benefit period. This amount is normally a percentage of the total cost of the service. NOTE: You may also have a co-pay on top of your co-insurance percentage.

Co-Insurance Limit: The maximum amount you will pay during a benefit period in co-insurance charges.

Condition: An illness, injury, disease, or disorder that may require care.

Contract: The agreement entered into by the policyholder with an insurance company.

Co-Payment (or Co-Pay): A flat rate cost that you pay to a provider (doctor, hospital, lab, etc) at the time you receive care. NOTE: Not all plans have a co-pay.

Covered Charges: The charges for a service that is covered under your insurance policy. Your policy may have a limit on these types of charges if your provider is out of their network of providers.

Covered Person: Any person (employee or dependent) who is covered under your insurance plan.

Covered Service: Any procedure, service, or medical supply that is covered under your health plan.

Deductible: The amount you are solely responsible for paying before your insurance company pays your claims. These deductibles are based on your benefit period and begin again once a new benefit period begins.

Dependent Coverage: Coverage for qualified dependents, which may include spouses and children (who are under the age of 26).

Emergency Medical Condition: A problem that requires immediate treatment, or something that someone with no medical training and a basic knowledge of health care would expect that the situation was a) life-threatening to a person or unborn child; b) likely to cause serious damage to the body and its systems; or c) likely to cause serious damage to organs.

Essential Benefits: After 2014, all insurance policies are required to include a package of benefits that includes hospitalization, outpatient care, maternity coverage, prescription drug coverage, emergency care options, and preventative care among other things. These essential benefits packages also limit how much patients must pay to receive this type of care, often making preventative care more accessible to insured people.

Experimental or Investigational Drug, Device, Medical Treatment, or Procedure: A procedure, drug, treatment, or device that has not yet been approved by the U.S. Food & Drug Administration or have not been considered an approved standard of care.

Excluded Services: Any services not covered by your health insurance. See also Non-Covered Charges.

FSA (Flexible Spending Account): Set up through your employer, an FSA allows you to save pre-tax money to cover common out-of-pocket costs or care. These funds have to be used before the end of the FSA term year or it will be returned to your employer. The costs covered must be qualified FSA costs, which you can determine by checking with your HR team or FSA provider. Some common qualified expenses include: co-pays, hospital fees or tests (like X-rays), dental and orthodontic charges, inpatient addiction treatment, and vaccines and flu shots when not covered as preventative care.

Group Health Plan: A benefit plan established or maintained by an employer that provides medical care for employees and their dependents either directly or through a reimbursement system.

High Deductible Health Plan (HDHP): A health insurance plan that requires more out-of-pocket spending for employees and their families in exchange for lower premiums.

Home Health Care: Health care services received at home, which may or may not be covered under your plan depending on the terms.

HMO (Health Maintenance Organization): This type of plan offers health care only within a specific, limited network of HMO providers. In an HMO plan, you will likely need to choose a Primary Care Physician (PCP) to manage your care and refer you to specialists if and when they are needed. In an HMO plan, services outside the network are generally not covered unless they are considered emergencies.

HRA (Health Reimbursement Account): This account is owned by the employer, letting them set aside money for health care costs and offering tax incentives to both employer and employee. These funds are used to pay back members for covered services paid for by employees.

HSA (Health Savings Account): This account allows you to save for future medical expenses before taxes. Unlike an FSA, the HSA funds can build up and roll over from year to year. HSAs must be paired with high-deductible health insurance plans (HDHP).

Inpatient Services: Care received after being admitted to a hospital and after a room & board charge is made to your account.

Institution: Hospital or other health care facility.

Legal Guardian: Person given the care of a child who also makes health care decisions for that child. The legal guardian can either be the natural parent or given the responsibility of caretaker by the courts.

Long-Term Insurance: A health insurance policy that covers a particular set of services over a period of time (usually a year).

Medical Care: Treatment for a condition given by a health care provider or facility.

Medically Necessary (or Medical Necessity): Services, medical supplies, or prescriptions that are necessary in order to treat or diagnose a medical condition. An insurer is responsible to determine whether or not this care is accepted practice (no experimental or investigational options), not ordered simply for your convenience or the convenience of the provider, and the right type of care for your situation.

Medicare: A United States federal program that pays for certain health care expenses for people aged 65 or over.

Network Provider/In-Network Provider: A provider who is a part of an insurance company’s preferred network.

Non-Covered Charges: Fees for any service or supply that is not covered under your health care plan. These types of charges may include services for acupuncture, weight loss surgery, marriage counseling, or experimental procedures not considered to be an accepted standard of care. These coverages change from plan to plan, so consult your specific plan’s provisions in order to determine what’s covered for you.

Open Enrollment Period: The specific time period during which people can sign up for or make changes to their benefits plan each year. Outside of that time period, insured people can only make changes if they experienced a Qualified Life Event.

Outpatient Services: Care that does not require an overnight stay in a hospital, whether these services are provided in a doctor’s office, hospital, or clinic.

Out-of-Pocket Expenses: Costs you must pay, which vary from plan to plan. Every plan as a maximum out-of-pocket cost, so you’ll know exactly how much you might be responsible for in order to cover your costs.

Pre-Authorization (or Prior Authorization, Prior Approval, or Pre-Certification): A decision by your insurance company that the treatment plan or service, drug, or equipment is medically necessary, made before the service, drug, or equipment is delivered or done. Some health insurance plans require pre-authorization before services are given unless it is an emergency. A pre-authorization from your insurance company does not mean that your insurance company promises to pay for all of the charges.

PPO (Preferred Provider Organization): This type of insurance plan offers better, more expansive coverage when you choose health care providers who are part of the network, but still gives you some coverage when you receive care outside of your network (unlike an HMO plan). PPOs are often more flexible, as a result, than HMOs, but they are also more expensive.

Prescription Drug: Medicine that cannot be bought without a prescription from a care provider, as a result of federal or state law.

Prescription Drug Coverage: The portion of your insurance coverage that pays for certain prescription drugs.

Premium: Your payment to your insurance provider in order to maintain your coverage, due at certain times during the benefit period.

Provider (Health Care Provider): Any licensed facility, doctor, or professional who can legally offer health care services.

Qualified Life Event: An event, like a death, divorce, birth, or job change, that will initiate the ability to enroll in a plan or change their insurance coverage.

Short-Term Insurance: Type of health insurance that covers services for a shorter period of time, typically six months or less.

Specialist: A health care provider who focuses on one particular type of condition or area of medicine.

Urgent Care Provider: Health care provider that offers services for health issues that need medical help immediately but are not considered emergencies.

Waiting Period: The time period that a new employee or dependents must wait after becoming employed before their health insurance coverage becomes effective.