Below is a list of basic terms you may come across while learning more about health insurance:
A cost-sharing arrangement between an insured person and health insurance company wherein the insured person pays a fixed dollar amount for covered medical services. For example, a PPO may require a $20 “co-payment” for normal services delivered during a physician office visit; after which the insurance company often pays the remainder.
A cost-sharing arrangement between an insured person and health insurance company wherein the insured person pays a stated percentage of expenses for covered medical services after the deductible amount, if any, was paid.
A cost-sharing arrangement between an insured person and health insurance company wherein the insured person is required to pay a fixed dollar amount each benefit period (typically a year) before the health insurance company will reimburse for covered health care expenses. Plans may have both per individual and family deductibles.
A period of time during which an insurance company can delay their coverage for a pre-existing condition. Sometimes this is called a pre-existing condition waiting period.
Explanation of Benefits (EOB)
Statement sent by insurance companies to persons who have experienced a claim under the health plan. An EOB details the charges for the services received, the amount the health insurance company will pay for those services, and the amount the insured person will be responsible for paying.
First Dollar Coverage
A term for not having to meet a yearly deductible amount prior to receiving reimbursement or payment for a medical service.
Health Maintenance Organization (HMO)
A prepaid health plan which covers certain aspects to patient treatment; for instance: doctors’ visits, emergency care, surgery, lab tests and therapy. In a HMO, one must choose a primary care physician who then coordinates all care and makes referrals to any specialists that may be required. Also in a HMO, one must use the doctors, hospitals and clinics participating in a specified network (usually within a specified geographic area).
Indemnity Health Plan
These plans are also sometimes called “fee-for-service”; and existed primarily before the rise of HMOs and PPOs. With indemnity plans, the individual has their choice of providers without effect on reimbursement. The fees for healthcare services are defined by the health care providers and vary from physician to physician, hospital to hospital.
A cap on the benefits paid for the duration of a health insurance policy. Many policies have a lifetime limit of $5 million, which means that the insurer agrees to cover up to $5 million in covered services over the life of the policy. Once the $5 million maximum is reached, no additional benefits are payable.
Managed Care Plan
Health insurance plan which generally provides comprehensive services to their members (“enrollees”), offering financial incentives for patients to use their participating providers in a specified network. HMO and PPO plans are both examples of a managed care plan.
Physicians, hospitals or other providers of medical services that have agreed to participate in a managed care network – offering their services at discounted rates and meeting other negotiated contractual provisions. They are also sometimes called “participating providers”.
The total dollar amount an insured person is required to pay for covered medical services during a specified period, such as one year. This may also be called the “stop-loss limit” or “catastrophic expense limit”.
Preferred Provider Organization (PPO) plan
A health insurance plan where coverage is provided through a network of selected health care providers (such as hospitals and physicians) who have negotiated contracts with the insurance company to offer their services at discounted costs. Enrollees may go outside the network for care, but this would most likely incur larger costs to the enrollee (e.g.: a higher deductible or higher, non-discounted, charges from the providers).
Primary Care Physician (PCP)
The primary contact for enrollees within a health plan, this is often a family physician, internist, or pediatrician. In a managed care plan (e.g.: a HMO or PPO), a PCP monitors patient health, treats and/or coordinates most patient health problems, and if required by the plan, refers patients to specialists when necessary.
A review of the need for health care services or products, before services are rendered or products are provided. This term refers to a decision made by the health insurance plan provider to cover or not cover the charges before any services/products are provided.
A contracted limit in a health insurance policy that provides for 100% payment of expenses after the total patient’s/group’s out-of-pocket expenses exceed a certain dollar amount.
Usual and Customary (U&C) Charge
The basis for how conventional indemnity plans operate. U&C charges is a term used for commonly charged or prevailing fees for health services within a geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community. This is sometimes also referred to as “Reasonable and Customary (R&C) Charge”. In contrast, PPO plans often operate on a negotiated (fixed) schedule of fees.
Wellness Office Visit
A doctor’s office visit not prompted by any sickness or injury.