Below is a selection of common health insurance terms. Please note that the definitions offered are meant to provide general guidance only and that some of these terms may be employed in different ways by different insurers. Work with your insurer or licensed agent to make sure you understand the terms used in your own health insurance policy.
More commonly referred to as “Obamacare,” this is the health reform legislation signed into law by President Obama in 2010. Major provisions of the law came into effect in 2014. The Affordable Care Act was responsible for reshaping the individual and family health insurance market in the United States, but has had significantly less effect on employer-sponsored health insurance coverage. This law and related regulations may change significantly based on political developments.
A licensed agent is a person approved by the state to sell health insurance. An agent works to match applicants with a health insurance company or plan that suits their needs. Agents are paid a commission by the insurance company, but generally represent the applicant rather than the insurance company. It does not cost anything extra to work through an agent. An agent can continue to serve you after you buy, for example to help you understand and deal with benefit and billing disputes with the insurance company.
Also referred to as the “Allowed Amount,” “Maximum Allowable” or “Usual, Customary and Reasonable” (UCR) charge, this is the dollar amount typically considered payment-in-full by an insurance company and its associated network of health care providers. The allowable charge is typically a discounted rate rather than the actual charge.
Additional health insurance products (such as vision or dental insurance) that can sometimes be added to a medical insurance plan for an additional fee.
Any service (such as an office visit, laboratory test, surgical procedure, etc.) or supply (such as prescription drugs, durable medical equipment, etc.) covered by a health insurance plan in the normal course of a patient's health care.
The amount a health insurance company agrees to pay for a specific covered benefit.
The annual cycle in which a health insurance plan operates. At the beginning of your benefit year, the health insurance company may alter plan benefits and update rates. Some benefit years follow the calendar year, renewing in January, whereas others may renew at other times.
A bill for medical services rendered, typically submitted to the insurance company on behalf of a patient by a health care provider.
Shorthand for the Consolidated Budget Reconciliation Act of 1985, COBRA is a federal law allowing eligible employees or their dependents to maintain group health insurance coverage under an employer's health insurance plan at individual expense for up to 18 months.
The amount you may be obligated to pay for covered medical services after you've paid any co-payment or deductible required by your health insurance plan. Coinsurance is typically expressed as a percentage of the allowable charge for a service rendered by a health care provider. For example, if your insurance company covers 80% of the allowable charge for a specific service, you may be required to cover the remaining 20% as coinsurance.
A specific charge your health insurance plan may require that you pay for a specific medical service or supply, also referred to as a “co-pay.” For example, your health insurance plan may require a $25 copayment for an office visit or brand-name prescription drug, after which the insurance company may pay the remainder of the charges.
A specific dollar amount your health insurance company may require that you pay out of pocket each year before your health insurance plan begins to make payments for claims.
Health insurance coverage extended to the spouse and children of the primary insured member. Certain age restrictions on the coverage of adult children may apply.
A list of prescription medications selected for coverage under a health insurance plan. Drugs may be included on a drug formulary based upon their efficacy, safety and cost-effectiveness. Insurance companies periodically change this list, so drugs may be added, removed, or covered at different amounts.
The date on which a person's health insurance coverage begins.
The portion of the monthly health insurance premium paid by the employee, usually deducted from wages by the employer.
The portion of an employee's health insurance premium paid by the employer.
The process through which an approved applicant and his or her dependents or employees are signed up for health insurance coverage.
A statement sent from the health insurance company to a member listing services that were billed by a health care provider, how those charges were processed, and the total amount of patient responsibility for the claim.
A health insurance plan that provides benefits for employees of a business or members of an organization, as opposed to individual and family health insurance.
Shorthand for the Health Insurance Portability and Accountability Act of 1996, federal legislation mandating specific privacy rules and practices for medical care providers and health insurance companies, designed to streamline industry practices and protect the privacy and identity of health care consumers.
A tax-advantaged savings account designed to be used in conjunction with certain high-deductible health insurance plans to pay for qualifying medical expenses. Contributions may be made to the account on a tax-free basis up to an annual limit. Funds remain in the account from year to year and may be invested at the discretion of the individual owning the account. Interest or investment returns accrue tax-free. Penalties may apply when funds are withdrawn to pay for anything other than qualifying medical expenses.
Health insurance purchased by an individual or family, independent of any employer group or organization.
A term designating standard individual and family or group health insurance plans providing benefits for a broad range of health care services, both inpatient and outpatient. This contrasts with other types of insurance, such as short-term health insurance, which have less comprehensive coverage and do not generally meet the requirements of the Affordable Care Act.
Coverage for medical services associated with pregnancy and delivery.
The maximum amount a member will be required to pay out of pocket in a single benefit year, often including copayments coinsurance and deductibles, but not monthly premiums.
Under the Affordable Care Act (“Obamacare”) all major medical health insurance plans are designated by a specific metal level. The metal level of a plan provides a short-hand guide to the amount of cost-sharing a plan is likely to require. Platinum and Gold plans, for example, tend to cover more of the cost of covered medical services than Bronze of Silver plans, but they also tend to come with higher monthly premiums. Bronze or Silver plans tend to come with lower monthly premiums, but they may require policy holders to pay a larger share of the cost when certain medical services are rendered.
A health care provider (such as a doctor or hospital) who has a contractual relationship with a health insurance company. Among other things, this contractual relationship may establish standards of care, clinical protocols, and allowable charges for specific services. Typically, most plans cover providers in the plan's network at a higher rate than non-network providers. Insurance companies regularly add and remove providers from their network.
Under the Affordable Care Act, most Americans are required to have major medical health insurance coverage or else to face a tax penalty, unless they qualify for an exemption. Generally speaking, enrolling in a qualifying individual or family or group health insurance plan will protect you from the Obamacare tax penalty, so long as you do not have a gap in your coverage of more than two consecutive months in the same calendar year.
Health care costs that a patient or enrollee must pay for out of his or her own pocket, often including such costs as coinsurance, deductibles, copayments, etc.
The total amount paid to the insurance company (usually on a monthly basis) to maintain health insurance coverage.
Medical care rendered not for a specific complaint but focused on prevention and early-detection of disease. Under the Affordable Care Act, many preventive medical services are provided at no out-of-pocket cost to health insurance enrollees.
Some health insurance plans require a patient to choose a primary care physician. A primary care physician usually serves as a patient's main health care provider and may refer a patient to specialists for additional services.
A term commonly used by health insurance companies to designate any health care provider, whether a doctor or nurse, hospital or clinic.
The process by which a patient is authorized by his or her primary care physician to a see a specialist for the diagnosis or treatment of a specific condition.
A federal tax form used to report business income or business losses. A copy of this form may be required when applying for a small business/group health insurance plan.
A federal tax form used to report a business partner's share of the income, credits and deductions from a business organized as a partnership. This is submitted to the federal government with the partner's federal tax return. A copy of this form may be required when applying for a small business/group health insurance plan.
Temporary health insurance plans that provide limited coverage only. Coverage typically extends for no more than 12 months and benefits are often less comprehensive than those provided by a major medical health insurance plan. Prescription drugs, preventive care, and treatment for pre-existing conditions are usually not covered. Also, a short-term plan does not protect you from the Obamacare tax penalty. Generally, short-term plans provide some temporary coverage while you are waiting for a major medical health insurance plan to start, but short-term plans are not a substitute for major medical health insurance.
A doctor who does not serve as a primary care physician but who provides secondary care in a specific medical field.
These are codes used to describe or classify businesses based upon the products or services they provide. When you apply for group health insurance coverage, you may be asked to select an SIC code to describe your business. This code provides the insurance company with information about the kind of work your employees are likely to perform and may be used to help determine a monthly premium.
Under the Affordable Care Act, persons purchasing individual or family health insurance coverage on their own may be eligible for government subsidies, based on their income. Generally speaking, persons with a household income of no more than 400% of the federal poverty level may be eligible to apply for government subsidies. These subsidies are not available to persons purchasing or enrolling in employer-sponsored group health insurance plans.
The process by which an insurance company determines how much monthly premiums should be for a group health insurance plan.