Health Insurance Terminology

Benefit  Amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss.

Capitation  Capitation represents a set dollar limit that you or your employer pay to a health maintenance organization (HMO), regardless of how much you use the services offered by the health maintenance providers.

Case Management  Case management is a system embraced by employers and insurance companies to ensure that individuals receive appropriate, reasonable health care services.

Claim  A request by an individual (or his or her provider) to an individual's insurance company for the insurance company to pay for services obtained from a health care professional.

Co-Insurance  Co-insurance refers to money that an individual is required to pay for services, after a deductible has been paid. In some health care plans, co-insurance is called "co-payment." Co-insurance is often specified by a percentage. For example, the employee pays 20 percent toward the changes for a service and the employer or insurance company pays 80 percent.

Co-Payment  Co-payment is a predetermined (flat) fee that an individual pays for health care services, in addition to what the insurance covers. For example, some HMOs require a $10 "co-payment" for each office visit, regardless of the type or level of services provided during the visit. Co-payments are not usually specified by percentages.

Deductible  The amount an individual must pay for health care expenses before insurance (or a self-insured company) covers the costs. Often, insurance plans are based on yearly deductible amounts.

Denial Of Claim  Refusal by an insurance company to honor a request by an individual (or his or her provider) to pay for health care services obtained from a health care professional.

Exclusions  Medical services that are not covered by an individual's health insurance policy.

Health Care Decision Counseling  Services, sometimes provided by insurance companies or employers, that help individuals weigh the benefits, risks and costs of medical tests and treatments. Unlike case management, health care decision counseling is non-judgmental. The goal of health care decision counseling is to help individuals make more informed choices about their health and medical care needs, and to help them make decisions that are right for the individual's unique set of circumstances.

Health Maintenance Organizations  Health Maintenance Organizations represent "pre-paid" or "capitated" insurance plan in which individuals or their employers pay a fixed monthly fee for services, instead of a separate charge for each visit or service. The monthly fees remain the same, regardless of types or levels of services provided, Services are provided by physicians who are employeed by, or under contract with, the HMO. HMOs vary in design. Depending on the type of the HMO, services may be provided in a central facility, or in a physician's own office.

Indemnity Health Plan  Indemnity health insurance plans are also called "fee-for-service." These are the types of plans that primarily existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage. For example, an individual might pay 20 percent for services and the insurance company pays 80 percent. The fees for services are defined by the providers and vary from physician to physician. Indemnity health plans offer individuals the freedom to choose their health care professionals.

Independent Practice Associations  IPAs are similar to HMOs, except that individuals receive care in a physician's own office, rather than in an HMO facility.

Length of Stay  A term used by insurance companies, case managers and/or employers to describe the amount of time an individual stays in a hospital or in-patient facility.

Managed Care  A medical delivery system that attempts to manage the quality and cost of medical services that individuals receive. Most managed care systems offer HMOs and PPOs that individuals are encouraged to use for their health care services. Some managed care plans attempt to improve health quality, by emphasizing prevention of disease.

Maximum Dollar Limit  The maximum amount of money that an insurance company (or self-insured company) will pay for claims within a specific time period. Maximum dollar limits vary greatly. They may be based on or specified in terms of types of illnesses or types of services. Sometimes they are specified in terms of lifetime, sometimes for a year.

Medigap Insurance Policies  Medigap insurance is offered by private insurance companies, not the government. It is not the same as Medicare or Medicaid. These policies are designed to pay for some of the costs that Medicare does not cover.

Open-ended HMOs  HMOs which allow enrolled individuals to use out-of-plan providers and still receive partial or full coverage and payment for the professional's services under a traditional indemnity plan.

Out-Of-Plan  This phrase usually refers to physicians, hospitals or other health care providers who are considered nonparticipants in an insurance plan (usually an HMO or PPO). Depending on an individual's health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual's insurance company.

Out-Of-Pocket Maximum  A predetermined limited amount of money that an individual must pay out of their own savings, before an insurance company or (self-insured employer) will pay 100 percent for an individual's health care expenses.

Outpatient  An individual (patient) who receives health care services (such as surgery) on an outpatient basis, meaning they do not stay overnight in a hospital or inpatient facility. Many insurance companies have identified a list of tests and procedures (including surgery) that will not be covered (paid for) unless they are performed on an outpatient basis. The term outpatient is also used synonymously with ambulatory to describe health care facilities where procedures are performed.

Pre-Admission Certification  Also called pre-certification review, or pre-admission review. Approval by a case manager or insurance company representative (usually a nurse) for a person to be admitted to a hospital or in-patient facility, granted prior to the admittance. Pre-admission certification often must be obtained by the individual. Sometimes, however, physicians will contact the appropriate individual. The goal of pre-admission certification is to ensure that individuals are not exposed to inappropriate health care services (services that are medically unnecessary).

Pre-Admission Review  A review of an individual's health care status or condition, prior to an individual being admitted to an inpatient health care facility, such as a hospital. Pre-admission reviews are often conducted by case managers or insurance company representatives (usually nurses) in cooperation with the individual, his or her physician or health care provider, and hospitals.

Preadmission Testing  Medical tests that are completed for an individual prior to being admitted to a hospital or inpatient health care facility.

Pre-existing Conditions  A medical condition that is excluded from coverage by an insurance company, because the condition was believed to exist prior to the individual obtaining a policy from the particular insurance company.

Preferred Provider Organizations  You or your employer receive discounted rates if you use doctors from a pre-selected group. If you use a physician outside the PPO plan, you must pay more for the medical care.

Primary Care Provider  A health care professional (usually a physician) who is responsible for monitoring an individual's overall health care needs. Typically, a PCP serves as a "quarterback" for an individual's medical care, referring the individual to more specialized physicians for specialist care.

Provider  A term used for health professionals who provide health care services. Sometimes, the term refers only to physicians. Often, however, the term also refers to other health care professionals such as hospitals, nurse practitioners, chiropractors, physical therapists, and others offering specialized health care services.

Reasonable and Customary Fees  The average fee charged by a particular type of health care practitioner within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test or procedure. If the fees are higher than the approved amount, the individual receiving the service is responsible for paying the difference. Sometimes, however, if an individual questions his or her physician about the fee, the provider will reduce the charge to the amount that the insurance company has defined as reasonable and customary.

Risk  The chance of loss, the degree of probability of loss or the amount of possible loss to the insuring company. For an individual, risk represents such probabilities as the likelihood of surgical complications, medications' side effects, exposure to infection, or the chance of suffering a medical problem because of a lifestyle or other choice. For example, an individual increases his or her risk of getting cancer if he or she chooses to smoke cigarettes.

Second Opinion  It is a medical opinion provided by a second physician or medical expert, when one physician provides a diagnosis or recommends surgery to an individual. Individuals are encouraged to obtain second opinions whenever a physician recommends surgery or presents an individual with a serious medical diagnosis.

Second Surgical Opinion  These are now standard benefits in many health insurance plans. It is an opinion provided by a second physician, when one physician recommends surgery to an individual.

Short-Term Disability  An injury or illness that keeps a person from working for a short time. The definition of short-term disability (and the time period over which coverage extends) differs among insurance companies and employers. Short-term disability insurance coverage is designed to protect an individual's full or partial wages during a time of injury or illness (that is not work-related) that would prohibit the individual from working.

Triple-Option  Insurance plans that offer three options from which an individual may choose. Usually, the three options are: traditional indemnity, an HMO, and a PPO.

Usual, Customary and Reasonable Expenses  An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.

Waiting Period  A period of time when you are not covered by insurance for a particular problem.

 Glossary of Insurance Terms (reference: Health Insurance Association of America)

Accident Insurance. Provides first-dollar coverage (no deductible or co-payments) when an injury is due to an accident. Another type of accident plan pays a fixed dollar amount ' $5,000 or $10,000, for example ' if a serious accidental injury occurs.

Centers of Excellence. Hospitals that specialize in treating particular illnesses, or performing particular treatments, such as cancer or organ transplants.

Concurrent Review.The review of continued-stay hospital cases and discharge-planning efforts to ensure proper and efficient placement of the hospital patient.

Deductible. The amount of covered expenses that must be incurred and paid by the insured before benefits become payable by the insurer.

Employee Assistance Program (EAP). A generic term for the variety of counseling services made available to employees (and frequently their families) through employer-sponsored programs.

Fee-for-Service. A method of charging whereby a physician or other practitioner bills for each visit or service. Premium costs for fee-for-service agreements can increase if physicians or other providers increase their fees, increase the number of visits, or substitute more costly services for less expensive ones.

Limited Policy.A policy that covers only specified accidents or sicknesses.

Major Medical Expense Insurance. A form of health insurance that provides benefits for most medical expenses up to a high maximum benefit. Such contracts may contain internal limits and are usually subject to deductibles and co-insurance.

Maximum Out-of-Pocket. The amount of money an insured will pay in a benefit period in addition to regular premium payments. Noncovered expenses are the employee's responsibility in addition to out-of-pocket amounts.

National Association of Insurance Commissioners (NAIC). A national organization of state officials charged with regulating insurance. Formed to provide national uniformity in insurance regulations.

Premium. A periodic payment made by a policyholder (employer, individual) for the cost of insurance.

Retrospective Review.A follow-up analysis that ensures medical care services were necessary and appropriate in order to detect and reduce the incidence of fraud and unnecessary services.

Special Benefit Networks. Provider networks for particular services, such as mental health, substance abuse, or prescription drugs.

State Insurance Department. An administrative agency that implements state insurance laws and supervises (within the scope of these laws) the activities of insurers operating within the state.

State-Mandated Benefits. Benefits for a variety of medical conditions that a given state requires of insurance policies sold in that state.

Third-Party Administrator (TPA). An outside person or firm, not a party to a contract, that maintains all records regarding the persons covered under the insurance plan.

Underwriting.The process by which an insurer determines whether or not and on what basis it will accept an application for insurance.

Utilization Review (UR). The process of assessing the delivery of medical services to determine if the care provided is appropriate, medically necessary, and of high quality. UR may include review of appropriateness of admissions, services ordered and provided, length of stay, and discharge practices, both on a concurrent and retrospective basis.