Insurance Information

Insurance Terms and Definitions

These terms and definitions are intended to be educational; always refer to the specific insurance company’s definition within their member handbook (Summary of Benefits booklet).

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ACA, Affordable Care Act - is short for the Patient Protection and Affordable Care Act that was signed into law in 2010. Its goal is to make health care more affordable and accessible for millions of Americans.

Allowed Amount – the maximum amount per the insurance carrier on which their payment is based for covered health care services. This may be called “contracted amount, eligible expense, payment allowance or negotiated rate”.

Authorization – The approval from the health insurance company prior to services/care being provided/supplied for certain tests, procedures, or medications. Failure to obtain authorization can result is higher out of pocket costs for the insured/member. Also referred to as pre- approval, pre-certification, prior authorization or prior auth.

Balance Billing – is the difference between the provider’s charge and the insurance company’s allowed amount that is billed to the patient.

Claim – is an invoice/bill requesting payment for services rendered.   This is usually done by the health care provider  but the insured/member may submit to the health insurance.

COB, coordination of benefits - is a method by which two or more insurance plans coordinate their respective benefits so that total benefit paid does not exceed 100% of the total allowable expenses incurred.

Co-insurance -The percentage the insured/member pays for some covered medical services. If the co-insurance is 20 percent, the health insurance company will pay 80 percent of the cost of covered services; the insured/member will pay the remaining 20 percent.

Contracted providers - The doctors, hospitals, labs, and other health care providers who contract with a health insurance company to deliver services to members at a reduced cost.

Copay - Short for copayment - a flat fee that is paid at the time of service when the patient sees a doctor or receive other medical services. For example, a copayment could be $20 to see a doctor or $100 to go to the emergency room.

Cost-sharing - Also known as out-of-pocket costs, it is the amount of money the insured/member pays in the form of copays, deductibles, and coinsurance. This is in addition to the premium or monthly rate for the health plan.

Deductible - The amount the member owes for health care services that their health insurance plan covers before the health insurance begins to pay. For example, if the plan has a $1,000 deductible, the insured/member must pay the first $1,000 of the costs for the health care services received. Once the amount has been processed toward submitted claims, the insurance payer will begin to pay a portion or all of the health care costs, depending on the plan.

EOB, explanation of benefits - A statement send from the health insurance company to a member listing services that were billed by a healthcare provider, how those charges were processed, and the total amount of patient responsibility for the claim.

Excluded Services – health care services that the health insurance plan does not pay for or cover. Also called “non covered”.

Exchange or Health Insurance Marketplace  – A website service that helps people shop for and enroll in health insurance plans for individuals, families and small businesses.  The federal government operates the Health Insurance Exchange Marketplace, available at HealthCare.gov.

HMO, Health Maintenance Organization - a type of health plan that requires the member to select a family doctor, often called a primary care physician or PCP. A referral from the PCP is needed for the member to see a specialist in the HMO network.  No referral can result in high out of pocket expenses

Hospitalization – care in a hospital that requires admission as an inpatient and usually requires an overnight state. An overnight stay for observation could be outpatient care.

In-network providers - The doctors, hospitals, labs, and other health care providers who contract with a health insurance company to deliver services to enrolled members.

Insurance card -  the card that lists the eligible people covered under a specific health insurance plan and includes information needed to confirm eligibility, covered services, and billing.

Limited/Narrow network – a network plan that covers only selected providers (hospital or physician groups) and or services.  Often is indicated by “limited benefits” on an insurance card

Medically Necessary - health care services or supplies needed to prevent, diagnose or treat an illness, injury, condition, disease or its symptoms and that meet accepted standards of medicine.

Network – the facilities, providers and supplies that a health insurance or plan has contracted with to provide health care services.  Using a network provider helps the insured have lower out of pocket expenses.

• In-network providers - The doctors, hospitals, labs, and other health care providers who contract with a health insurance company to deliver services to enrolled members.
• Out-of-network providers - “noncontracting” --The doctors, hospitals, labs, and other health care providers who DO NOT have a contract with a health insurance company. Some health plans include coverage (at a higher cost) for out-of-network providers, and some may not provide coverage at all.

Non-covered Services – health care services that the health insurance company/or plan does not pay for or cover. Also called “excluded services”.

Out-of-pocket costs - Also known as cost-sharing, it is the amount of money you pay for care, in the form of copays, deductibles, and coinsurance. This is in addition to the premium or monthly rate you pay to be a member of the health plan.   Each plan/benefit year (typically calendar year – January 1^st) your out of pocket costs start over.

Out-of-pocket maximum - This is the maximum amount that you will have to pay for care during the plan year. This does not include your premium, just out-of-pocket costs, such as copays, deductibles, and coinsurance. Any covered services/care you receive after you meet your out-of-pocket maximum for the year is covered 100 percent by the insurance company.

Payer – the health insurance company that processes the claim and issues payment and/or response.  (examples - Blue Cross/Blue Shield, Aetna, United Healthcare, Medicare, etc)

Plan – is the group of benefits  the employer, union or other group sponsor provides to the member for health care services.

Policy number/Member ID – a unique identification number assigned to the member to allow the provider and your insurance to review your specific policy terms and process benefits.

PPO, Preferred Provider Organization -is a type of health plan that allows members to see providers in and out of the network. You pay lower costs when you see network providers.

Preauthorization/pre-certification - approval from the health plan prior to services rendered for certain tests, procedures, or medications. Failure to obtain authorization can result is higher out of pocket costs for the member. Also referred to as pre- approval, pre-cert, prior auth or prior authorization.  Prior authorization is not a guarantee that the health insurance will cover the cost.

Preferred provider - a provider who has a contract with the health insurance or plan to provide services at a discount. A provider is a term used to refer to a healthcare facility like a hospital or clinic, or pharmacy or the  physician.

Referral - approval from the primary care physician (PCP) for the patient to be seen by another network provider for specific services.  If a referral is not obtained, and it is a requirement of the payer, this could result in a reduction or denial of benefit coverage.

Specialist - A specialist focuses on a specific area of medicine to diagnose, manage, prevent or treat certain types of symptoms and conditions.

Subscriber - this term may be used in two ways: First, it may refer to the person or organization that pays for health insurance premiums; secondly, it may refer to the person whose employment makes them eligible for group health insurance benefits.

Summary of Benefits and Coverage (SBC) - The federal government requires all health plans to use a standard template to describe the benefits, cost-sharing, and coverage limitations and exceptions included in the plan, this is called the Summary of Benefits.

TPA, Third Party Administrator- is an organization that processes insurance claims or certain aspects of employee benefit plans for a separate entity. Often in the case of insurance claims, a TPA handles the claims processing for an employer that self-insures its employees. An insurance company may also use a TPA to manage its claims processing, provider networks, utilization review or membership functions. While some third part administrators may operate as units of insurance companies, they are often independent.

Tiered Network Plan - A tiered network plan divides a provider network into groups called “tiers,” based on cost, and in many cases, quality measures. The patient can visit doctors and hospitals from any of the tiers, but will save the most on their out-of-pocket costs if they stay within a particular tier. For example, Tier 1 may offer the lowest out-of-pockets costs when using specific providers, Tier 2 may be a bit higher and has a larger group of providers, and Tier 3 may have the highest out-of-pocket costs with no restrictions on providers.

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For more definitions, refer to HealthCare.gov's Glossary.