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A Quick Health Insurance Dictionary

Know what these health insurance words mean before you decide on your health coverage.

September 18, 2017 - By HealthCare.com Staff - read

Have you ever read through a health insurance letter, only to realize that NOTHING was in a language you understood?

Healthcare terminology can be hard to translate, especially during your first time looking for a plan. Our guide to health insurance jargon can help you understand what these medical terms actually mean.

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The Most Common Health Insurance Definitions

Health insurance (health plan)

a contract that requires a health insurer to pay most of your medical costs, subject to certain rules.

  • health insurance policy
    • Your health insurance plan and its rules are known as a “policy”. People or families without job-based coverage will get an individual or family policy. Employers cover multiple unrelated people using a group policy.
  • benefits
    • The items or services covered under a health insurance plan.

Affordable Care Act (ACA, Obamacare)

This comprehensive healthcare reform law was enacted in March 2010. It sets the modern US standards for health insurance.

  • ACA plans are major medical plans. Major medical plans generally have features and protections that other plan types can choose to leave out.

Broker

An agent or broker is the licensed professional who will finalize your health insurance coverage. In some circumstances, they can get you payment help. Agents and brokers can make specific recommendations about which plan you should enroll in.

Claim

A request for payment that your healthcare provider (or you) submits to your health insurer for items or services.

Co-insurance

When your health plan charges co-insurance, it means you’re responsible for a percentage of care. For instance, a silver plan will pay 70 percent of the service, leaving you responsible for the remaining 30 percent.

  • This is different than a co-payment, in which you’re responsible for a fixed amount.

Co-payment (or copay)

A copay or copayment is a fixed amount you’ll pay for a covered healthcare service. Copayments are frequently due during your doctor visit. Copays are not meant to be a barrier to care, typically ranging anywhere from $20 to $100.

  • This is different than co-insurance, in which you’re responsible for a percentage of costs.

Deductible

A plan deductible is the total amount you need to pay out-of-pocket pocket for medical care and services, before your health insurance company begins to cover the cost of these expenses.

  • For example, if your deductible is $3,000, your plan won’t pay anything until you’ve already paid $3,000 for covered medical services from your own bank account.
  • Some basic services, such as preventive care, do not require a deductible.
  • Some plans have two separate deductibles: one for prescription drugs and another for medical care.

Formulary (drug list)

A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits.

  • It’s important to review your health plan’s drug formulary if you take many medications or specialty medications.

Maximum Out-of-Pocket (MOOP, out-of-pocket limit)

The most you pay during the length of your health plan (usually a year) before your health insurance plan begins to pay 100% of the allowed amount.

  • Some costs, including your monthly premium and any treatments your health insurance doesn’t cover, will not count towards this limit.

Network (provider network, HMO/PPO)

  • In-network: If a doctor is “in-network”, that means they fully accept your insurance. You health insurance company works with a large group of doctors, hospitals and clinics to create an in-network system. You received preferred pricing when you visit in-network doctors.
  • Out-of-network: If you receive medical services outside of your in-network doctor or medical facility, you will pay more for this out-of-network care. Some plans may not cover out-of-network care or count it towards your deductible at all.

Open Enrollment Period (OEP)

The 6-week period each year during which you can sign up for Affordable Care Act health insurance. If you join during OEP, your plan will last for 12 months.

  • You may also gain a 60-day long Special Enrollment Period at any time if you experience certain life-changing events.
  • You can apply for Medicaid, CHIP, or less-comprehensive short-term insurance at any time of the year.
  • For coverage starting in 2019, the Open Enrollment Period was November 1, 2018 – December 15, 2018.

Premium

The flat amount you pay each month for health insurance coverage is called a premium. This payment simply keeps your plan active. If you get health insurance from your job, your employer may pay this for you.

Provider

A physician, healthcare professional or facility. Can also be a specialist who focuses on a specific area of medicine. They offer physician services. Preferred and participating providers have a contract with your health insurer or plan to provide services to you at a discount, the details of which depend on your plan.

Short-term health plans (temporary health insurance, limited-duration plans)

Short-term health plans last from 30 to 364 days. They are less expensive than traditional major medical health insurance plans, but do not provide coverage for pre-existing conditions or all services.

Tax Subsidy (ACA, Advance Premium Tax Credit, Obamacare subsidy)

A tax subsidy is a form of financial assistance that you may receive to help pay for your health plan, if you make less than $48,560 per year (as a single individual in 2018).

  • Subsidies can be hundreds of dollars per month, lowering your premium to $0.
  • You can calculate your subsidy at HealthCare.com.

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Advanced Health Insurance Vocabulary

This glossary of less common terms may not be necessary for everyone, but can help you understand more about your health plan.

Allowed Amount

Maximum amount on which payment is based for covered health care services. This may be called “eligible expense,” “payment allowance” or “negotiated rate.” If your medical provider charges more than your plan’s allowed amount, you may have to pay the difference.

  • Usual, Reasonable and Customary – the amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service. The URC amount is sometimes used to determine the allowed amount.

Annual Limit

Annual dollar limits are banned on most health insurance plans; short-term plans may still use them. These are a cap on the benefits your insurance company will pay in a year while you’re enrolled in a particular health insurance plan.

Annual limits may also be placed on the number of visits that will be covered for a particular service. After an annual limit is reached, you must pay all associated health care costs for the rest of the year.

Balance Billing

When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. A preferred provider may not balance bill you for covered services.

Dependent Coverage

Insurance coverage for family members of the policyholder, such as spouses, children, or partners.

Durable Medical Equipment (DME)

Equipment and supplies ordered by a health care provider for extended use. Examples of DME include oxygen pumps, wheelchairs, or blood testing devices for diabetics.

Flexible Benefits Plan

A benefit program that offers employees a choice between various benefits including cash, life insurance, health insurance, vacations, retirement plans, and child care. Also known as a Cafeteria plan or IRS 125 Plan.

Grievance

A complaint that you air to your health insurer.

Individual Mandate (tax penalty)

Between 2014 and 2018, you would have paid a fine on your income taxes for not carrying health insurance coverage (with some exceptions). The fine or fee is also referred to as an “individual responsibility payment” or “individual mandate.” In 2018 the fine was $695 per adult ($347.50 per child) or 2.5 percent of your income; whichever was greater. As of 2019, only 3 states (DC, MA, and NJ) still have a tax penalty.

Medically Necessary

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

Pre-existing condition

A medical issue that began before you joined health insurance. Since 2010, most health insurance plans – including ACA and Medicare – can never charge you extra, never prevent you from joining, and never exclude coverage for specific pre-existing conditions.

Prior authorization (preauthorization, prior approval, precertification)

A decision by your health insurer or plan that a service, treatment plan, prescription drug or durable medical equipment is medically necessary. Your health insurance or plan may require preauthorization or a doctor’s referral for certain services before you receive them.

  • You don’t need to get prior authorization in an emergency.
  • Preauthorization isn’t a promise your health insurance or plan will cover the cost.

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