Like other types of insurance, health insurance is one of those things that you always hope you don’t have to use. If you’re lucky, you’ll only need it for regular checkups, but regardless of whether your healthcare needs are routine or you require specialist care, it is important to understand your plan. And in order to do that, there are a number of key healthcare terms that you will need to know.
The list below explains some of the more common health insurance terms as a starting point for understanding what your current policy offers – or if you’re shopping around – what to look for in a new one.
This is the total amount that your insurer agrees to pay for specific services and supplies. Sometimes also called the “allowed amount”, “maximum allowable” or “allowed charges”, this contracted rate is usually lower than the non-negotiated rate that you would be charged without insurance. You will find the allowed amount listed on your explanation of benefits for medical treatment, hospital services and medications.
The medical services and items that the health insurance policy will cover.
This is the amount that the insurer agrees to pay for a covered benefit.
Health insurance plans run on a yearly basis. A benefit year runs January 1 – December 31, and any changes to plan benefits and costs will be made at the beginning of the calendar year. Deductibles are typically accrued during this twelve month period and do not roll over.
This is a request to your insurer for payment of medical services for you or anyone else covered by your policy. In most cases, the healthcare provider files the claim after services have been performed, but there may be situations where you submit the claim. Your insurance provider will review the claim and pay covered expenses either directly to the healthcare provider or to you.
This is the percentage that the insured (that’s you) will contribute for medical services once you’ve met your deductible. Common coinsurance splits are 70/30, 80/20 and 90/10.
Health insurance plans have a set dollar amount that you must pay for medical services like doctor visits and prescriptions. The copay amount will vary by plan and by the service type or prescription (i.e. General Practitioner VS specialist visits). Copayments usually do not contribute to meeting your deductible.
The deductible is the cumulative amount that you must pay for healthcare services before your policy will begin to cover costs. Some preventive services such as wellness visits may be fully covered before you reach your deductible, but most other medical costs will fall to you until your deductible is met.
This term describes any spouse or children of the primary insured member that have been included on the policy.
Also called a “drug formulary”, this is a list of prescription drugs that are covered by your plan.
The date that coverage under your policy begins.
An exclusion is any specific condition or treatment that is not covered in your plan.
Explanation of Benefits
This is a statement from your insurer explaining how a medical claim was paid. It will show the service, the allowable charges paid to the provider, and any amounts owed by you.
Group Health Insurance
An insurance plan offered by an employer that provides coverage to employees and their dependents.
Health Maintenance Organization Plan
This is a type of health insurance plan that is characterized by a restricted provider network. You must choose a provider within the network in order for services to be covered, and with most HMO plans, you are required to see a primary care physician to obtain a referral for any specialist treatment.
Health Savings Account
If you are enrolled in a high deductible health plan (see below), you will have the option to open a health savings account to help you save for medical expenses. You or your employer may contribute a certain amount to the investment account each year tax free, and any fund growth is also tax free. Tax-free withdrawals may only be made for allowable medical services.
High Deductible Health Plan
With a high deductible health plan, you typically pay a higher deductible in return for lower premiums. This can be a way to save money on your insurance costs if you don’t have any medical conditions (i.e. you rarely see a doctor and don’t need prescription medication).
Individual Health Insurance
This is a policy purchased by an individual as opposed to a group plan offered by employers for their staff.
The person or persons covered by an insurance plan.
This term describes healthcare professionals, pharmacies, clinics, laboratories and hospitals that have contracts with your insurer – also sometimes called preferred providers. If you visit an in-network provider, you will pay less for services than for those that are out of network.
Any medical treatment that requires admission to a medical facility, usually in the form of an overnight stay in hospital.
Government funded insurance program that provides health benefits to low-income individuals and families.
Federal health insurance program for adults aged 65 and older, those with disabilities and certain other conditions. Medicare covers hospital services (Part A) and doctors (Part B).
A healthcare professional, pharmacy, clinic, laboratory or hospital that is not contracted with your insurance plan as a preferred provider. You will pay more for services from out-of-network providers, and with some plans, your insurer may not contribute to out-of-network provider services at all.
The amount you contribute to provider services outside of your premium, like your deductible, copayments and coinsurance, are considered to be out-of-pocket costs.
If you receive care from a medical facility or a hospital that does not require an overnight stay, this is considered outpatient care. The term covers doctor visits, tests and surgical procedures.
This is a medical condition that you have prior to buying a new health insurance policy.
This is the amount you and/or your employer pay for your insurance coverage. It is usually paid monthly, but may be quarterly or yearly. Premiums vary by policy in addition to your personal details including your age, sex, where you live, and some specific lifestyle factors such as tobacco use.
A prior authorization is an approval from your insurer that may be required before you receive specific treatments to ensure coverage.
A hospital, clinic or any medical professional that provides healthcare services.
Medical conditions that requires immediate attention, but are not serious enough for emergency room treatment.
This is the time you will need to wait as a new employee before you become eligible for coverage under your employer’s group health plan.