Allowed Amount:  The amount of the billed charge the insurance company deems is payable by the plan.  This may or may not equal the amount actually billed by the provider.  The insurance carrier may limit the amount it will consider for payment based upon Usual, Customary, and Reasonable or because of a negotiated fee with the provider.

Ambulatory Care:  Medical care on an Outpatient basis, such as hospital outpatient clinics and ER Departments, physician's office and home health care are examples.

Ancillary Services:  The name given to professional services such as laboratory tests and radiology exams.

Authorization (Prior Authorization):  If a physician wants to perform a surgery, order a medical supply, or refer the patient to a specialist, an authorization and approval by the health plan is required.  The provider is usually the one to obtain the authorization from the insurance company; however, you should always make sure that the authorization is received before having any treatment performed. 

Birthday Rule:  A method of determining coordination of benefits under both parent's plans of medical insurance.  Under the Birthday Rule, a dependent child is covered under the plan of the parent whose birthday falls earlier in the calendar year.

Brand Name Drugs:  A prescription drug that has been patented and given a brand name by the manufacturer.  Brand Name Drugs are usually the most expensive drugs available. 

Case Management:  A component of Utilization Review.  Under Case Management, a health plan attempts to manage the care given to an individual Member on a coordinated basis, based upon a given disease or condition.  This is particularly true of large cases.  The health plan attempts to coordinate all care given to the patient to ensure that Participating Providers are used as much as possible and that the patient gets the maximum benefit out of the plan. 

Claim:  A claim is a request for payment from your insurance company for medical expenses incurred due to an illness or injury covered under the terms of the policy.

COBRA - Consolidated Omnibus Budget Reconciliation Act of 1986:  COBRA is a federal law that allows for an extension of your eligibility on your group health insurance policy. COBRA is a good option if your employment ends and you lose your group health insurance or if a dependent no longer meets the definition of dependent under the policy.  COBRA can extend the life of the actual policy you had while at work. It includes the same benefits, coverage and stipulations for 18 to 36 months.

There is a federal and a state (Utah) COBRA program.   The federal program applies to employers with more than 19 employees.  The state program applies to employers with from 2 to 19 employees.  Both programs are similar in that they allow you to have access to the same benefits as active employees, once your insurance coverage ends.  However, you must pay the premiums for this coverage.  Under the federal program, you are responsible for 102% of the total premium.  Under the state program, you are responsible for 125% of total premium.

COBRA is an extremely complicated program.  Please consult your employer or insurance company for more information regarding COBRA.

Co-Insurance:  The co-insurance clause requires you to pay a percentage (or a fixed dollar amount) of your covered medical expenses. This means that after you have paid the deductible amount (if any) as stated in your policy, you will pay the stated percentage of the medical bills, and the insurance company will pay the remaining amount of the covered medical expenses. When your total expenses reach a dollar amount stated in your policy (see Out-of-Pocket Maximum), the insurance company pays 100% of the covered expenses up to the maximum benefit of your policy.

Conversion Plan:  When an individual terminates his/her group policy or when the COBRA time period runs out, an option to continue coverage is by purchasing an individual health plan called a conversion policy.  Most insurance companies offer Conversion Plans.

Copayment (Copay):   A form of medical cost sharing in a plan that requires an insured person to pay a fixed dollar amount when a medical service is received. The insurer is responsible for the rest of the reimbursement.  Copayments are usually applied to office visits, prescription drugs, and inpatient hospital stays.  Copayments are usually required to be paid at the time of service.

Covered Expense:  Charges for services which are Medically Necessary and eligible for payment under the health plan.  A Covered Expense can be no more than the maximum amount stated in the plan.  Covered Expenses are usually described in detail in your insurance booklet.

Deductible:  A fixed dollar amount during the benefit period - usually a year - that an insured person pays before the insurer starts to make any payments for covered medical services.  Plans may have both per individual and family deductibles. Deductibles may differ if services are received from an approved provider or if received from providers not on the approved list.

Dependent:   An individual who is considered a dependent of the Insured.  This can be a spouse, a natural child, or an adopted child.  Check the definition of Dependent in your insurance booklet.  Insurance companies define dependent differently – particularly in terms of when a dependent child no longer qualifies as a Dependent under the policy.

Emergency:  generally means the onset of a medical condition that manifests itself by symptoms of sufficient severity that a prudent person would believe that the absence of immediate medical attention could result in serious jeopardy to the health of the person, serious impairment of a bodily function or serious dysfunction of any bodily organ or part. 

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

Exclusions: These state the types of injuries or illnesses and other items that are not covered. All policies have exclusions. The most common types of exclusions are self-inflicted injuries, and injuries incurred while committing a criminal act. Injuries resulting from some specific activities may also be excluded.  Never assume you will always be covered. Check the exclusions in your insurance booklet before you seek treatment.

Explanation of Benefits (EOB):  A summary of the payment made by your health plan to the medical provider.  You should always receive a copy of the EOB on each Claim filed from your insurance company.

Flexible Benefits Plan (Cafeteria Plan) (IRS Section 125 Plan):  A benefit program under Section 125 of the Internal Revenue Code that offers employees a choice between permissible taxable benefits, including cash, and nontaxable benefits such as life and health insurance, vacations, retirement plans and child care.  Although a common core of benefits may be required, the employee can determine how his or her remaining benefit dollars are to be allocated for each type of benefit from the total amount promised by the employer.  Sometimes employee contributions may be made for additional coverage. Typically, employee amounts in the plan must be used within the given benefit year or the employee loses the money.  Flexible spending accounts can also be provided to cover childcare expenses, but those accounts must be established separately from medical FSAs.

Formulary:  A listing of prescription drugs the health plan pays for.  Formularies can be quite limited or they can be extensive.  If your health plan has a formulary, it is important for you to inform your physician so that he/she can prescribe drugs from the formulary.  You will pay more for non-formulary than for formulary drugs. 

Fully-Insured Plan:  A plan where the employer contracts with an insurance company to assume financial responsibility for the Member's medical claims and for all incurred administrative costs.

Gatekeeper:  Under some health insurance arrangements, a gatekeeper is responsible for the administration of the patient's treatment; the gatekeeper coordinates and authorizes all medical services, laboratory studies, specialty referrals and hospitalizations.  The gatekeeper is usually a Primary Care Physician (PCP).

Generic Drugs:  A pharmaceutical equivalent of a Brand Name Drug.  It must be approved by the FDA as meeting the same manufacturing and quality standards as the Brand Name Drug.  Generic Drugs are usually less expensive than Brand Name Drugs and most plans encourage you to use Generic Drugs rather than Brand Name Drugs.  Approximately half of all Brand Name Drugs have a Generic Drug equivalent.

Health Maintenance Organization (HMO):  This organization takes a financial risk to provide members with specific medical services for a fixed price and for a given period of time. A person with an HMO must choose a physician as their PCP (Primary Care Physician). This PCP acts as a "gatekeeper" for medical services to specialists. An HMO does not allow a person to see a physician outside of their network, as it is not a Covered Expense. The HMO plan exerts a great deal of control over its HMO physicians because the health plan is an integral part of the medical decision-making. This results in the HMO being more effective in controlling costs, by oftentimes paying physicians on a capitated basis and monitoring costs involved in treating patients, such as reviewing utilization rates, referral patterns, and methods of treatment.

HIPAA (Health Insurance Portability and Accountability Act):  An act passed by Congress designed to provide employees who terminate health insurance coverage with the ability to become insured with a new employer without penalties.  Also provides a framework for electronic claims submission by providers and offers increased privacy protection for individuals.  This is an extremely complicated act which has ramifications in many areas of health insurance.

HRA (Health Reimbursement Arrangement):  A relatively new type of account that allows an employer to contribute certain tax-exempt funds into an account that employees can then use to pay for qualified medical expenses.  Usually used in conjunction with a high deductible plan with the HRA reimbursing employees for amounts attributed to the high deductible.  Funds can be carried over from one year to the next.

HSA (Health Savings Account):  Passed as a part of the Medicare Prescription Drug bill.  Allows employees and/or employers to contribute to a tax-exempt account that the employee can use to pay for qualified medical expenses.  Amounts in the fund can be carried over from one year to the next.  Employee fund amounts are portable and can be taken with the employee when leaving the employer.  Any interest earned is tax-free.  Like an HRA, is to be used in conjunction with a high deductible plan (with certain restrictions).

Indemnity Plan:  Technically, a plan that reimburses providers and insureds based upon the amounts charged for services.  The insured is “indemnified” for the Loss associated with a Claim.  Therefore, any plan that pays providers based upon services provided and amounts charged is an indemnity plan.  Lately, the term has come to mean traditional insurance plans that do not have any provider network and will allow you to see any provider that you wish.  Plans such as HMOs would not be indemnity plans since they oftentimes reimburse providers on a Capitated basis.

Inpatient:  If you receive medical care at a hospital for at least one full day and are charged room and board, you are considered an inpatient.  The recent addition of “observation” units in hospitals has made this definition less definite.  Sometimes stays in an observation unit are considered inpatient, and sometimes they are not.

Insured (Subscriber):  The individual (usually the employee) who is the primary person insured under the policy.  Under a group policy, this will always be the employee (except in certain COBRA situations). 

Lifetime Maximum:  The maximum amount payable by the insurer for covered expenses for the insured and each covered dependent while covered under the health plan. Plans can have a yearly and/or a lifetime maximum dollar limit.

Limits:  All insurance policies have stated limits for the medical benefits they will pay. They also have maximum limits for what will be paid for certain services.  For example, the policy may state limits to what it will pay as a lifetime maximum or for certain procedures such as temperomandibular joint dysfunction.

Maintenance Drugs:  Drugs that you take on a continuing basis for an extended time period.  Blood pressure medication is a good example of a Maintenance Drug.

Managed Care:  A method by which cost containment features are applied to a health plan either by limiting the reimbursement levels paid to providers and/or by reducing utilization.   Managed care plans generally provide comprehensive health services to their members, and offer financial incentives for patients to use the providers who belong to the plan.  Examples of managed care plans include:

• Health maintenance organizations (HMOs),
• Preferred provider organizations (PPOs), 
• Exclusive provider organizations (EPOs), and
• Point of service plans (POSs).

Medical Savings Accounts (MSA):  Savings accounts designated for out-of-pocket medical expenses.  In an MSA, employers and individuals are allowed to contribute to a savings account on a pre-tax basis and carry over the unused funds at the end of the year.  One major difference between a Flexible Spending Account (FSA) and a Medical Savings Account (MSA) is the ability under an MSA to carry over the unused funds for use in a future year, instead of losing unused funds at the end of the year.  Most MSAs allow unused balances and earnings to accumulate.  Unlike FSAs, most MSAs are combined with a high deductible or catastrophic health insurance plan.  MSAs are currently only available to self-employed individuals and to employer groups of 50 or less employees.

Medically Necessary:  The most common definition of medical necessity is: medical or dental treatment that is (a) consistent with generally accepted medical practice for the covered injury or covered sickness; (b) in accordance with "approved" and generally accepted medical, surgical or dental practice as determined by the insurance company; (c) accepted as safe, effective and reliable by a medical specialty or board recognized by the American Board of Medical Specialties; and (d) not "experimental or investigational" treatment as determined by the insurance company.  Check the definition in your insurance policy as some policies may differ from this definition.

Medicare:  A national insurance plan established by the federal government to provide coverage primarily to elderly Americans.  Anyone eligible for Social Security is ultimately eligible for Medicare.  Certain other classifications of people are also eligible for Medicare (end stage renal disease, etc.)

Medicaid:  A federal program under which states provide benefits to certain individuals who qualify for coverage because of income or health status.  These individuals are usually not covered under any other kind of benefit program.

Network/In-Network:  the term used for services received from doctors, hospitals and other providers contracting with an insurance company or HMO to provide care at the negotiated fee and to handle the paperwork associated therewith.

Open Enrollment Period:  A set time, usually once a year, during which you or your dependents may enroll in a health plan or make changes to your health plan coverage.  In HMOs, people can enroll in the plan during open enrollment, with no restrictions.  Under PPO and indemnity plans, pre-existing limitations may still apply.  Generally, unless there is a qualifying event, you cannot enroll in the plan at any time other than during open enrollment. 

Outpatient:  If you receive medical treatment from a physician or in a hospital or clinic, but are not confined or charged room or board, you are considered an outpatient.

Out-of-Network/Non-Network:  The term used for services received from doctors, hospitals or to the providers that are not part of the network of providers contracted by an insurance company. You pay substantially more for out-of-network services.

Out-of-Pocket Expense (Maximum):  The dollar amount a health plan member is required to pay out of pocket during a plan year.  Until the Out-of-Pocket Maximum is met, the plan and group member share in the cost of Covered Expenses.  After the maximum is reached, the insurance carrier pays all covered expenses, often up to a lifetime maximum.  Sometimes this Out-of-Pocket Maximum includes the amount paid for Deductibles and copayments, and sometimes it does not.  Prescriptions are rarely applied to Out-of-Pocket Maximum.

Participating (Contracted) Provider:  A physician or other medical provider that has agreed to accept a set fee for services provided to members of a specific health plan.  These providers are deemed to be "in-network" or “in-plan”.  Under an HMO, you must see a Participating Provider to receive any benefit.  Under a PPO, you must see a Participating Provider to receive the maximum benefit. 

Point-of-Service (POS) Plan:   A POS plan is an "HMO/PPO" hybrid; sometimes referred to as an "open-ended" HMO, when offered by an HMO.  POS plans resemble HMOs for in-network services.  Services received outside of the HMO network are usually reimbursed in a manner similar to a PPO (e.g., provider reimbursement based on a fee schedule or usual, customary and reasonable charges).  Benefits are usually higher for in-network, HMO-type services.  Benefits are usually less for out-of-network, PPO-type services.  These plans are referred to as “point-of-service” in that the individual can choose at the time of service whether to access the HMO network of providers or other providers.  Some POS plans have three levels: and HMO panel with the highest benefits, a PPO panel with lesser benefits, and an out-of-network option that allows a member to go to any provider for an even lower benefit.

Pre-Existing Condition:  If you receive medical advice, or treatment was recommended or received for any accident, illness, or other medical condition during a certain time period before you enroll in a health plan, you won't be covered for the care you receive as a result of that condition until you've been enrolled in the plan for specific time period.  These time periods vary by plan.  Check your insurance booklet for a specific definition of how your plan defines these time periods and under what conditions the Pre-Existing Condition limitation may be applied.

Preferred Provider Organization (PPO):   A plan which contracts with medical providers for a discounted rate on medical services. A PPO allows a person to see any physician they would like, but there are better benefits if they visit a physician within their insurance (PPO) network. PPO plans pay their physicians on a fee-for-service basis, which means that the medical provider must submit a claim to the insurance company for payment each time a medical service is performed.

Premium:  Agreed upon fees paid for coverage of medical benefits for a defined benefit period.  Premiums can be paid by employers, unions, employees, or shared by both the insured individual and the plan sponsor.

Primary Care Physician (PCP):   A physician who serves as a group member's primary contact within a health plan (usually an HMO).  In a managed care plan, the primary care physician provides basic medical services, coordinates and, if required by the plan, authorizes referrals to specialists and hospitals.

Prior Authorization:  See Authorization.

 

Qualifying Prior Coverage:  Under certain circumstances, a member who loses insurance coverage with one insurance company can obtain coverage with another insurance company without a pre-existing limitation if the member had Qualifying Prior Coverage.  Any individual or group plan that provides medical, hospital, and surgical coverage, including continuation or conversion coverage or coverage under a publicly sponsored program such as Medicare or Medicaid is considered Qualifying Prior Coverage. Qualifying Prior Coverage does not include accident-only, credit, disability income, Medicare supplement, long term care insurance, dental, vision, workers' compensation insurance, automobile insurance, no-fault insurance, or any medical coverage designed to supplement other private or governmental plans.

Qualifying Event:   A life changing event that allows a person to enroll in a health plan at any time.  Such events include marriage, birth of a child, or loss of other group insurance coverage.  For example, a wife is covered under her plan at work.  Her husband is covered under his plan at work.  Her husband loses his job and his insurance coverage.  The wife can now add the husband to her plan as a dependent because of his loss of coverage (the qualifying event). 

Referral:  The process by which one physician “refers” a patient to another physician for treatment.  Many insurance plans require that a patient receive a referral from a primary care physician before receiving treatment from a specialist physician. 

Rider:  An amendment to an insurance policy that provides a modification, either by expanding or restricting certain benefits and coverage.  Many common medical riders cover pharmacy, dental or vision benefits.

Second Surgical Opinion:  A cost-management strategy that encourages or requires patients to obtain the opinion of another doctor after a physician has recommended that a non-emergency or elective surgery be performed.  Programs may be voluntary or mandatory in that reimbursement is reduced or denied if the participant does not obtain the second opinion. Plans usually require that such opinions be obtained from board-certified specialists with no personal or financial interest in the outcome.  

Section 125 – Cafeteria Plans:  Employer-sponsored savings accounts designed to reduce your Social Security and Medicare Tax (7.65%) and Federal Income Tax (15% to nearly 40%) by enrolling in you company-sponsored Flexible Benefits Plan. These tax savings can apply to one or more of the following options:

• A Premium Conversion Account allows your share of qualifying group insurance premiums to be automatically deducted from your pay, tax free.
• A Health Care Flexible Spending Account allows you to spend tax-free dollars on health care expenses for yourself and your family, for expenses not covered by health insurance. This includes medical and dental services, vision, orthodontia, prescriptions and other over-the-counter medications, etc.
• A Dependent Care Flexible Spending Account allows you to pay for child day care or dependent care expenses up to $5,000 per year.

Self-Funded (Self-Insured) Plan:  A plan offered by employers who directly assume the major cost of health coverage for their employees.  In a self-funded arrangement, the employer essentially pays claims itself.  Some self-insured plans bear the entire risk.  Other self-funded employers insure against large claims by purchasing stop-loss coverage (reinsurance).  Some self-funded employers contract with insurance carriers or third party administrators for claims processing and other administrative services; other self-funded plans are self-administered.  All types of plans (Conventional Indemnity, PPO, EPO, HMO, and POS) can be financed on a self-funded basis.  Employers may offer both self-funded and fully insured plans to their employees.

Stop Loss:  See "out-of-pocket maximum."

Third Party Administrator (TPA):  An individual or firm hired by an employer to handle claims processing, pay providers, and manage other functions related to the operation of the health plan.  The TPA is not the policyholder or the insurer.

Untimely Submission:  A medical claim must be submitted within the time frame given by the insurance company or the claim will be denied.

Usual, Customary, and Reasonable (UCR) charges:  Conventional Indemnity Plans operate based on usual, customary, and reasonable (UCR) charges. UCR charges mean that the charge for services is the provider's usual fee for a service that does not exceed the customary fee in that geographic area and is reasonable based on the circumstances.  The insurance company will not consider amounts in excess of UCR to be a Covered Benefit.  Instead of UCR charges, PPO plans often operate based on a negotiated (fixed) schedule of fees that recognize charges for covered services up to a negotiated fixed dollar amount.

Utilization Review:  The general area under which a plan attempts to manage care given to Members in order to reduce cost and provide the most efficient care possible.  Utilization review usually requires that a member and their physician receive approval for a variety of services such as hospitalizations and surgeries. These administrative procedures can sometimes be cumbersome and may be viewed as limiting a Member’s choice and access.  Utilization Review does help to lower costs, which translates into lower premiums.

Life Insurance Terms

Accidental Death Benefit:  A provision added to a life insurance policy for payment of an additional benefit in case of death as a result of an accident.

Accidental Death and Dismemberment (AD&D):   A separate type of term policy that provides a benefit in the event that an insured dies accidentally or suffers the loss of certain limbs.  The benefit amount for AD&D policies is usually the same as for the term life policy purchased by the group.  This is sometimes known as double indemnity.

Actuary:   A professional individual responsible for reviewing the technical and financial aspects of an insurance policy, such as setting the premium rates and assessing risks.

Beneficiary:   The individual named in the policy as the recipient of the life insurance payment at the time of policyholder’s death.

Convertible Term Insurance:  Term insurance that could be covered into a permanent life insurance policy without evidence of insurability.

Face Amount:   The amount stated on the face of the policy that will be paid in case of death. It does not include additional amounts payable under accidental death or other special provisions.

Group Life Insurance:   A life insurance policy that is offered to a group of people under a master policy and which does not require medical examinations.  It is usually issued to an employer for its employees or to members of an association.

Guaranteed Insurability:   It provides the policyholder with an option to purchase additional insurance in the future without evidence of insurability.

Insurability:   The insurance company’s acceptance of an applicant of insurance.

Insured:   The individual to which the policy is issued.

Long Term Care Insurance (LTC):  Long Term Care policies pay for long-term care services (such as nursing home and home care) that Medicare and Medigap policies do not cover. Long term care is the type of care that you may need if you can no longer perform "activities of daily living" by yourself, such as eating, bathing or getting dressed. It also includes the kind of care you would need if you had a severe cognitive impairment like Alzheimer's disease. Care can be received in a variety of settings, including your own home, assisted living facilities, adult day care centers or hospice facilities. LTC Insurance policies vary in terms of what they will cover, and may be expensive. Coverage may be denied based on health status or age.

Long Term Disability Insurance (LTD):  Long Term Disability Insurance pays a percentage of your salary if you become temporarily disabled and are not able to work for an extended period of time due to sickness or injury. (On-the-job injuries are not usually covered by an LTD policy – this is covered by workers’ compensation insurance.) A typical LTD policy guarantees that you will receive a portion of your monthly salary, typically 60%, or 66 2/3%, after a benefit waiting period. Most LTD policies have a “cap,” meaning you receive a maximum benefit amount per month.

Mortality Table:   A table statistically representing the death rates at various ages.

Policyholder:   The owner of the insurance policy.

Reasonable & Customary (R&C):   “Reasonable and Customary” refers to the commonly charged or prevailing fees for health services within a specific geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community. This is sometimes called UCR – “Usual, Customary, and Reasonable.”

Reinstatement:   Restoring a lapsed policy.

Renewable Term Insurance:   Term insurance which can be renewed at the end of the term, at the option of the policyowner and without evidence of insurability, for a limited number of successive terms. The rates generally increase at each renewal as the age of the insured increases.

Rider:  An amendment of an insurance policy that provides a modification, either by expanding or restricting certain benefits and coverage.

Short Term Disability Insurance (STD):  Short term disability (STD) insurance pays a percentage of your salary if you become temporarily disabled and are not able to work for a short period of time due to sickness or injury (On-the-job injuries are not usually covered by an STD policy – this is covered by workers’ compensation insurance.) A typical STD policy provides you with a weekly portion of your salary, usually 50%, 60% or 66 2/3% for 13 to 26 weeks. Most STD policies have a “cap”, meaning you receive a maximum benefit amount per month.

Term Insurance:  Term life insurance is life insurance coverage at a guaranteed rate for a specified period of time. (Example: 30 year level term would guarantee a level premium for 30 years based on a specified death benefit). Term life insurance does not accumulate any case value.  It strictly provides a defined benefit in the event of the death of the insured.  Term life insurance is usually the least expensive form of life coverage.

Waiver of Premium:  A provision by which the insurance company keeps an existing insurance policy in force under certain conditions, when the premium is not being paid.