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Glossary of Health Care Insurance Terms

The vocabulary used in the health insurance industry often leaves consumers baffled and frustrated. Here is a glossary of many of the most common terms as explained by the professionals at Deborah Reyes Insurance Services, Inc. serving La Verne, Pasadena, and all of the Greater Los Angeles metropolitan area.

Actuary

A mathematician who uses statistical models to calculate underwriting risks and insurance premiums.

Agent

An individual licensed to represent multiple insurance providers.

Annual Deductible

The amount of money a health insurance policyholder must pay over the course of one year before the health insurance provider assumes responsibility for medical costs. The annual deductible affects the premium amounts. Higher annual deductibles result in lower premiums; lower annual deductible result in higher premiums.

Benefit

Payment for a medical expense covered by a health insurance plan.

Broker

An individual licensed to procure multiple insurance quotes for a client.

Carrier

An insurance provider offering a health plan.

Claim

A request for benefits provided by an insurance policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

A federal law requiring the providers of group health insurance to offer the members the opportunity to extend their health coverage after their group health insurance policy is terminated.

Coinsurance

The portion—usually expressed as a percentage—of a medical cost that the health insurance policyholder is responsible for paying. The remainder of the bill is paid by the health insurance provider. For example, in an 80/20 plan, the health insurance provider pays 80 percent of the expense while the health insurance policyholder pays 20 percent. Most plans have a limit on how much coinsurance the policyholder must pay.

Co-payment

A predetermined amount of a medical expense that a health insurance policyholder must pay at the time the care is delivered. For example, a plan may require a co-payment of $10 for a doctor’s office visit or a prescription drug purchase.

Covered medical expense

A medical bill or portion of a bill that a health insurance company is contractually obligated to pay.

Effective date

The date that health insurance coverage begins.

Exclusions

Medical expenses that are not covered by a health insurance policy.

Generic medication

A drug that is chemically identical to a better known brand name medication. Generic medications cost less than brand name medications, resulting in lower co-payments.

Group health insurance

A health insurance plan provided to members of a group, such as employees of a company or nonprofit organization.

Health Maintenance Organization (HMO) 

An alternative to commercial insurance that stresses preventive care, early diagnosis and treatment on an outpatient basis. HMOs are licensed by the state to provide care for enrollees by contracting with specific health care providers to provide specified benefits. Many HMOs require enrollees to see a particular primary care physician (PCP) who will refer them to a specialist if deemed necessary.

Health Maintenance Organization (HMO)

A healthcare provider that delivers medical care through a network of doctors and other healthcare professionals who agree to follow certain guidelines for costs and care.

Indemnity health insurance

Also known as fee-for-service health insurance, indemnity health insurance allows the insured to seek care from any health care professional. Unlike a PPO or HMO, an indemnity plan does not require the policyholder to choose from a network of caregivers. The insured pays a set percentage of the medical bills while the insurance company pays the balance of the charges. However, the insurance company sets usual and customary rates for each treatment or procedure. If the caregiver exceeds the usual and customary rates, the patient (policyholder) must pay the difference.

Lifetime maximum benefit

The total amount a health insurance provider will pay for one policyholder’s medical care over his or her lifetime.

Medical savings account

A savings account with tax advantages designed to allow self-employed individuals and the owners of small businesses to set aside money for the payment of medical expenses not covered by health insurance policies.

Medicare

A program of the federal government that provides health insurance to Americans aged sixty-five and up or who qualify on other criteria. Funded by payroll taxes, Medicare consists of two health care insurance programs: Medicare Part A and Medicare Part B. Medicare Part A is funded entirely by taxpayers. The recipients of Medicare Part A do not pay a premium for their health insurance coverage. Medicare Part A pays for care provided by hospitals, skilled nursing facilities, or hospices. The other component of the program, Medicare Part B, is partially funded by FICA taxes but also requires the plan members to pay premiums. The Medicare Part B plan pays for traditional healthcare, including doctor office visits, physical therapy, outpatient treatment, and even some home care.

Portability

The ability of a health insurance consumer to move from one health insurance plan to another without being required to face waiting times for coverage of preexisting medical conditions. With health insurance portability, the amount of time a person was enrolled in a health insurance plan is deducted from the waiting time the insurance company normally would require for a new customer. For example, a consumer who had continuous health insurance coverage for twelve months receive benefits immediately even for a preexisting condition that normally has an twelve-month waiting period (12 - 12 = 0).

Point-of-service health insurance (POS)

A managed care health insurance organization that, like an HMO or PPO, requires members of the plan to obtain care from a network of healthcare professionals under the management of a family doctor known as a “point-of-service” physician. The POS physician monitors care and makes referrals when necessary . Unlike an HMO, a POS will pay for part of the care obtained outside the approved network of healthcare providers. To receive reimbursement, the POS policyholder must manage all the paperwork related to out-of-network care.

Preferred Provider Organization (PPO)

Like a POS or an HMO, a PPO delivers healthcare via a network of approved healthcare professionals. Like a POS, a PPO provides coverage for care obtained outside the PPO’s network of preferred healthcare professionals. Both POS and PPO plans covers a smaller portion of expenses for out-of-network care. In contrast to a POS, a PPO does not require the PPO plan member to manage the paperwork for care received outside the network.

Pre-existing condition

A health condition, such as a chronic disease, that an individual has been diagnosed for prior to applying for health insurance coverage. California insurance law allows health insurance providers to postpone or deny coverage for some pre-existing conditions, but health insurance benefits cannot be denied to members of group plans, even if they have pre-existing conditions.

Supplemental health insurance

A health care insurance policy designed to pay for medical expenses excluded from a primary health insurance policy. For example, since Medicare health insurance does not cover many treatments, many Medicare recipients purchase private supplemental health insurance to protect against uninsured medical expenses.

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