GLOSSARY OF TERMS

Please note that health insurance laws typically vary from state to state. So check the laws of your state and/or consult with your lawyer before assuming that any of the below apply to you.

-A-

Affiliation Period. The amount of time a new plan member must wait before being eligible for health care coverage, imposed by the health plan and not an employer. This waiting period cannot last longer than three months.

-B-

Balance Billing. When doctors and hospitals charge patients the difference between their fee and the amount their insurer pays.

-C-

Capitated Payment. A set payment to a health care provider for a certain amount of time or type of treatment regardless of how much care the individual gets or needs. The provider's financial incentive is to deliver as few services as possible. The opposite of fee-for-service.

Carrier. The insurance company offering a health insurance policy.

Catastrophic Coverage. Insurance designed to protect an individual from having to pay very high out-of-pocket costs. Catastrophic coverage usually begins after the person has spent a high pre-determined amount.

Catastrophic Limit. The most amount of money an individual will have to pay out of pocket during a given period of time for certain services. After the person has reached the catastrophic limit, a higher level of coverage begins, though he or she may still have to pay some portion of health care costs. Not all out-of-pocket costs may count towards the catastrophic limit. Varies by plan.

Certificate of Insurance. The printed description of the benefits and coverage provisions forming the contract between a person and his or her carrier, which details what the plan covers, what it does not, and dollar limits.

Claim. A bill to an insurance company asking for payment for services or benefits a plan member received.

COBRA. The Consolidated Omnibus Budget Reconciliation Act (COBRA) is a federal law that guarantees employees and their families who lose their employer-sponsored health coverage due to termination of employment, death, divorce, or other circumstances the right to purchase continued coverage under the employer's group health plan for limited periods of time. Qualified individuals are required to pay the entire premium for coverage plus an administrative fee, up to 102 percent of the cost of the plan. COBRA generally applies to people who worked for employers with 20 or more employees in the prior year.

Coinsurance. The portion of the cost of care you are required to pay after your health plan pays. Usually, it is a percentage (like 20 percent) of the amount approved by the insurer.

Conversion Policy. An employer-sponsored group health policy that can be converted to an individual policy with the same insurance company. These policies are usually very expensive.

Community Rating. A way to set insurance premiums that is based on the claims experience of people in the community. With community rating, each policyholder's premium is based on the average cost of the entire pool-healthy and sick mixed together-not on each individual's age or health status. The opposite of risk-based rating.

Copayment. A set amount (like $25) you are required to pay for each medical service you receive, such as a visit to your doctor.

Cost Sharing. Out-of-pocket costs for medical care or the portion of medical care that you pay yourself, such as a copayment, coinsurance or deductible. Premiums are not considered cost sharing.

Cost Tiers. A system that insurance plans use to set drug coverage cost sharing. Generic drugs are generally on the first, least expensive tier of the plan's formulary, followed by brand-name drugs, and then specialty drugs, with each subsequent tier requiring higher cost sharing.

-D-

Deductible. The amount of health care expenses you must pay before your health insurer begins to pay. Deductibles are generally for a calendar year.

Denial of Coverage. A refusal by your insurer to pay for medical services, usually because services are not covered by your policy, because you did not follow the plan's rules (such as getting pre-authorization for a service from the plan), or because the insurer does not consider the treatment medically necessary for you.

-E-

Effective Date. The date your insurance is set to actually begin. You are not covered until the policy's effective date.

Employer Waiting Period. Found in an employer group health plan, this is the amount of time a new employee must wait, often within three months of the first day of the full month the employee joins, before being eligible for health care coverage. This waiting period is imposed by the employer and is usually done to avoid "hit and run" behavior by a new employee, in which the employee files a large claim right after joining and then quickly leaves the company.

Exclusion. Medical services that are not covered by your insurance policy.

Exclusion Period. The amount of time a new health plan member must wait to get coverage for care related to a pre-existing condition. The length of this type of waiting period can vary.

Explanation of Benefits (EOB). The insurance company's written explanation of a claim, showing what it paid and what you must pay. If a claim is denied, the EOB will include a reason for the denial.

-F-

Fee-for-Service. Payment to doctors, hospitals and other health care providers for each service they give a patient. The provider's financial incentive is to give as many services as possible. The opposite of a capitated payment.

Federal Employees Health Benefits Program (FEHB). Health insurance benefits offered to employees of the federal government, including members of Congress. Like private employers, the government contracts with private insurance plans across the country to provide benefits to federal employees. The government subsidizes a portion of the premium of the plan the employee selects.

Formulary. The list of drugs a health insurance plan will cover at some level under particular circumstances.

-G-

Guaranteed Issue. A consumer protection offered by some states and the federal government for government insurance that gives people the right to buy health insurance coverage regardless of their age or health status.

Guaranteed Renewability. A consumer protection that gives people the right to keep their health insurance coverage regardless of their age or health status but at a price the insurer determines.

Group Insurance. A health insurance policy that is sold to cover a large number of people. Everyone in the group gets the same coverage for the same price. The insurance company spreads the risk equally among the healthy and the sick in the group.

-H-

HIPAA. The Health Insurance Portability and Accountability Act (HIPAA) amended the Employee Retirement Income Security Act (ERISA), to provide new rights and protections for members of group health plans. HIPAA contains protections both for health coverage offered in connection with employment (group health plans) and for the availability of individual insurance policies sold by insurance companies to people who previously had group coverage.

HMO (Health Maintenance Organization). A type of managed care plan that generally covers only the care you get from doctors, hospitals, and other health care providers that are in the plan's network. HMO members generally must choose a primary care doctor who acts as the 'gatekeeper,' deciding when they can go to a specialist.

-I-

In-Network. Doctors, hospitals and other health care providers that contract with a health plan to treat plan members. You usually pay less when using in-network providers, because they provide services at lower cost to the insurance companies with which they have contracts.

Indemnity Health Plan. These are the fee-for-service types of plans that primarily existed before the rise of managed care plans like HMOs. In an indemnity plan, you pay a pre-determined percentage of the cost of health care services, and the insurance company pays the other percentage. For example, you might pay 20 percent for services and the insurance company pays 80 percent. Indemnity health plans, also called "fee for service" plans give you the freedom to choose any health care provider.

Individual Insurance. A health insurance policy sold to an individual and not as part of a group. Individual insurance policies are generally regulated by the states, so rules vary widely across the country. Individual insurance policies are generally more expensive and less comprehensive than group policies.

-L-

Length of Stay (LOS). A term used by insurance companies, case managers and/or employers to describe the amount of time an individual stays in a hospital or in-patient facility.

Lifetime Maximum Benefit (or Maximum Lifetime Benefit). The maximum amount a health plan will pay in benefits to an insured individual during that individual's lifetime.

Limitations. A limit on the amount of benefits paid out for a particular covered expense, as disclosed on the Certificate of Insurance.

-M-

Managed Care. A medical delivery system, like an HMO or PPO that attempts to manage the quality and cost of medical services an individual receives.

Medicaid. A joint state and federal program that provides health care coverage to people with very low incomes or [??] who meet other eligibility criteria, such as being a child, being pregnant, being a single parent, having a disability, or being 65 years of age or older.

Medical Loss Ratio. The amount of premium revenues actually spent on paying for medical services. For example, if an insurance company spends 75 cents of every dollar it makes in premiums on paying for medical care for their policy holders, its medical loss ratio is 75 percent.

Medicare. The federal government program that provides health care coverage to people 65 years of age or older and people under 65 who have a disability, no matter their income or state of residence. The vast majority of people with Medicare (about 75 percent) get their medical benefits directly from the government-administered public program. The rest have joined a private insurance company that contracts with the government to provide benefits to people with Medicare.

Medical Underwriting. An insurance company practice that bases the premium and, sometimes the benefits, on an individual's medical history. So the premium for people who are sick or who are likely to become sick (for example, people with diabetes) is higher than for people who are healthy.

Medically Necessary. An insurance industry phrase used to apply to those procedures, services, or equipment that the insurance company deems to meet good medical standards and are necessary for the diagnosis and treatment of a medical condition. Many disputes arise between insurance companies and patients because the insurance company deems a given treatment not medically necessary, while the patient and doctor think it is.

-N-

Network. A group of doctors, hospitals and other health care providers contracted to provide services to an insurance company's customers at predetermined fees. Provider networks can cover a large geographic market or a wide range of health care services. Insured individuals typically pay less for using a network provider.

-O-

Out-of-Network. Doctors, hospitals and other health care providers that are not part of your insurance plan's network. If you get services from an out-of-network provider, it usually means that you will have to pay more out of your own pocket for the services you received.

Out-of-Pocket Costs. Health care costs that you must pay because your insurer does not cover them. Similar to cost sharing.

Out-Of-Pocket Maximum. A predetermined limit on the amount of money you must pay of your own money each year on medical costs before your insurance company will pay 100 percent of your health care expenses.

-P-

PCP (Primary Care Physician). The doctor that manages your care and refers you to specialty care if you need it. A managed care plan, like an HMO, generally requires you to have a PCP. If you don't consult your PCP before seeing a specialist, your managed care plan will likely not cover your care. PCPs can be general or family practitioners, internists, pediatricians (for children) or gynecologists (for women).

POS Option (Point-of-Service Option). A type of HMO that provides plan members partial coverage for certain services they get outside the managed care plan network of providers.

PPO (Preferred Provider Organization). A type of managed care plan that should partially cover the care from out-of-network providers. To get full coverage, you must use network providers.

Pre-Admission Certification. Also called pre-certification review, or pre-admission review. Approval by an insurance company representative for you to be admitted to a hospital or in-patient facility, granted prior to admittance. Pre-admission certification often must be obtained by the individual. Sometimes, however, physicians will contact the appropriate individual. In some plans, if you do not get pre-admission certification, the plan will not pay for the services provided.

Pre-Authorization. Also called "pre-approval." An approval that a managed care plan member must ask for from the plan or primary care doctor before getting certain medical services, such as an inpatient hospital stay. In some plans, if you do not get pre-authorization the plan will not pay for the care received.

Pre-Existing Condition. A medical condition or disease you have or had prior to joining the health plan. The exact definition of a pre-existing condition and how long a plan can look back in your medical history to find a pre-existing condition varies by the type of plan. For employer group plans, regulated by federal law, the health plan can only look back six months prior to your joining the plan and can only exclude coverage for your condition for up to 18 months. The amount of time the plan can exclude coverage depends on how long you were without coverage for that condition prior to joining the plan. For individual and small group plans, regulated by state law, the rules vary widely by state. Some states allow the plan to look back years into your medical history and exclude coverage for that condition forever; other states limit the health plans to looking back six months and exclude coverage for no more than six months. Some health insurance companies response to any large claims by a plan member is to look back over the member�s application to try to find a pre-existing condition that would allow the company to deny insurance benefits.

Premium. The amount that you and/or your employer pays to an insurer for health care coverage, usually on a monthly basis.

Private Insurance. Insurance coverage provided by a non-governmental entity, where the private company takes on the risk of insuring its members. Can be for-profit or not-for-profit.

Public Plan. Insurance coverage provided directly by the government, where the government takes on the risk of insuring its members. It is always not-for-profit.

-R-

Reasonable and Customary Fees. The average fee charged by a particular type of health care provider within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test or procedure. If the fees are higher than the approved amount, you may be responsible for paying the difference.

Referral. Authorization that HMOs and other managed care plans usually require for services not provided by your primary care doctor. For instance, HMOs generally require you to get a referral from your primary care doctor in order to see a specialist or get certain exams.

Rider. A modification made to a Certificate of Insurance regarding the clauses and provisions of a policy (usually adding or excluding coverage).

Risk. The chance of loss, the degree of probability of loss, or the amount of possible loss to the insuring company.

Risk-Based Rating. Setting premiums based on an individual's likely health care needs. For example, somebody who already has diabetes or has a family history of diabetes would be charged more than somebody with no health problems. The difference in premiums would reflect the difference in expected health care costs for each policyholder. The opposite of community rating.

Risk Pooling. If health insurance works the way it should, it pools many people together to share (or spread) the costs (or risk) generated by a small number of people. The number of people covered makes up the 'pool' of people in the plan. Over the long run, risk pooling makes sense because almost everybody, eventually, needs expensive health care. It is more manageable to pay an average amount (or premium) every month than to get hit all at once by medical bills that reach tens or hundreds of thousands of dollars.

-S-

SCHIP. The State Children's Health Insurance Program (SCHIP) is a joint state and federal government program that provides health care coverage to families with children. The program was designed to cover uninsured children in families with incomes that are low, but too high to qualify for Medicaid. SCHIP benefits are provided through private insurance companies that contract with the state.

Service Area. The geographical area within which a health plan provides medical services to its members. In an HMO, it is the area where your network of doctors and hospitals is located.

Specialist. A physician who specializes in treating only a certain part of the body or a certain condition. For instance, a cardiologist only treats people with heart problems.

State Continuation Coverage. A law enacted in most states that extends COBRA-like rights to people who work for companies that have fewer than 20 employees. In some states, these laws apply to fully insured group coverage purchased by larger employers, as well. However, there is little uniformity between each of the states in regards to qualifying events, duration, covered benefits and the cost of state continuation coverage. Each state defines different qualifying events that trigger the right to continue group coverage. Depending on the state, these qualifying events are not necessarily the same as those under COBRA. Also, most states require people to have been covered under their group plan for a minimum period (such as three months) in order to be eligible for state continuation coverage. By contrast, COBRA only requires a person to have been covered under the group health plan on the day before the qualifying event.

-U-

Underwriter. The company or entity that assumes responsibility (is liable) for the risk of certain losses specified in the insurance policy, issues insurance policies and receives premiums.

Usual, Customary and Reasonable (UCR) Rates or Covered Expenses. An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.

-V-

Veterans Health Administration (VHA). The federal agency that provides health care to U.S. veterans. A closed, integrated health care system, the VHA owns and operates health care facilities around the country. The health care providers, doctors, nurses, etc., who provide health care in those facilities are employees of the VHA. Veterans can only get VHA covered care at VHA facilities. This type of health care system is known as socialized medicine. The VHA has used its integrated framework to create a model evidence-based quality-improvement program that delivers the highest quality care in the nation, as measured by adherence to established treatment protocols.

-W-

Waiting Period. The period of time specified in a health insurance policy that must pass before some or all of your health care coverage can begin.