Health Insurance Terms

actuary – a mathematician in the insurance field.
Responsible for calculating premiums, developing plans and defining
underwriting risk.

agent – a licensed individual who represents several
insurance companies and sells their products.

benefit – reimbursement for covered medical expenses
as specified by the plan.

brand-name drug – prescription drug which is marketed
with a specific brand name by the company that manufactures it. May
cost insured individuals a higher co-pay than generic drugs on some
health plans. (see “generic.”)

broker – a licensed insurance professional who obtains
multiple quotes and plan information in the interest of his client.

carrier – insurance company or HMO insuring the
health plan.

Certificate Booklet – the plan agreement. A printed
description of the benefits and coverage provisions intended to explain
the contractual arrangement between the carrier and the insured group
or individual. May also be referred to as a policy booklet

claim – a formal request made by an insured person
for the benefits provided by a policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act)
– Federal legislation that requires group health plans to provide
health plan members the opportunity to purchase continued coverage in
the event their insurance is terminated. Applies only to employer groups
with 20 or more employees. Learn more about COBRA at the Department
of Labor’s website. – Please note this may take a few minutes to appear.

co-insurance – the percentage of covered expenses
an insured individual shares with the carrier. (i.e., for an 80/20 plan,
the health plan member’s co-insurance is 20%.) If applicable, co-insurance
applies after the insured pays the deductible and is only required up
to the plan’s stop loss amount. (see “stop loss.”)

co-pay/co-payment – the amount an insured individual
must pay toward the cost of a particular benefit. For example, a plan
might require a $10 co-pay for each doctor’s office visit.

credit for prior coverage – any pre-existing condition
waiting period met under an employer’s prior (qualifying) coverage will
be credited to the current plan, if any interruption of coverage between
the new and prior plans meets state guidelines.

deductible – the dollar amount an insured individual
must pay for covered expenses during a calendar year before the plan
begins paying co-insurance benefits.

dependents – usually the spouse and unmarried children
(adopted, step or natural) of an employee.

effective date – the date requested by an employer
for insurance coverage to begin.

exclusions – expenses which are not covered under
an insurance plan. These are listed in the Certificate Booklet.

Explanation of Benefits (EOB) – a carrier’s written
response to a claim for benefits. Sometimes accompanied by a benefits

Generic drug ­ the chemical equivalent to a “brand
name drug.” These drugs cost less, and the savings is passed onto health
plan members in the form of a lower co-pay.

group insurance – an insurance contract made with
an employer or other entity that covers individuals in the group.

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.

HIPAA – Health Insurance Portability and Accountability
Act of 1996, P.L. 104-91. This law relates to underwriting, pre-existing
limitations, guaranteed renewal, COBRA and certification requirements
in the event someone terminates from the plan. The new law, commonly
known as the “Kennedy-Kassebaum Bill,” establishes new requirements
for self-funded, fully-insured group plans (including church plans)
and Individual Health policies. The purpose of the law is to:

  • Improve portability and continuity of health insurance coverage
    in the group and individual markets
  • To combat waste, fraud and abuse in health insurance and health
    care delivery
  • To promote the use of medical savings accounts
  • To improve access to long-term care services and coverage
  • To simplify the administration of health insurance
  • Learn more about HIPAA at the Department of Labor’s website.
    – Please note this may take a few minutes to appear.

pre-certification – an insurance company requirement
that an insured obtain pre-approval before being admitted to a hospital
or receiving certain kinds of treatment.

ID card/identification card – card given to insured
individuals which advises medical providers that a patient is covered
by a particular health insurance plan.

indemnity insurance plans – traditional insurance
plans (not HMOs or PPOs) which permit insured individuals to choose
their doctors and hospitals. Insured individuals do not have to choose
doctors or hospitals from a specific list of providers. Also called
“fee-for-service” plans.

in-network – describes a provider or health care
facility which is part of a health plan’s network. When applicable,
insured individuals usually pay less when using an in-network provider.

lifetime maximum benefit – the maximum amount a
health plan will pay in benefits to an insured individual.

limitations – a restriction on the amount of benefits
paid out for a particular covered expense.

long-term disability (LTD) – insurance which pays
employees a percentage of monthly earnings in the event of disability.

managed care – the coordination of health care services
in the attempt to produce high quality health care for the lowest possible
cost. Examples are the use of primary care physicians as gatekeepers
in HMO plans and pre-certification of care.

Medical Loss Ratio (MLR) – MLR requires insurance companies to spend at least 80% or 85% of premium dollars on medical care, with the review provisions imposing tighter limits on health insurance rate increases. If they fail to meet these standards, the insurance companies will be required to provide a rebate to their customers starting in 2012.

Multiple Employer Trust (MET) – an arrangement created
to obtain health and other benefits for participating employer groups.
Small employers can pool their contributions to receive the advantages
of large group underwriting.

network – a group of doctors, hospitals and other
providers contracted to provide services to insured individuals for
less than their usual fees. Provider networks can cover large geographic
markets and/or a wide range of health care services. If a health plan
uses a preferred provider network, insured individuals typically pay
less for using a network provider.

out-of-network – describes a provider or health
care facility which is not part of a health plan’s network. Insured
individuals usually pay more when using an out-of-network provider,
if the plan uses a network.

out-of-pocket maximum – the total of an insured
individual’s co-insurance payments and co-payments.

plan administration – overseeing the details and
routine activities of installing and running a health plan, such as
answering questions, enrolling new individuals for coverage, billing
and collecting premiums, etc.

point-of-service (POS) – health plan which allows
the enrollee to choose HMO, PPO or indemnity coverage at the point of
service (time the services are received).

pre-certification – Pre-admission review and approval
of appropriateness and medical necessity of hospitalization or other
medical treatment.

pre-existing condition – an illness, injury or condition
for which the insured individual received medical advice, treatment,
services or supplies; had diagnostic tests done or recommended; had
medicines prescribed or recommended; or had symptoms of typically within
12 months (time periods may vary depending on state laws) prior to the
effective date of insurance coverage.

Preferred Provider Organization (PPO) – A network
or panel of physicians and hospitals that agrees to discount its normal
fees in exchange for a high volume of patients. The insured individual
can choose from among the physicians on the panel.

premiums – payments to an insurance company providing

provider – any person or entity providing health
care services, including hospitals, physicians, home health agencies
and nursing homes. Usually licensed by the state.

referral ­ within many managed care plans, transfer
to specialty physician or specialty care by a primary care physician.

rider – a modification to a Certificate of Insurance
regarding clauses and provisions of a policy. A rider usually adds or
excludes coverage.

risk – uncertainty of financial loss.

short-term medical – temporary health coverage for
an individual for a short period of time, usually from 30 days to six

small employer group – groups with 1 ­ 99 employees.
The definition of small employer group may vary between states.

state mandated benefits – state laws requiring that
commercial health insurance plans include specific benefits.

stop-loss – the dollar amount of claims filed for
eligible expenses at which the insurance begins to pay at 100% per insured
individual. Stop-loss is reached when an insured individual has paid
the deductible and reached the out-of-pocket maximum amount of co-insurance.

Third Party Administrator (TPA) – An organization
responsible for marketing and administering small group and individual
health plans. This includes collecting premiums, paying claims, providing
administrative services and promoting products.

underwriter – entity that assumes responsibility
for the risk, issues insurance policies and receives premiums.

waiver of coverage – a section on the enrollment
form which states that an employee was offered insurance coverage but
opted to waive this coverage.

Worker’s Compensation Insurance – insurance coverage
for work-related illness and injury. All states require employers to
carry this insurance.