Insurance Term Definition
Actuary Business professional who analyzes probabilities of risk and risk management including calculation of premiums, dividends and other applicable insurance industry standards.
Adjudication Process used by payers to determine benefit or coverage eligibility, as well as the determination of the payment amount for a claim or the denial of a claim.
Administrative Services Only (ASO) An arrangement in which an organization funds its own employee benefit plan but hires an outside firm to perform specific administrative services. For example, an organization may hire an insurance company to evaluate and process claims under its employee health plan while maintaining the responsibility to pay the claims itself.
Agent Licensed salespersons that represent a health insurance company and is allowed to present their products to consumers.
Aggregate The maximum dollar amount or total amount of coverage payable for a single loss, or multiple losses, during a policy period, or on a single project.
Allowed Amount The maximum amount a health care plan will cover for services rendered at a provider. From the health plan’s perspective, this is the fair and reasonable price for a health care service.
Alternative Medicine Medical treatment that is not deemed effective by the medical community at large. Examples may include acupuncture and aromatherapy. Coverage of these types of services may not be provided by a majority of insurance companies.
Ambulatory Care Medical care performed on an outpatient basis. Services often include diagnosis, treatment, surgery and rehabilitation.
American National Standards Institute (ANSI) In 1979, ANSI chartered the Accredited Standards Committee (ASC) to create a standard for submission of electronic medical bills or Electronic Data Interchange (EDI). The Institute oversees the creation of norms and guidelines for nearly every sector of industry.
Ancillary Services Healthcare services such as physical therapy, lab work or x-rays that are provided in addition to standard medical or hospital care.
Appeal A request to an insurance payer to review and reconsider an adverse decision.
Assignment of Benefits A health insurance payment of benefits made directly to a healthcare provider rather than the member of the health plan.
Balance Billing When a doctor or hospital bills the patient for the difference between the bill charges and the allowed amount.
Beneficiary An individual who is covered under a health benefit plan, insurance policy or government program.
Benefit Level The maximum amount of paid benefits a member is entitled to receive for a covered service, as described in health plan contract.
Benefit Period The Length of time that benefits are paid to the named insured or his/her dependents.
Benefits Total expenditures for health care services paid to or on behalf of a member.
Billed Amount (Billed Charges) The total dollar amount billed by a physician or other healthcare provider for services and supplies rendered at their facility. Without insurance, this is the amount a provider would charge the patient.
Brand Name Drug This is a prescription drug that uses a trade name protected by a patent. The drug can only be manufactured and sold by the patent holding company.
Broker An individual who receives commissions from the sale and service of insurance policies. These individuals work on behalf of the customer and are not restricted to selling policies for a specific company but commissions are paid by the company with which the sale was made.
Capitation A system where an HMO pays a doctor or hospital a monthly flat rate for the care of each health plan member regardless if any services are delivered or not.
Carrier The insurance or underwriting organization offering a health plan.
Case Management The coordination of medical care and services for a patient requiring care.
Ceded Premium Amount of premium (fees) used to purchase reinsurance.
Centers for Medicare & Medicaid Services (CMS) U.S. governmental agency responsible for Medicare and Medicaid. This was formerly the Health Care Financing Administration.
Children’s Health Insurance Program (CHIP) A program created by the Balanced Budget Act that’s designed to provide health assistance to uninsured, low-income children. The program is delivered either through separate programs or through the expanded eligibility under state Medicaid programs.
Chronic A permanent, recurring or long lasting condition.
Claim A request made by the insured for insurer remittance of payment due to loss incurred and covered under the policy agreement.
Claim Audit The process of reviewing medical claims for appropriate billing and coding.
Claim Negotiation The act of working with providers and payers to come to a mutually agreed upon settlement rate.
Claims Submission Form A referral for cost containment services such as claim negotiations or Usual and Customary pricing data.
Coinsurance The percentage of a provider’s charge that the insured agrees to pay based on the terms of their policy.
Consolidated Omnibus Budget Reconciliation Act (COBRA) The Consolidated Omnibus Budget Reconciliation Act of 1986 provides former employees and their dependents the right to temporarily continue employment-based health insurance coverage at group rates.
Conventional Indemnity Plan An indemnity plan that allows the covered individual to choose any provider without the reimbursement being affected. These plans reimburse the patient and/or provider as expenses are incurred.
Coordination of Benefits (COB) Provision to eliminate over insurance and establish a prompt and orderly claims payment system when a person is covered by more than one group insurance and/or group service plan.
Co-payment The fixed amount a patient pays for a covered healthcare service, usually paid at the time of service.
Cost Containment The process of controlling medical expenses through claim settlement, usual and customary reimbursement, high-dollar pharmacy carve-out programs, claim audits or other related cost savings services.
Cost Sharing Any out-of-pocket payment made the health plan member for the cost of a covered service. Copayments, deductibles, coinsurance, and balance bills are types of cost sharing.
Coverage The extent of protection provided under an insurance policy.
Covered Charges Charges for services rendered or supplies furnished by a healthcare provider to a covered individual that qualify as covered services under the applicable health benefit plan, insurance policy or government program.
Covered Person An individual covered under a health plan.
Covered Service Services rendered or supplies furnished by a healthcare provider to a covered individual that qualify as covered and reimbursable expenses under the applicable health benefit plan, insurance policy or government program.
Date of Service The date a medical service was provided.
Deductible The amount a patient pays for covered healthcare services before the insurance company begins to pay.
Department of Health and Human Services The department of the US federal government established to protect the health and well being of all Americans. HHS has 11 operating divisions, including the Centers for Medicare and Medicaid Services (CMS) and Centers for Disease Control and Prevention (CDC).
Dependent A person enrolled on an employee’s group health plan, which relies on them for financial support. Under health care reform, adult children can remain on a parent’s health plan up to age 26.
Electronic Data Interchange (EDI) Electronic communication system providing standards and structure for transmitting medical claims between providers and payers.
Eligible Charge The negotiated reimbursement a PPO will pay a provider for its rendered services. The amount is typically less than the actual charge.
Employee Retirement Income Security Act of 1974 (ERISA) A federal statute governing standards for private pension plans, including vesting requirements, funding mechanisms, and plan design. ERISA prevents states from directly regulating employee welfare benefits, including employer-sponsored health plans.
End-Stage Renal Disease (ESRD) Irreversible damage to the kidneys requiring dialysis or a kidney transplant in order to survive.
Enrollee An employee or other eligible person who is enrolled in a health insurance plan.
Enrollment Period The specified time when an individual can enroll in health benefits offered by an employer or association, or a Medicare-eligible person can choose to join or leave a Medicare plan.
Exclusions Certain causes and conditions which are not covered by an insurance policy.
Exclusive Provider Organization (EPO) Plan A restrictive type of managed care plan under which the covered individual must use providers from the specified network of physicians and hospitals to receive coverage. The only exception is in case of an emergency situation.
Explanation of Benefits (EOB) A statement sent by an insurance company to a covered member showing dates of service, billed charges and allowed amounts paid on a medical claim.
First Dollar Coverage Insurance coverage that provides for the payment of all losses up to the specified limit without any use of deductibles.
Formulary A list of prescription drugs covered by a health plan.
Fully insured plan A plan that hires a third party to assume financial responsibility for the enrollees’ medical claims and for all incurred administrative costs.
Glomerular Filtration Rate (GFR) GFR is the best test to measure kidney function level. It is calculated using a patient’s Blood Creatinine as well as their age and body mass. The calculated GFR is used to track the different stages of Chronic Kidney Disease.
Grace Period The period of time a policyholder has to make a payment after the payment due date has passed, while still retaining insurance coverage.
Generic Drug This is a drug that has been approved by the Food and Drug Administration as meeting the same standards of safety, purity, strength and effectiveness as the brand name drug.
Group Coverage A health plan which gives coverage to a group of individuals. This is usually offered by an employer or employee organization.
Health Maintenance Organization (HMO) A prepaid group health insurance plan that limits members to a specific network of participating physicians, hospitals and clinics. Emphasis is on preventative medicine, and members must use the contracted health-care providers.
Home Health Care Professional Medical services delivered in a home setting rather than in a hospital or nursing facility.
ICD-9 / ICD-10 The International Classification of Diseases is a healthcare classification system providing diagnostic codes to classify diseases. Providers and Payers are moving towards the ICD/10 system from the current ICD/9 system.
Indemnity Plan Often known as “fee-for-service” plans, indemnity plans reimburse the patient and/or provider as expenses are incurred. The individual is required to pay a pre-determined percentage of the cost, and the plan will cover the rest.
In-Network Contracted provider with your PPO Network or Health plan.
In-Patient A patient admitted to a medical facility for at least a 24-hour residence, or overnight, for treatment.
Lapse Insurance coverage that was terminated due to nonpayment by a specific date.
Managed Care The integration of both the delivery of healthcare and financing within a system that seeks to manage and organize the accessibility, cost, and quality of that care.
Managing General Underwriter (MGU) An organization authorized to provide underwriting services, collect premiums and pay claims for their Carrier Partners.
Maximum out-of-pocket expense The dollar amount limit a covered individual is required to pay for covered expenses during a specific time period (e.g., calendar year). After the maximum dollar amount is reached, the payer reimburses covered expenses at 100% for the remainder of the specific time period.
Maximum plan dollar limit The maximum dollar amount payable under a health benefit plan for covered expenses incurred by a covered individual.
Medicaid A joint state and federal program that provides health care coverage to eligible low income individuals.
Medically Necessary Health care services or supplies that are needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms. The services and supplies all need to meet accepted standards of medicine.
Medical Savings Accounts (MSA) A savings account designed to help with out-of-pocket medical expenses. In an MSA, both employers and individuals are allowed to contribute to the savings account on a pre-tax basis and carry over the unused funds at year end. One of the major differences between a Flexible Spending Account (FSA) and a Medical Savings Account (MSA) is the ability to carry over the unused funds, as opposed to losing them in the FSA. Most MSAs will allow the unused balances and earnings to accumulate and are combined with a high deductible and/or a catastrophic health insurance plan.
Medicare A federal program for individuals age 65 or older, that pays for certain healthcare expenses.
Medicare Part A Covers inpatient hospital stays, skilled nursing facilities, hospice and home health care.
Medicare Part B Helps pay for certain doctor services, outpatient care, home health care, preventive services and other services.
Medicare Part C (Medicare Advantage Plan) An alternative to original Medicare, offered by a private company, that combines parts of both Medicare Parts A and B, and usually prescription drug coverage under one plan. If you’re enrolled in a Medicare Advantage Plan, hospital, doctor, and prescription drug services may be included, and if so, they are covered through the plan and aren’t paid for under original Medicare. Medicare Advantage Plans include Health Maintenance Organizations, Preferred Provider Organizations, Private Fee-for-Service Plans, Special Needs Plans, and Medicare Medical Savings Account Plans.
Medicare Part D This section adds prescription drug coverage to original Medicare. Prescription drug plans have what is known as a coverage gap. This means that before the health care law was passed, when total spending on prescriptions reached a certain limit, you had to pay for all of your prescription drug costs on your own. After paying this set amount, your prescription drug plan would help pay for medicines again. Today, with the passing of the health care law, the coverage gap is slowly closing and set to disappear in 2020.
Medicare Secondary Payer (MSP) Is the term generally used when Medicare is not the primary payer of benefits.
Medigap (Medicare Supplement Plans or Medicare Supplement Insurance) Medigap helps pay for a varied amount of out-of-pocket costs that are not covered by original Medicare, Part A and Part B. Ten standardized Medigap plans are set up in 47 states; Massachusetts, Minnesota, and Wisconsin have unique plans in their states. Medigap is also referred to as Medicare Supplement plans and/or Medicare Supplement Insurance.
Out-of-Network A non-contracted provider of service.
Out-of-Pocket Limit A predetermined sum of money required to be paid by an individual before insurance will pay 100% for an individual’s health-care expenses.
Outpatient Care Services provided to a patient who is able to return home post treatment. An overnight stay in a hospital or other inpatient facility is not required.
Patient Protection and Affordable Care Act (PPACA) PPACA is the health care reform law, 2010 HR3590 that is known as Obamacare.
Physician-Hospital Organization (PHO) An alliance between physicians and hospitals that helps providers attain market share. This improves the bargaining power of providers and helps reduce the administrative costs. These entities sell their services to managed care organizations or directly to employers.
Plan Amendment Changes to a plan document to modify payment methodology or to keep the plan current with changing laws.
Plan Document Describes the terms and conditions of an Employer Group Health Plan.
Plan Year The 12 month period of benefit coverage for an Employer Group Health Plan.
Point of Service (POS) Plan A type of managed care health insurance where patients pay a small co-payment to see providers within the plan network. They can also see providers outside the network and pay a percentage of the cost.
Precertification (Prospective Authorization) The required authorization to deliver healthcare service that is issued before any service is preformed.
Preferred Provider Organization (PPO) A type of health plan that provides coverage through a network of contracted providers.
Preferred Provider Arrangement (PPA) A contract set up between a healthcare insurer and a healthcare provider, or group of providers. This agreement will allow the provider to give its services to persons covered under the contract. Examples include preferred provider organizations (PPOs) and exclusive provider organizations (EPOs).
Premium The Cost the insured pays for insurance protection for a specified risk, for a specified period of time.
Premium equivalent The cost per covered employee for self-insured plans. This is the amount an organization would expect to pay per covered employee for claims, administrative costs and stop-loss premiums, if applicable.
Primary Care Physician (PCP) This is the physician who will serve as the group’s primary contact within the health plan. They will provide all basic medical services, will coordinate and if required by the plan authorize referrals to specialists and hospitals.
Reimbursement Compensating someone for an expense.
Reinsurance The practice of insurers transferring portions of risk to other parties to reduce the likelihood of having to pay a large claim.
Risk Management The identification and assessment of risks and plans to minimize and mitigate the probability or impact.
Schedule of Benefits (SOB) A list of the benefits and the amounts of coverage provided in a health insurance policy.
Self-Insured Plan Plans offered by employers who directly assume the major cost of health insurance for their employees, some even bear the entire risk. Other self-insured employers invest in stop-loss coverage to cover the risk of large claims. Self-insured employers can contract with insurance carriers or third party administrators for claims processing and other administrative services. Their alternative is to self administer the plan. Employers may offer both self-insured and fully insured plans to their employees. Minimum Premium Plans (MPP) are included in the self-insured health plan category, as well as all types of plans, such as the conventional Indemnity, PPO, EPO, HMO, POS, and PHOs.
Specific Deductible The amount that an employer group is responsible for paying prior to charges being covered by the stop-loss policy.
Stop-Loss Insurance Insurance for a health plan or self-insured employer plan, to insure against the risk that one claim will exceed a specific dollar amount.
Stop-Loss Treaty A reinsurance agreement between a ceding company and reinsurer.
Subrogation Situation where an insurer has a right to bring suit against a third-party for causing a loss.
The Accredited Standards Committee (ASC) Developed and maintains Electronic Data Interchange (EDI) standards which help to drive electronic business globally.
TPA (Third-Party Administrator) An organization with responsibility to processes claims and performs other administrative services in accordance with a service contract, usually in the field of employee benefits, for self-insured Employer Group Health Plans.
Tricare The Department of Defense’s collection of health care programs serving active and retired military personnel as well as their family members.
UB-04 The claim form used by institutional providers for billing medical claims.
Underwriting The process of classifying applicants for insurance, based on their insurability and potential for incurring claims.
Utilization Management (UM) The management of medical services aimed to ensure that a patient receives the necessary and appropriate high-quality care in a cost-effective manner.
Utilization Review (UR) A safeguard for health plans against unnecessary or inappropriate care.