Glossary of Health Insurance Terms

Benefits: The medical services included in a health insurance policy to which the insured person or persons are entitled.

Calendar Year: The time period from January 1 to December 31 in a single year.

Catastrophic Health Insurance: Insurance, with a very high deductible, covering an injury or illness with medical expenses that are above the normal parameters of basic health insurance.

Claim: A health-related bill submitted for payment to a health insurance company by the policy holder or health care provider.

COBRA: “Consolidated Omnibus Budget Reconciliation Act” of 1985 is a regulation that affects most U.S. employers of over 20 employees, whereby they must offer departing employees a continuation of their health insurance; it includes other options.

Co-insurance: The amount of money a health plan will pay for covered expenses, usually expressed in a percentage.

Co-payment: The dollar amount the policyholder pays at each visit for a medical service; it varies according to each insurance policy.

Coverage: A health service which qualifies as a benefit under the terms of an insurance contract.

Deductible: The amount of money the policyholder pays for medical bills before insurance starts to pay its part. This is a yearly amount and may be anywhere from several hundred dollars to several thousand per year, depending on the insurance policy.

Discount Plans: Large buying organizations formed to provide discounts on health services to its members. It is not a form of health insurance.

Family Health Insurance: Health coverage taking into account the unique needs in each family. It can be either a group or an individual type of insurance.

Group Health Insurance: Health coverage based on a collection of people, whether assembled by an organization or a business. The cost is spread out among the members of the group. Under federal guidelines, a “large employer” is one with 51 or more employees and a “small employer” averages 2 to 50 employees in a calendar year.

HIPAA: “Health Insurance Portability and Accountability Act” gives patients a means to the documents which pertain to their medical care; provides that a person with a pre-existing condition, who has had continuous health coverage for over 12 months, can leave a job and not be turned down for health insurance at a new job.

HMO: “Health Maintenance Organization” is a type of group health plan in which an organization is formed to provide medical care to its members. The physicians and medical personnel work for the HMO and provide medical care to the members of the HMO, with limited referrals to outside specialists. There is often an emphasis on prevention of disease and participation in programs for better health. Recently, members of HMOs may see health care professionals outside of their system, with higher fees. Members usually obtain all of their medical needs from their HMO clinics through managed medical care.

HSA: “Health Savings Account” is a personal savings account set up to be exclusively used for medical expenses and is paired with a high deductible health insurance policy.

Individual Health Insurance: Health coverage on an individual basis, not part of a group. The premium is usually higher for individual health insurance than for a group policy.

Managed Care: Comprehensive health care which is provided to participating members of an organized health care organization through the use of a network of health care providers and facilities; it uses a delivery system that secures cost effective health care.

Maximum Limits: The highest dollar amounts a health insurance plan will pay: 1) for a single claim; 2) over the lifetime of an insured person.

Network: The doctors or other medical providers and facilities that either work for or contract with a group health care organization.

Out-of-Network: Doctors or other medical providers and facilities which either do not work for or which do not contract with a group health care organization.

PCP: “Primary Care Physician” or “Personal Care Provider” is a physician or other medical care provider who participates in a health care system.

Policy: The legal agreement between an insurance company and insured person, whereby the company agrees to pay for the covered medical services included in the agreement and the insured agrees to pay the premium price.

POS: “Point of Service” is a type of group insurance with a combination of HMO and PPO characteristics. The policyholders must use a primary care physician, but they can use other network health providers when needed or go to out-of-network providers, at higher cost.

PPO: “Preferred Provider Organization” is a type of group health plan. The medical professionals in the system agree to accept a standard fee schedule and patient care controls; the system is usually organized by an insurance company. In a PPO, the policyholder can go to any medical provider in the PPO network and pay the co-payment amount for each regular service. If the policyholder chooses to go to an out-of-network provider, he/she often pays that doctor’s fees directly and files for reimbursement from the insurance company. This is a greater cost. For that reason, the PPO system encourages its policyholders to see the doctors and health providers who are part of the system.

Pre-existing Condition: A physical or mental condition which existed before applying for a policy, for which medical care was already recommended or received, and which may not be covered by insurance, or only after a time lapse.

Premium: The money paid by an insured person or business for a health insurance policy.

Prescription Plans: An organized plan whereby prescription needs are provided to group members at a lower cost, usually through a vendor with a pharmacy network that covers the whole country and negotiates for lower drug costs.

Provider: A physician, hospital, medical care facility, or other type of medical personnel who provide health care.

Referral: The method whereby a physician directs a patient to the services of another physician.

SDHP: “Self-Directed Health Plan” utilizes a money account with a declining balance used for medical expenses.

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