Health Insurance Terminology
Expert-defined terms from the Professional Certificate in Understanding Health Insurance course at London School of Planning and Management. Free to read, free to share, paired with a globally recognised certification pathway.
Allowed Amount #
The maximum amount an insurance company will pay for a covered healthcare service, based on the negotiated rate between the provider and the insurer. Any costs above the allowed amount may be the responsibility of the patient.
Beneficiary #
The individual who is eligible to receive benefits from an insurance policy. In the context of health insurance, the beneficiary is typically the person insured under the policy.
Certificate of Coverage #
A document provided by an insurance company to a policyholder that outlines the terms and conditions of the health insurance policy. It usually includes information such as covered services, exclusions, copayments, and deductibles.
Coinsurance #
The percentage of costs for covered healthcare services that the insured individual is responsible for paying after the deductible has been met. For example, if the coinsurance is 20%, the insured would pay 20% of the cost of the service, and the insurance company would pay the remaining 80%.
Copayment #
A fixed amount that the insured individual must pay for covered healthcare services, typically due at the time of service. For example, a copayment for a doctor's visit might be $20.
Claim #
A request for payment submitted by a healthcare provider to an insurance company for services provided to a patient. The claim includes information such as the date of service, the services provided, and the cost of the services.
Coverage #
The extent of protection provided by an insurance policy. Health insurance coverage may include services such as doctor visits, hospital stays, prescription drugs, and preventive care.
Deductible #
The amount that the insured individual must pay out of pocket for covered healthcare services before the insurance company will begin to pay. For example, if the deductible is $1,000, the insured would need to pay $1,000 before the insurance company starts covering costs.
Exclusion #
Services or treatments that are not covered by an insurance policy. It is important for policyholders to be aware of any exclusions in their coverage to avoid unexpected expenses.
Explanation of Benefits (EOB) #
A statement sent by the insurance company to the insured individual after a claim has been processed. The EOB details the services provided, the amount billed, the allowed amount, and any out-of-pocket costs.
Formulary #
A list of prescription drugs that are covered by a health insurance plan. Formularies often categorize medications into tiers based on cost and may require different copayments or coinsurance for drugs in each tier.
Grace Period #
A period of time after the due date for a premium payment during which the policy remains in effect. If the premium is paid within the grace period, coverage will continue without interruption.
Health Maintenance Organization (HMO) #
A type of managed care plan that requires members to choose a primary care physician and obtain referrals to see specialists. HMOs typically have a network of providers that members must use for covered services.
Indemnity Plan #
A type of health insurance plan that allows the insured individual to choose any healthcare provider and does not require referrals to see specialists. Indemnity plans often have higher out-of-pocket costs but offer more flexibility in choosing providers.
Junk Insurance #
A term used to describe health insurance plans that provide minimal coverage and may not meet the requirements of the Affordable Care Act. Junk insurance plans may have limited benefits and high out-of-pocket costs.
Kickback #
A payment or incentive given to a healthcare provider in exchange for patient referrals or the use of certain services or products. Kickbacks are illegal and can lead to fines or criminal charges.
Lifetime Maximum #
The maximum amount that an insurance company will pay for covered services over the lifetime of the policy. Once the lifetime maximum is reached, the insured individual is responsible for all additional costs.
Medicaid #
A state and federally funded program that provides health insurance to low-income individuals and families. Medicaid covers a wide range of healthcare services, including doctor visits, hospital stays, and prescription drugs.
Medicare #
A federal health insurance program for individuals age 65 and older, as well as younger people with certain disabilities. Medicare is divided into several parts, including Part A (hospital insurance) and Part B (medical insurance).
Network #
A group of healthcare providers, hospitals, and other facilities that have contracted with an insurance company to provide services to its members. In-network providers typically offer lower costs to insured individuals than out-of-network providers.
Out #
of-Pocket Maximum: The maximum amount that the insured individual is required to pay for covered healthcare services in a given year. Once the out-of-pocket maximum is reached, the insurance company will pay 100% of covered costs.
Preauthorization #
Approval from an insurance company for a healthcare service or treatment before it is provided. Preauthorization is often required for expensive or non-emergency procedures to ensure that the service is medically necessary.
Provider #
A healthcare professional or facility that provides medical services to patients. Providers may include doctors, hospitals, pharmacies, and other healthcare professionals.
Qualifying Life Event #
A change in circumstances that allows an individual to enroll in or make changes to a health insurance plan outside of the regular open enrollment period. Qualifying life events may include marriage, the birth of a child, or loss of other health coverage.
Renewal #
The process of continuing coverage under a health insurance policy for another term. Renewal typically requires the payment of premiums and may involve changes to the policy terms or coverage.
Subsidy #
Financial assistance provided by the government to help individuals and families afford health insurance. Subsidies are based on income and can reduce the cost of premiums, deductibles, and other out-of-pocket expenses.
Third #
Party Payer: An entity, such as an insurance company or government program, that pays for healthcare services on behalf of the patient. Third-party payers may cover some or all of the costs of medical care.
Underwriting #
The process used by insurance companies to evaluate the risk of insuring an individual or group. Underwriting may involve reviewing medical history, lifestyle factors, and other information to determine premiums and coverage options.
Value #
Based Care: A healthcare delivery model that emphasizes improving patient outcomes and reducing costs by focusing on quality and efficiency. Value-based care may involve incentives for providers to deliver high-quality care and improve patient satisfaction.
Wellness Program #
A program offered by employers or health insurance companies to promote healthy behaviors and prevent disease. Wellness programs may include activities such as smoking cessation, weight management, and exercise programs.