Glossary of Health Insurance Terms to Know Before You Enroll

By on April 30, 2013

As you sit down to navigate through the variety of health insurance options available to you, it will be helpful to understand a bit of industry jargon. Whether you are looking for an individual plan or set up a group insurance policy for your employees, here are some of the most common terms you will come across in your search:

Health Insurance Glossary

Affordable Care Act (ACA)
The Patient Protection and Affordable Care Act (PPACA) –or Affordable Care Act (ACA) – is the landmark health reform legislation passed by the 111th Congress and signed into law by President Barack Obama in March 2010. The legislation includes a long list of health-related provisions that began taking effect in 2010 and will continue to roll-out through 2014. Key provisions are intended to extend coverage to millions of uninsured Americans, to implement measures that will lower health care costs and improve system efficiency, and to eliminate industry practices that include rescission and denial of coverage due to pre-existing conditions.
Agent
Licensed salespersons who represent one or more health insurance companies and presents their products to consumers.
Benefits
Benefits refer to the amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss, illness or injury.
Broker
A licensed insurance salesperson who obtains quotes and plan from multiple sources information for clients.
Claim
A claim is an request for benefits provided by your health plan. You must file a claim before funds will be reimbursed to your medical provider. A claim may be denied based on the carrier’s assessment of the circumstance.
Coinsurance / Co-payment
Coinsurance refers to money that an individual is required to pay for services, after a deductible has been paid. In some health care plans (HMOs), co-insurance is called “copayment.” Coinsurance is often specified by a percentage, for example: 80% (company) and 20% (you), or a fixed fee under HMOs.
Consumer Operated & Oriented Plan (Co-Ops)
The Affordable Care Act (ACA) provides $6 billion in loans and grants to develop non-profit organizations, owned by their members, meant to offer affordable health insurance options to individuals and small businesses. and will offer a network of health care providers or contract out for medical services and Plans, sold inside and outside the health insurance exchanges, will have to meet ACA standards for health plans. Co-Ops are not government agencies nor commercial insurers.
Coverage
The conditions under which the insurance company will pay
Deductible
The amount of health care expenses that an individual must pay annually before benefits will are paid by the insurance company. Often, insurance plans are based on yearly deductible amounts. If the insurance policy indicates a $250 deductible, the insurance company pays as agreed after you pay the first $250 for qualifying expenses.
Dependents
A spouse, disabled adult under care and/or children up to the age of 26.
Emergency
A severe medical condition which may include pain, loss of breathing or consciousness, heart attack, stroke, poisoning, convulsions or severe bleeding.
Health Insurance Exchange
These exchanges were established by the Affordable Care Act to provide a competitive marketplace of insurance providers, each offering different qualified plans which meet established and enforced standards , i.e. participating plans will not be allowed to discriminate against applicants based on pre-existing conditions or future risk. Competition between the plan providers should encourage the providers to improve the quality and pricing of offered plans.
Exclusions
Conditions under which the insurance company will not pay; for example, cosmetic procedures are exclusions.
Explanation of Benefits (EOB)
The statement you receive from the insurance company showing the services, amounts paid by the plan and total for which you are being billed.
Group Health Insurance
Coverage through an employer or other entity that covers all individuals in the group
Health Maintenance Organization (HMO)
These organizations represent prepaid insurance plans in which individuals or their employers pay a fixed monthly fee for services instead of a separate charge for each visit or service and regardless of types or levels of services provided. HMO plan designs are quite varied. Depending on the plan design, services may be provided by physicians employed or under contract by the HMO in a central facility, or in a physician’s own office.
Identification Card
A card given to you that identifies you as being eligible for benefits. The card must be presented when seeking treatment.
Independent Practice Associations (IPAs)
IPAs are similar to HMOs, except that individuals receive care in a physician’s own office, rather than in an HMO facility.
Individual Health Insurance
Health insurance coverage on an individual (family) basis. The premium is usually higher for an individual health insurance plan than for a group policy, but new exchanges are meant to allow individuals to compete for lower premiums as well.
Insurance
A system under which individuals, businesses and other organizations, in exchange for a premium, are promised payment for losses resulting from certain dangers as specified in a contract.
Long Term Care Insurance
The policies cover certain services, including nursing care, home health care services, and custodial care, for a specified period of time. Long-term care policies and their prices are varied by insurance company.
Insurance Company
An organization licensed to operate as an insurer
Insured
A person or organization covered by an insurance policy.
Major Medical
A plan that provides much broader coverage than the basic medical plan.You may increase your coverage by paying an additional amount over your basic premium.
Medicaid
Medicaid is a health insurance program for low-income individuals who cannot afford Medicare or other commercial health insurance plans. Medicaid is funded in part by the federal and state government where the enrollee lives.
Medicare
Medicare is the federal government’s health insurance program which provides coverage to Americans age 65 and older and younger people with permanent disabilities or who have been diagnosed with end-stage renal disease or amyotrophic lateral sclerosis (ALS).
Out-of-Pocket Costs
The total you pay out of your pocket for a policy year, including the deductible, coinsurance and amounts the insurance company considers to be above usual and customary charges.
Pharmacy
A business where drugs approved by a doctor are legally sold.
Pre-existing Condition
A medical condition that required treatment during a fixed period of time, usually 3 or 6 months, before you purchased your insurance policy.
Preferred Provider Organization (PPO)
These managed care organizations is a group of health providers who contract with an insurer or third-party administrator to provide coverage to policyholders. While policyholders receive substantial discounts from health care providers who are partnered with the PPO, they typically pay more for services from out-of-plan physicians.
Premium
The price you pay for your insurance policy.

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About Terri A. Kamoto

Senior writer for FSN - Terri is a former financial analyst dedicated to making personal finances, budgeting, investment and insurance advice accessible, up to date and easy to understand. It is hard to find professional advice written in a language someone without a financial background can understand. Terri helps companies synthesize industry lingo and expertise into clear and informative content which builds smarter, financially successful individuals. You can find Terri on !

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