Common Insurance Terms And What They Mean

November 5, 2020 12:38 newlambertagency

Just like every other industry, health insurance has a unique language. If you’re not familiar with them, you face the risk of choosing bad insurance plans for you and your family.

But not to worry, we have curated this insurance glossary for you to make things easier.

Below are some important insurance terms you should include in your brain dictionary:

Allowable charge – also known as the “allowed amount,” “maximum allowable,” and “usual, customary, and reasonable (UCR)” charge, this is the dollar amount considered by a health insurance company to be a reasonable charge for medical services or supplies based on the rates in your area.

Benefit – the amount paid by the insurance provider or company to a member for their medical costs.

Benefit level – the maximum amount that a health insurance company has agreed to pay for a covered benefit.

Benefit year – the 12 months for which health insurance benefits are calculated, not necessarily coinciding with the calendar year. Health insurance companies may update plan benefits and rates at the beginning of the benefit year.

Claim – a request by a customer under a plan, or a plan customer’s health care provider, for the insurance company to pay for medical services.

Co-insurance – the amount you pay to share the cost of covered services after your deductible has been paid. The coinsurance rate is usually a percentage. For example, if the insurance company pays 80% of the claim, you pay 20%.

Co-ordination of benefits – sometimes two insurance plans work together to pay claims for the same person. That process is called coordination of benefits. Benefits under the two plans usually are limited to no more than 100% of the claim.

Co-payment – a predetermined amount for a covered service, paid by a patient to the provider of service before receiving the service. For eg: you pay 10$ for every visit to the doctor while your insurance covers the rest.

Deductible – the amount of money you must pay each year to cover eligible medical expenses before your insurance policy starts paying.

Dependent – any individual, either spouse or child, that is covered by the primary insured customer’s plan.

Decline – an insurance company refuses to accept the request for insurance coverage.

Effective date – The date on which a policyholder’s particular coverage begins.

Exclusion ­– also referred to as limitations, they are any specific situation, condition, or treatment that a health insurance plan does not cover.

We’re halfway through our insurance glossary, just a few more.

Explanation of benefits – the health insurance company’s written explanation of how a medical claim was paid. It contains detailed information about what the company paid and what portion of the costs you are responsible for.

HMO – Health Maintenance Organization is a health care financing and delivery system that provides comprehensive health care services for members in a particular geographic area who use in-network providers.

In-Network provider – a health care professional, hospital, or pharmacy that is part of a health plan’s network of preferred providers. You will generally pay less for services received from in-network providers because they have negotiated a discount for their services in exchange for the insurance company sending more patients their way.

Medicaid – a health insurance program created in 1965 that provides health benefits to low-income individuals who cannot afford Medicare or other commercial plans.

Medicare – a federal health insurance program that provides health benefits to Americans age 65 and older.

Out-of-network provider – a health care professional, hospital, or pharmacy that is not part of a health plan’s network of providers. You will generally have to pay more for services received from out-of-network providers.

Out-of-pocket maximum – the most money you will pay during a year for coverage. It includes deductibles, co-payments, and coinsurance, but is in addition to your regular premiums. Beyond this amount, the insurance company will pay all expenses for the remainder of the year.

PPO – Preferred Provider Organization is a health insurance plan that allows its customers to receive care from either in-network or out-of-network (non-preferred) providers. Although they’ll receive the highest level of benefits when they use providers inside the network.

Premium – the amount you or your employer pays each month in exchange for insurance coverage.

Provider ­– any person that includes doctor, nurse, dentist, or any institution i.e., hospital or clinic that provides medical care.

Waiting period – the period of time that an employer makes a new employee wait before he or she becomes eligible for coverage under the company’s health plan. Also, the period of time beginning with a policy’s effective date during which a health plan may not pay benefits for certain pre-existing conditions.

There you go! Your very own handy dictionary to understand the insurance world better. Although there are a lot more terms involved, with this insurance glossary, you’re now better prepared to evaluate your needs, ask good questions, and take a more active role in your health insurance decisions.