Insurance Glossary

Here is a helpful list of common insurance industry terms and their meanings:

agent - A licensed individual who represents several insurance companies and sells their products.

benefit - Reimbursement for covered medical expenses as specified by the plan.

brand-name drug - Prescription drug which is marketed with a specific brand name by the company that manufactures it. May cost insured individuals a higher co-pay than generic drugs on some health plans. (see "generic drug")

broker - A licensed insurance professional who obtains multiple quotes and plan information in the interest of his client.

calendar year - The time period from January 1 to December 31 in a single year.

carrier - Insurance company or HMO insuring the health plan.

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 formal request made by an insured person for the benefits provided by a policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act) - Federal legislation that requires group health plans to provide health plan members the opportunity to purchase continued coverage in the event their insurance is terminated. Applies only to employer groups with 20 or more employees. Learn more about COBRA at the Department of Labor's website. - Please note this page may take a few minutes to load .

co-insurance - The percentage of covered expenses an insured individual shares with the carrier. (i.e., for an 80/20 plan, the health plan member's co-insurance is 20%.) If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan's stop loss amount. (see "stop loss.")

co-pay/co-payment - The amount an insured individual must pay toward the cost of a particular benefit. For example, a plan might require a $10 co-pay for each doctor's office visit.

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

deductible - The dollar amount an insured individual must pay for covered expenses during a calendar year before the plan begins paying co-insurance benefits.

dependents - Usually the spouse and unmarried children (adopted, step or natural) of an employee.

discount plans - Large buying organizations formed to provide discounts on health services to its members. It is not a form of health insurance.

effective date - The date requested by an employer for insurance coverage to begin.

exclusions - Expenses which are not covered under an insurance plan.

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.

generic drug ­ The chemical equivalent to a "brand name drug." These drugs cost less, and the savings is passed onto health plan members in the form of a lower co-pay.

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.

health maintenance organization (HMO) - An alternative to commercial insurance that stresses preventive care, early diagnosis and treatment on an outpatient basis. HMOs are licensed by the state to provide care for enrollees by contracting with specific health care providers to provide specified benefits. Many HMOs require enrollees to see a particular primary care physician (PCP) who will refer them to a specialist if deemed necessary.

health savings account (HSA) - A personal savings account set up to be exclusively used for medical expenses and is paired with a high deductible health insurance policy.

HIPAA - Health Insurance Portability and Accountability Act of 1996, P.L. 104-91. This law relates to underwriting, pre-existing limitations, guaranteed renewal, COBRA and certification requirements in the event someone terminates from the plan. The new law, commonly known as the "Kennedy-Kassebaum Bill," establishes new requirements for self-funded, fully-insured group plans (including church plans) and Individual Health policies. The purpose of the law is to:

ID card/identification card - Card given to insured individuals which advises medical providers that a patient is covered by a particular health insurance plan.

indemnity insurance plans - Traditional insurance plans (not HMOs or PPOs) which permit insured individuals to choose their doctors and hospitals. Insured individuals do not have to choose doctors or hospitals from a specific list of providers. Also called "fee-for-service" plans.

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.

in-network - Describes a provider or health care facility which is part of a health plan's network. When applicable, insured individuals usually pay less when using an in-network provider.

lifetime maximum benefit - The maximum amount a health plan will pay in benefits to an insured individual.

limitations - A restriction on the amount of benefits paid out for a particular covered expense.

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 - A group of doctors, hospitals and other providers contracted to provide services to insured individuals for less than their usual fees. Provider networks can cover large geographic markets and/or a wide range of health care services. If a health plan uses a preferred provider network, insured individuals typically pay less for using a network provider.

out-of-network - Describes a provider or health care facility which is not part of a health plan's network. Insured individuals usually pay more when using an out-of-network provider, if the plan uses a network.

out-of-pocket maximum - The total of an insured individual's co-insurance payments and co-payments.

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

pre-certification - An insurance company requirement that an insured obtain pre-approval before being admitted to a hospital or receiving certain kinds of treatment.

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.

preferred provider organization (PPO) - 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.

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 - Any person or entity providing health care services, including hospitals, physicians, home health agencies and nursing homes. Usually licensed by the state.

referral - The method whereby a physician directs a patient to the services of another physician.

rider - A modification to a Certificate of Insurance regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.

short-term medical - Temporary health coverage for an individual for a short period of time, usually from 30 days to six months.

small employer group - Groups with 1 ­ 99 employees. The definition of small employer group may vary between states.

state mandated benefits - State laws requiring that commercial health insurance plans include specific benefits.

stop-loss - The dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.

third party administrator (TPA) - An organization responsible for marketing and administering small group and individual health plans. This includes collecting premiums, paying claims, providing administrative services and promoting products.

underwriter - Entity that assumes responsibility for the risk, issues insurance policies and receives premiums.

waiver of coverage - A section on the enrollment form which states that an employee was offered insurance coverage but opted to waive this coverage.

worker's compensation insurance - Insurance coverage for work-related illness and injury. All states require employers to carry this insurance.

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