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Health Insurance Terminology

It is important to understand the terminology used in health insurance to best understand what medical services your policy will cover and what charges you will be responsible for.

Coinsurance

A percentage that you are required to pay, after the deductible has been met, in major medical insurance plans. Many times this would be 20%, with the insurance company paying 80% of medical services.

Coordination of Benefits

A way for insurance companies to coordinate payments when an insured is covered under two different health insurance plans. Each company would pay a portion of the bill, with no more than 100% of the bill being paid.

Co-payment

Found in HMOs, PPOs or POS insurance plans, this is usually a set dollar amount the insured would pay for medical services. For example, doctors visits may require a $15.00 co-payment. The insured would pay the doctor $15.00 and the insurance company would pay the doctor directly for the balance of the bill.

Covered Expenses

An insurance policy will provide a list of covered expenses. This list will provide you with information on what services are covered and what is not covered under the plan. Examples of covered services might be; doctors visits for illness or accident, lab tests, hospital expenses, prescription drugs. (Note: prescription drugs are not covered by all insurance plans.)

Customary Fees (sometimes called Reasonable and Customary Fees)

Customary fees are normally determined by area (or network) and are the fees an insurance company will pay for any given medical service. If a doctor charges more than the customary fee, the insured is responsible for the balance.

Deductible

A deductible is the amount an insured must pay before the insurance company will begin to pay benefits. For example, if your deductible is $500.00, you would need to pay for the first $500.00 worth of medical services each year. Once you have paid this, the insurance company will begin to pay benefits on any further services.

Exclusions

Any services the insurance company specifically states are not covered by the policy. An example might be “pre-existing” conditions. In addition, private insurance companies may put an exclusion on a specific condition before issuing a policy.

Grace Period

An amount of time an insured has to pay their premium past the premium due date without losing coverage.

Lifetime Maximum

This is the most money an insurance company will pay through the policy over the lifetime of an insured. These amounts are normally highest in Major Medical policies.

Medical Necessity

A medical procedure or service that is deemed to be necessary by your primary care physician.

Out-of-Pocket Expenses

Out-of-Pocket expenses are those fees that the insured must pay. These can include deductibles, co-insurance or co-payments. There is often a maximum out-of-pocket. This is the most an insured will need to pay in a calendar year for co-insurance. This amount is set by the insurance company and will be included in the policy.

Pre-existing Condition

Any health condition that existed, or you should have reasonably known to exist, prior to the policy effective date. Many individual health insurance policies will exclude pre-existing conditions for a certain amount of time.

Premium

The amount of money paid to keep the policy in force. Often paid on a monthly basis.

Primary Care Doctor (PCP)

In HMO and POS plans, an insured must choose a primary care physician. This is normally your family doctor and will be your first contact when you need health care. Women usually can also choose a gynecologist in addition to their family doctor. The PCP would be the one to provide a referral if a specialist or additional medical tests are necessary.