Understanding Health Insurance Terms

A

Affordable Care Act (ACA)
A federal law passed in 2010 that expanded access to health insurance, created the Health Insurance Marketplace, and required most plans to cover essential health benefits and preventive care.

Allowed Amount
The maximum amount an insurance company will pay for a covered healthcare service. If your provider charges more than this amount, you may be responsible for the difference.

Annual Limit
The maximum your plan will pay for covered services in a year. Under the ACA, most plans can’t place annual dollar limits on essential health benefits.

Appeal
A request for your insurance company to review a decision you disagree with, such as a denied claim or coverage issue.

B

Balance Billing
When a provider bills you for the difference between what your plan pays and what the provider charges. This usually happens if you visit an out-of-network provider.

Beneficiary
The person who receives benefits from an insurance policy — for example, you or your family members covered under your plan.

Benefit Period
The time frame (often one year) during which your health insurance plan calculates your coverage, deductibles, and out-of-pocket maximums.

C

Claim
A request for payment submitted to your insurance company for services received.

Coinsurance
Your share of the costs for a covered healthcare service, calculated as a percentage (for example, 20%) of the allowed amount.

Copayment (Copay)
A fixed dollar amount you pay for a covered healthcare service, such as $25 for a doctor’s visit or $10 for a prescription.

Coverage
The services and benefits your health insurance plan pays for under your policy.

Covered Services
The medical treatments, procedures, or supplies that your plan agrees to pay for, either in full or in part.

D

Deductible
The amount you pay for covered healthcare services each year before your insurance plan begins to pay.

Dependent
A family member (such as a spouse or child) who is covered under your health insurance plan.

Drug Formulary
A list of prescription drugs your insurance plan covers. Medications are often grouped by “tiers,” which affect how much you pay.

E

Effective Date
The date when your health insurance coverage begins.

Emergency Medical Condition
A serious health issue that requires immediate medical attention to prevent serious harm or death.

Exclusions
Services or items that your insurance plan does not cover.

Explanation of Benefits (EOB)
A document from your insurer showing what was billed, what the plan paid, and what you may owe after a claim is processed.

F

Flexible Spending Account (FSA)
An employer-sponsored account where you can set aside pre-tax dollars to pay for eligible medical expenses. Funds generally must be used within the plan year.

Formulary
Another term for the list of covered prescription drugs under your plan.

G

Generic Drug
A medication that contains the same active ingredients as a brand-name drug but is typically less expensive.

Grace Period
A short time (usually 30 days) after a missed premium payment during which your insurance coverage remains active.

H

Health Maintenance Organization (HMO)
A type of plan that requires you to choose a primary care physician and get referrals to see specialists. It usually offers lower premiums but less flexibility.

Health Reimbursement Arrangement (HRA)
An employer-funded account that reimburses employees for qualified medical expenses.

Health Savings Account (HSA)
A tax-advantaged savings account used to pay for qualified medical expenses. You must have a High Deductible Health Plan (HDHP) to qualify.

High Deductible Health Plan (HDHP)
A plan with lower premiums and higher deductibles. It allows you to use an HSA for medical expenses.

I

In-Network Provider
A doctor, hospital, or healthcare facility that has a contract with your insurance company to provide services at a discounted rate.

Individual Plan
Health insurance coverage purchased by an individual rather than through an employer.

L

Lifetime Maximum
The total dollar amount a plan will pay for covered services during a person’s lifetime. The ACA prohibits lifetime limits on essential health benefits.

Long-Term Care
Services that help meet personal or health needs over an extended period, such as in a nursing home or assisted living facility.

M

Maximum Out-of-Pocket (MOOP)
The most you’ll have to pay for covered healthcare services in a year. Once you reach this limit, your plan pays 100% of covered costs.

Medicaid
A state and federal program that provides health coverage to low-income individuals and families.

Medicare
Federal health insurance for people aged 65 or older, and for some younger people with disabilities.

Metal Tiers
Categories of ACA Marketplace plans (Bronze, Silver, Gold, Platinum) that indicate cost-sharing levels between you and the insurer.

N

Network
The group of doctors, hospitals, and other providers that contract with your insurance company to provide services at discounted rates.

Non-Covered Services
Medical services or treatments your plan does not pay for.

O

Open Enrollment
The annual period when you can enroll in, change, or renew your health insurance plan.

Out-of-Network Provider
A healthcare provider that does not have a contract with your insurer. Care from out-of-network providers often costs more.

Out-of-Pocket Costs
The expenses you pay for healthcare that aren’t reimbursed by insurance, including deductibles, copays, and coinsurance.

P

Point of Service (POS) Plan
A type of plan that combines features of HMOs and PPOs — you choose a primary doctor and need referrals for specialists, but can go out-of-network at a higher cost.

Policyholder
The person who owns the health insurance policy and pays the premiums.

Preferred Provider Organization (PPO)
A plan that offers flexibility to see specialists without referrals and provides partial coverage for out-of-network care.

Premium
The amount you pay (usually monthly) to keep your health insurance coverage active.

Preventive Care
Routine health services — like checkups, vaccines, and screenings — that help prevent illness and are often covered at no cost.

Primary Care Physician (PCP)
Your main doctor who coordinates your healthcare and provides general medical care.

R

Referral
A written order from your primary care doctor allowing you to see a specialist or receive certain medical services.

Renewal
When your health insurance coverage is extended for another year.

S

Special Enrollment Period (SEP)
A time outside of Open Enrollment when you can enroll in a new plan if you experience a qualifying life event, such as losing coverage, getting married, or having a baby.

Specialist
A doctor who focuses on a specific area of medicine, such as cardiology or dermatology.

Subsidy
Financial assistance from the government that helps lower your monthly premiums or out-of-pocket costs if you qualify based on income.

T

Telehealth (Telemedicine)
Virtual healthcare visits that allow you to speak with a doctor or nurse online or by phone instead of going to an office.

Tiered Network
A structure where providers are divided into tiers based on cost and quality. Visiting higher-tier providers typically costs less.

U

Underwriting
The process insurers use to evaluate applications and determine eligibility. The ACA restricts underwriting based on health status for most plans.

Urgent Care
Medical care for conditions that need prompt attention but aren’t life-threatening, such as sprains or infections.

W

Waiting Period
The time between enrolling in a plan and when certain benefits take effect. Most modern plans have eliminated waiting periods for essential benefits.

Wellness Program
Employer or insurer-sponsored initiatives that encourage healthy behaviors, often providing rewards for participation.