Health Insurance Glossary of Terms
Calendar Year Maximum
A cap that limits the maximum dollar amount the medical insurance carrier will pay for each Covered Person for the calendar year for all Covered Charges. This maximum starts over every January 1st. Typically, the Calendar Year Maximum for Comprehensive Major Medical Insurance is $1 to $5 million per Covered Person, while Scheduled Health Insurance (Limited Benefit Medical Plans) can be $25,000 or less.
Certificate of Coverage
Evidence or proof of medical insurance under a group plan.
Certificate of Credible Coverage (CCC)
Indicates the length of time a person has been continuously covered under a qualifying previous Health Insurance Policy or health plan.
TIP: Since most health insurance carriers impose a waiting period for pre-existing conditions for new individuals, the time previously covered under a previous qualifying Health Insurance Policy can be credited toward satisfying the pre-existing conditions period under the new Health Insurance Policy. There are, however, some special requirements that apply.
The natural or lawfully adopted child of the Insured Person. Also, a child that resides with the Insured Person where the Insured Person has been appointed legal guardian by a court, or the Insured Person is required to provide medical insurance pursuant to a Qualified Medical Support Order.
Consolidated Omnibus Budget Reconciliation Act of 1985 (also called COBRA)
enacted in 1985, COBRA allows individuals and their family members to continue their health insurance coverage under their employer’s group health plan, at their expense, for 18 to 36 months depending on the circumstances. In 2009, recent changes were made to COBRA through The American Recovery and Reinvestment Act of 2009. Eligible individuals pay only 35 percent of their COBRA health insurance premium and the remaining 65 percent is reimbursed to the employer by the federal government through a tax credit.
TIP: COBRA coverage is generally expensive. While it can help individuals and their families significantly in times of a health crisis, an individual/ family Comprehensive Major Medical Insurance Policy can generally save money and offer more options. Not everyone will qualify since these policies are Medically Underwritten.
TIP: If you need health insurance for less than one year, a Short-Term Major Medical Insurance is another option to COBRA coverage. Similar to Comprehensive Major Medical Insurance not everyone will qualify if there are pre-existing health conditions.
The percentage of payment for which the Covered Person is responsible for. Most Comprehensive Major Medical Insurance requires the Covered Person to share in the cost of healthcare expenses with the health insurance carrier after they have satisfied their Deductible. This shared amount is referred to as Coinsurance. For example, the Covered Person would pay 20% of the cost of healthcare services and the health insurance carrier would pay 80%. High deductible policies usually pay 100% of the cost of healthcare services from an In-Network Provider after the Deductible is met, thus leaving the Covered Person with no additional out-of-pocket expense for the remainder of the calendar year.
TIP: Purchase a Health Insurance Policy that includes Preferred Providers and obtain care from them whenever possible. This will significantly reduce your out-of-pocket cost.
TIP: Consider Comprehensive Major Medical Insurance with a high deductible. The Premium and total financial risk or exposure (Deductible, plus Maximum Out-of-Pocket) is often significantly less than a traditional major medical policy with a lower Deductible and Copayment for many services.
Comprehensive Major Medical Insurance
A Health Insurance Policy with at least $1 million Coverage Limit per Covered Person that pays for outpatient medical services and supplies (lab, x-ray, and advanced diagnostic imaging), inpatient care, surgery, physician visits and other ancillary services and supplies. Preventive Care is usually covered; however, prescription drugs may or may not be. This type of a medical insurance is subject to Medical Underwriting. Not everyone will qualify.
The upfront fixed dollar amount the Covered Person is required to pay for a Covered Charge, such as physician office visit or lab work. After the Copayment, 100% of the Covered Charges are usually paid by the health insurance carrier.
Covered Charges (also called Eligible Expenses)
Healthcare services and/or supplies that are covered under the Health Insurance Policy. For a Covered Charge to be considered eligible, it generally must be: listed as a Covered Charge in the Health Insurance Policy, medically necessary, Reasonable and Customary Charge for the service or supply, authorized or ordered by a physician, incurred while the Health Insurance Policy is in force and not be excluded by the Health Insurance Policy.
The maximum dollar amount the health insurance carrier will pay for all covered healthcare services or a specific medical procedure(s). The Covered Person is responsible for all remaining costs. Under most Comprehensive Major Medical Insurance, Coverage Limits range from $1 to $5 million per Covered Person. Other types of health insurance, such as Scheduled Health Insurance (Limited Benefit Medical Plans), specify a cap for every healthcare service, procedure and supply. These health insurance policies are designed to provide supplemental coverage only and are not a replacement for Comprehensive Major Medical Insurance.
Covered Person or Member
The Insured Person and his/ her Dependents covered under the Health Insurance Policy.
Critical Illness Insurance
A Health Insurance Policy that pays a lump-sum cash benefit upon the diagnosis of a critical illness or condition, such as cancer, stroke, heart attack, coronary bypass surgery, organ transplant, kidney failure, multiple sclerosis or paralysis. It helps prevent financial strain that is often associated with a major illness.
TIP: Save money by purchasing Critical Illness Insurance and Comprehensive Major Medical Insurance with a high deductible. The monies received from the Critical Illness Insurance can be used to help fund the Deductible under the Comprehensive Major Medical Insurance policy.
Deductible (also called Individual Deductible)
The dollar amount each Covered Person is required to pay before the health insurance carrier begins paying for healthcare services and/ or supplies. The Deductible is usually based on the calendar year, so a new Deductible must be satisfied every January 1st. Copayments usually do not count toward satisfying the Deductible.
The lawful spouse of the opposite gender under age 65 years, unmarried Child who is primarily dependent upon the Insured Person for support and is less than 19 years of age; or between ages of 19 and 25 provided the Child is a full-time student actively attending an accredited college, vocational or high school.
The date coverage becomes effective under the Health Insurance Policy.
A specific medical condition or healthcare service or supply that is not covered under a Health Insurance Policy.
The number of Covered Persons in the family that are required to satisfy a Deductible, usually 2 or 3 with most Comprehensive Major Medical Insurance. Some health insurance plans have a combined Deductible for the entire family. In this scenario, the Covered Charges for all family members would satisfy the one Family Deductible. This means the Family Deductible could be met by one or more covered family members. Copayments usually do not count toward satisfying the Deductible and the Deductible begins again every January 1st.
TIP: Make sure you know the Deductible and Maximum Out-of-Pocket that your family is required to pay. While many health insurance policies look favorable because of a low deductible, they can end up costing you more when the Family Deductible and Maximum Out-of-Pocket are considered.
TIP: Consider purchasing Comprehensive Major Medical Insurance with a high deductible that pays 100% of Covered Charges after the calendar year Deductible is met when obtaining care from Preferred Providers. These medical insurance policies cost less money and you will pay nothing out of pocket once you meet the calendar year Deductible.
Family Maximum Out-of-Pocket or Stop-Loss
The number of Covered Persons in the family that are required to satisfy the Maximum Out-of-Pocket before the health insurance carrier will pay 100% of Covered Charges for the remainder of the calendar year. The Maximum Out-of-Pocket begins again every January 1st and may not apply to prescription drugs or other services and supplies, and generally does not include Deductibles and Copayments.
TIP: Make sure you know the Deductible and Maximum Out-of-Pocket that your family is required to pay. While many health insurance policies look favorable because of a low Deductible, they can end up costing you more when the Family Deductible and Maximum Out-of-Pocket are considered.
TIP: Consider purchasing Comprehensive Major Medical Insurance with a high deductible that pays 100% of Covered Charges after the calendar year Deductible is met when obtaining care from Preferred Providers. These policies cost less money and you will pay nothing out of pocket once you meet the calendar year Deductible.
Guarantee Issue (also called Guaranteed Acceptance)
Every applicant is accepted for medical insurance and issued a Health Insurance Policy, regardless of their health status. No medical questions or special underwriting requirements exist. Generally, Scheduled Health Insurance (Limited Benefit Medical Plans) is offered as Guarantee Issue.
Health Insurance Portability and Accountability Act (also called HIPAA)
Enacted in 1996, HIPAA is a federal law that: 1) guarantees continuous health insurance coverage for Pre-Existing Conditions when an individual changes employers and his/her prior health insurance plan covered the medical condition, 2) limits to 12 months the time period a new employer’s health plan can exclude a Pre-Existing Condition if the medical condition was not previously covered, 3) requires states to offer some type of health insurance with no exclusions for Pre-Existing Conditions to individuals who have exhausted COBRA coverage, 4) sets privacy standards for healthcare providers and medical insurance carriers, and 5) prohibits discrimination against employees on the basis of their health.
TIP: Protect your rights under HIPAA by ensuring that you maintain continuous health insurance.
Health Maintenance Organization (HMO)
A health plan that offers a wide range of healthcare services through an exclusive panel of healthcare providers. Covered Persons are required to select a primary care physician (PCP). The PCP provides most healthcare services and approves visits to specialists, if necessary. Treatment obtained from healthcare providers outside the HMO are generally not covered, except in emergency, life-threatening situations. Since there are fewer healthcare providers to choose from and less freedom and flexibility to move about the system, HMOs generally charge Covered Persons small Copayments for most services. HMOs also place much emphasis on Preventive Care.
Health Savings Accounts (HSA)
A special bank account that is used in conjunction with a high deductible health insurance policy. The HSA is designed to help the Covered Person fund their Deductible and pay for other qualified out-of-pocket healthcare expenses, such as medical, dental, vision and over-the-counter medication with tax-free money. Monies deposited into an HSA are tax deductible and funds withdrawn to pay for healthcare expenses are not taxed. HSA monies can be invested and accumulate tax-free for retirement.
Comprehensive Major Medical Insurance that does include a Preferred Provider Organization. Covered Persons can obtain medical care and treatment from any healthcare provider. The payment by the health insurance carrier to these healthcare providers is based on the Reasonable and Customary Amount. This type of plan is common in rural parts of the United States because healthcare providers usually do not join a Preferred Provider Organization due to limited competition in their community.
In-Network Provider or Preferred Provider
a hospital, physician, pharmacy or other healthcare provider who has been contracted by the medical insurance carrier to accept discounted rates for healthcare services and supplies beyond the Reasonable and Customary Amount the medical insurance carrier pays Out-of-Network Providers. The Covered Person will usually pay significantly less out of pocket by utilizing the services of an In-Network Provider.
TIP: Always seek the services of a Preferred Provider whenever possible because your out-of-pocket cost will usually be significantly less.
Insured Person or Subscriber
The individual that holds the Certificate of Coverage or Health Insurance Policy.
Lifetime Maximum Benefit
The maximum amount the medical insurance carrier will pay for each Covered Person’s lifetime for all Covered Charges under the Health Insurance Policy. No benefits are payable once this maximum is reached. Most Comprehensive Major Medical Insurance provides a Lifetime Maximum Benefit of $1 to $5 million per Covered Person.
A hospital, physician, pharmacy or other healthcare provider who has not been contracted to provide discounted healthcare services and supplies to Covered Persons. As a result, the Covered Person will usually pay significantly more for medical care and treatment.
This type of managed care plan requires the Covered Person to select a primary care physician. Unlike an HMO, however, the Covered Person may visit a specialist without a referral and coverage is also provided when treatment is obtained from an Out-of-Network Provider. This added flexibility gives the Covered Person more control over his/ her healthcare.
The process used by medical insurance carriers to assess an applicant’s anticipated risk or morbidity (chance of sickness and disease) to determine if an application should be accepted, declined or modified/ rated (issued at a higher premium level and/ or with limited benefits). The following factors are typically considered: current health and physical condition, health history, occupation, personal habits (including tobacco, alcohol or drug use), age, gender, and other factors, such as high risk activities and driving record. Generally, Comprehensive Major Medical Insurance and Short-Term Major Medical Insurance are subject to Medical Underwriting.
Health Insurance Policy or Master Policy
Contract that is issued to a group, such as an employer, credit union, trade or professional association, which provides health insurance coverage to individuals and their dependents. Coverage is contingent upon being an employee of the employer or member of the credit union, trade or professional association. Individuals can also hold the Health Insurance Policy or Master Policy. This occurs when the Master Policy is issued directly to the individual.
Maximum Out-of-Pocket or Stop-Loss (also called Individual Maximum Out-of-Pocket)
A cap that limits or “stops” the Covered Person’s financial responsibility to pay for Covered Charges under the Health Insurance Policy. Once the Covered Person has satisfied the Maximum Out-of-Pocket, usually $1,500 or more with most Comprehensive Major Medical Insurance, the health insurance carrier will pay 100% of the remaining healthcare expenses or Covered Charges for the balance of the calendar year. The Maximum Out-of-Pocket begins once the Covered Person has satisfied their Deductible and begins sharing in the cost of Covered Charges with the medical insurance carrier. This shared amount is called Coinsurance. The Maximum Out-of-Pocket begins again every January 1st, usually applies to each covered family member (up to a maximum number) and may not apply to prescription drugs or other services and supplies, and generally does not include Deductibles and Copayments.
TIP: Make sure you know the Deductible and Maximum Out-of-Pocket that you are required to pay. While many Health Insurance Policies look favorable because of a low deductible, they can end up costing you more when the Maximum Out-of-Pocket is considered.
TIP: Consider purchasing Comprehensive Major Medical Insurance with a high deductible that pays 100% of Covered Charges after the calendar year Deductible is met when obtaining care from Preferred Providers. These policies cost less money and you will pay nothing out of pocket once you meet the calendar year deductible.
Obtaining healthcare outside the patient’s country. In the United States, medical tourism is a popular way for individuals to save money because healthcare services, such as knee and hip replacements, heart bypass, spinal fusion and even dental work can cost significantly less in other parts of the world. A hip replacement in the United States, for example, can cost upwards of $30,000 while the same procedure can be performed in Costa Rica for $11,000. Even considering the cost of airfare and hotel accommodations, the savings can be substantial. It’s also a great opportunity to travel abroad.
The reduced fee accepted by a hospital, physician, pharmacy or other healthcare provider for services or supplies rendered. Healthcare providers are contractually required to write-off the difference, if any, between their retail fee and the Negotiated Rate. The Covered Person can not be billed for this difference.
TIP: Always seek the services of a Preferred Provider whenever possible because your out-of-pocket cost will usually be significantly less.
Pre-Certification (Prior Authorization) and Case Management
The evaluation of appropriateness, medical need and efficiency of health care services and procedures, such as hospital admission, surgery and second opinion, according to established criteria before, during and after care is rendered. Medical insurance carriers and health plans require the Covered Person to comply with these cost containment guidelines in order to receive full benefits.
Any physical or mental condition for which medical advice, diagnosis, care, or treatment was received prior (usually 12 months) to the Effective Date of the Health Insurance Policy. Pre-Existing Conditions are generally covered after a specified timeframe, usually 12 months.
Preferred Provider Organization (PPO)
The most popular type of managed care health insurance today. Individuals covered under a PPO Plan may choose from a broad network of healthcare providers, are not required to select a primary care physician or obtain a referral to visit a specialist. Since health insurance companies have negotiated deep discounts with network providers (15%-50% or more), the Covered Person will pay significantly less when treatment is rendered by a participating provider. PPO Plans also allow for out-of-network coverage. This means medical care can be obtained from an Out-of-Network Provider. The Covered Person, however, is usually required to pay significantly more out-of-pocket.
The dollar amount the Insured Person pays (usually monthly) to the medical insurance carrier or health plan for health insurance.
Preventive Care or Wellness
Refers to routine physicals/ check-ups, lab work, mammography, pap smears, immunizations and cancer screenings for the prevention and early detection of disease and other health problems.
Reasonable and Customary Amount
A schedule used by health insurance carriers to determine if excessive fees are billed by healthcare providers. It represents the fee charged by a healthcare provider for services and supplies compared to the fee charged for the same service or supply in the same geographic area or zip code by other healthcare providers. If the charge is more than the Reasonable and Customary Amount as determined by the health insurance carrier, the Covered Person may be responsible for paying the additional amount out of their pocket. The Reasonable and Customary amount is only applicable when the Covered Person obtains medical care from an Out-of-Network Provider or purchases a Health Insurance Policy, such as an indemnity plan that does not offer a Preferred Provider Network.
Scheduled Health Insurance (also called Mini-Med, Gap Plans, Defined Benefit Plans, Limited Benefit Plans and Guaranteed Acceptance Plans)
A Health Insurance Policy that pays a specific dollar amount per procedure or healthcare service and/or supply. Although hospitalization and surgery may be covered, the Coverage Limits are very low, typically in the range of $1,000 to $25,000 per Covered Person per calendar year. As a result, these Health Insurance Policies are designed to provide basic coverage for medical expenses and prescription drugs. They are not meant to replace Comprehensive Major Medical Insurance. Unlike Comprehensive Major Medical Insurance, acceptance by the health insurance carrier is guaranteed. There are no medical questions to answer or special underwriting requirements to meet. Most Scheduled Health Insurance will not pay for Pre-Existing Conditions for a specified timeframe.
Short-Term Major Medical Insurance
Designed to cover a 12 month period or less, these health insurance policies expire at the end of the specified timeframe. They can not be renewed and you must reapply for a new policy. Premiums for Short-Term Major Medical Insurance are significantly less than Comprehensive Major Medical Insurance that has no policy expiration date.
The specified period of time a medical service, procedure or condition is not covered by the Health Insurance Policy.