Insurance Definitions - Explained
A couple of notes before we get started:
Insured – The person who has the insurance coverage Balance Billing Catch-Up Contribution – These are additional contributions in to certain types of qualified accounts (401(k)s, HSAs) allowed for individuals age 55 or older. These contributions are allowed in addition to the annual amounts allowed by law.
Cafeteria plan (Flexible benefits plan) (IRS 125 Plan) – A benefit program under Section 125 (hence the name) of the Internal Revenue Code that offers employees a choice between Coinsurance - A form of medical cost sharing that requires the insured to pay a stated percentage of medical expenses. Typical coinsurance amounts are 80/20 or 70/30. In the 80/20 example, the carrier pays 80% of the expense and the insured pays 20% of the expense. The insured’s costs are usually limited to a certain amount (out-of-pocket maximum). The coinsurance is usually part of an insurance plan after a deductible Back to List Back to List Back to List Flexible benefits plan– See “Cafeteria Plan” High Deductible Health Plan (HDHP) – A health insurance plan that has a high deductible, which does not cover the initial costs or all of the costs of medical expenses. The deductible requires the insured to pay ‘first dollar’ of a medical expense before the insurance comes in to play. The plan may or may not be a Qualified High Deductible Health Plan. Health Reimbursement Arrangement (HRA) – A health care spending account funded by Health Savings Account (HSA) – An account established by an individual that has “HSA-qualified” health insurance coverage for payment of out-of-pocket expenses tax-free. HSA-Qualified Plan – A health plan that meets federal requirements regarding minimum Gatekeeper - Under some health insurance arrangements, a gatekeeper is responsible for In-Network – Care provided by health care professionals and facilities that have entered into an agreement with your insurance carrier to provide services to you and accept a negotiated fee for the services provided. Health Care Plans and Systems – These are just a few of the more popular types of health plans available. Indemnity plan - A type of medical plan that reimburses the insured and/or provider as expenses are incurred. There is usually a list of procedures or events that are covered by the plan along with a schedule of benefits (payments) for those procedures/events. Preferred provider organization (PPO) plan - An plan where coverage is provided to participants through a network of selected providers. The insured members may go outside the network, but could incur additional costs in the form of higher deductibles, higher coinsurance rates, higher out-of-pocket expense limits or non-discounted charges from the providers. Health maintenance organization (HMO) – This type of plan has numerous variations, but in its most popular form, it is a health care system that contracts with multiple physician groups to provide services to its insureds (HMO members). The physician groups may provide services to both HMO and non-HMO plan participants. Generally there is no coverage for insured members who seek care outside of the plan’s network of providers. Point-of-service (POS) plan - A POS plan is an "HMO/PPO" hybrid; sometimes referred to as an "open-ended" HMO when offered by an HMO. POS plans resemble HMOs for in-network services, but services received outside of the network are usually reimbursed in a manner similar to conventional indemnity plans (e.g., provider reimbursement based on a fee schedule or usual, customary and reasonable charges).
– An umbrella term used to identify plans that generally provide comprehensive health services to their members, and offer financial incentives for patients to use in-network providers. Examples of managed care plans include:
Maximum plan dollar limit (Maximum benefit limit) - The maximum amount payable by the carrier for covered expenses for the insured and each covered dependent while covered under the health plan. Plans can have a yearly and/or a lifetime maximum benefit limit. Typical lifetime maximum benefits for individual plans are in the range of $1 million to $5 million per individual. Maximum out-of-pocket expense - The maximum dollar amount a member is required to pay out of pocket during a year. Until this maximum is met, the plan and member share in the cost of covered expenses. After the maximum is reached, the insurance carrier pays all covered expenses, often up to a lifetime maximum. (See previous definition.) Medical savings accounts (MSA) – Savings accounts designated for out-of-pocket medical expenses. An older type of savings account that was a precursor to the current Health Savings Accounts (HSAs). Out-of-Network - Providers that have not entered into an agreement with your carrier to provide services to you and have not accepted a negotiated fee for the services provided. These providers may charge their full price (no discount) for these services. The insured’s carrier may not pay these full charges. This puts the insured at risk for balance billing. NOTE: Not all insurance contracts include out-of-network care as a covered benefit. In those cases, there is no coverage by your carrier if you go out-of-network. Preadmission certification (Precertification) – A cost management strategy that requires an authorization for hospital admission be given by a carrier to an insured prior to hospitalization. Failure to obtain a preadmission certification in non-emergency situations can result in the reduction or elimination of the carreier’s obligation to pay for services rendered. Preadmission testing - A requirement designed to encourage patients to obtain necessary diagnostic services on an outpatient basis prior to non-emergency hospital admission. The testing is designed to reduce the length of a hospital stay. Primary care physician (PCP) - A physician who serves as an insured’s primarycontact within the health system. In a managed care plan, the primary care physicianprovides basic medical services, coordinates and, if required by the plan, authorizes referrals to specialists and hospitals. Qualified Medical Expense – An expense that is allowed to be paid tax-free from an FSA, HRA or HAS. Section 213(d) of the federal Internal Revenue Code governs what can be a qualified medical expense. You can get more information about the types of expenses that are considered ‘qualified’ from IRS Publication 502 (available at www.irs.gov). Second surgical opinion - A cost-management strategy that encourages or requires an insured to obtain the opinion of another doctor after a physician has recommended that a on-emergency or elective surgery be performed. Programs may be voluntary or mandatory in that reimbursement is reduced or denied if the participant does not obtain the second opinion. Usual, Customary, and Reasonable (UCR) - Base amount that carriers generally use to determine how much will be paid for services that are reimbursed under a health insurance plan. You are most likely to encountered this term when you go out-of-network for care. Utilization review - The process of reviewing the appropriateness and quality of care provided to patients. Utilization review may take place before, during, or after the services are rendered.
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