Ever looked at a health insurance policy and wondered what those words and acronyms mean? There are a number of terms that are unfamiliar to the average consumer. If a basic definition is provided, it’s often in insurer-speak that only confuses consumers more.
In this article, we’ve listed easy-to-understand definitions of the most common insurance terms.
Allowable charge: A dollar amount considered reasonable by an insurance company for medical services or supplies based on the rates in the policyholder’s region.
Benefit: The amount an insurance company will pay for a member’s medical costs
Benefit level: The most that the health insurance company is required to pay for a covered benefit.
Benefit year: The twelve months over which health insurance benefits are calculated
Claim: A request from a customer that the insurance company pay for medical services.
Coinsurance: The share the policyholder pays for covered services after their deductible has been paid.
Copayment: The flat fee the policyholder pays for certain medical expenses, and the insurance company covers the rest.
Deductible: The amount of money the policyholder pays each year before their insurance starts to pay.
Drug formulary: All the prescription drugs covered by the plan.
Group health insurance: The insurance plan an employer or organization offers.
HMO plan: A health care system that provides comprehensive medical services to residents of a particular area.
Health savings account (HSA): A tax-advantaged account that allows one to pay for eligible medical expenses with pre-tax dollars.
In-network provider: A healthcare professional, hospital, or pharmacy that is part of a health plan’s preferred provider network.
Individual health insurance: Plans that individuals can purchase to cover themselves and their families.
Out-of-network provider: A healthcare professional, hospital, or pharmacy outside the health plan’s network of providers.
Out-of-pocket maximum: The most money an individual will pay annually for coverage.
Pre-existing condition: A health problem one has been diagnosed with or treated for before buying a health insurance plan.
Preferred Provider Organization (PPO) plan: A health insurance plan that gives one greater freedom to choose their own doctor.
Premium: The amount paid each month in exchange for insurance coverage.
Provider: Any person or institution providing medical care.
Underwriting: The process by which insurance companies decide whether to provide coverage and at what rate.
Waiting period: The time during which a health plan may not pay benefits for certain pre-existing conditions.
