Understanding
Health Insurance Terms
COBRA
The Consolidated Omnibus Budget Reconciliation
Act of 1985, commonly known as COBRA, requires
group health plans with 20 or more employees
to offer continued health coverage for you and
your dependents for 18 months after you leave
your job. Longer durations of continuance are
available under certain circumstances. If you
opt to continue coverage, you must pay the entire
premium, plus a two percent administration charge.
Coinsurance
The amount you are required to pay for medical
care in a fee-for-service plan or preferred
provider organization (PPO) after you have met
your deductible. The coinsurance rate is usually
expressed as a percentage of billed charges.
For example, if the insurance company pays 80
percent of the claim, you pay 20 percent.
Coordination of Benefits
A system to eliminate duplication of benefits
when you are covered under more than one group
plan. Benefits under the two plans usually are
limited to no more than 100 percent of the claim.
Copayment
Another way of sharing medical costs. You pay
a flat fee every time you receive a medical
service (for example, $5 for every visit to
the doctor). The insurance company pays the
rest.
Covered Expenses
Most insurance plans, whether they are fee-for-service,
HMOs, or PPOs, do not pay for all services.
Some may not pay for prescription drugs. Others
may not pay for mental health care. Covered
services are those medical procedures the insurer
agrees to pay for. They are listed in the policy.
Deductible
The amount of money you must pay each year to
cover your medical care expenses before your
insurance policy starts paying.
Exclusions
Specific conditions or circumstances for which
the policy will not provide benefits.
Health Maintenance Organization (HMO)
Prepaid health plans. You pay a monthly premium
and the HMO covers your doctors' visits, hospital
stays, emergency care, surgery, checkups, lab
tests, x-rays, and therapy. You must use the
doctors and hospitals designated by the HMO.
Lifetime Limit
A cap on the benefits paid under a policy. Many
policies have a lifetime limit of $1 million,
which means that the insurer agrees to cover
up to $1 million in covered services over the
life of the policy.
Managed Care
An organized way to manage costs, use, and quality
of the health care system. The major types of
managed care plans are health maintenance organizations
(HMOs), point-of-service (POS) plans and preferred
provider organizations (PPOs).
Medicaid
A joint federal-state health insurance program
that is run by the states and covers certain
low-income people (especially children and pregnant
women), and disabled people.
Medicare
The federally sponsored health insurance program
of hospital and medical insurance primarily
for people age 65 and over.
Noncancellable Policy
A policy that guarantees you can receive insurance,
as long as you pay the premium. It is also called
a guaranteed renewable policy.
Out of-Pocket Maximum
The most money you will be required to pay in
a year for deductibles and coinsurance. It is
a stated dollar amount set by the insurance
company, in addition to regular premiums.
Point-of-Service
(POS) Plan A type of managed care plan combining
features of health maintenance organizations
(HMOs) and preferred provider organizations
(PPOs), in which individuals decide whether
to go to a network provider and pay a flat dollar
co-payment (say $10 for a doctor's visit), or
to an out-of-network provider and pay a deductible
and/or a coinsurance charge.
Portability
The ability for an individual to transfer from
one health insurer to another health insurer
with regard to pre-existing conditions or other
risk factors.
PPO (Preferred Provider Organization)
A combination of traditional fee-for-service
and an HMO. When you use the doctors and hospitals
that are part of the PPO, you can have a larger
part of your medical bills covered. You can
use other doctors, but at a higher cost.
Pre-authorization
A cost containment feature of many group medical
policies whereby the insured must contact the
insurer prior to a hospitalization or surgery
and receive authorization for the service.
Pre-existing Condition
A health problem that existed before the date
your insurance became effective. Many insurance
plans will not cover preexisting conditions.
Some will cover them only after a waiting period.
Preferred Provider Organization (PPO)
A network of health care providers with which
a health insurer has negotiated contracts for
its insured population to receive health services
at discounted costs. Health care decisions generally
remain with the patient as he or she selects
providers and determines his or her own need
for services. Patients have financial incentives
to select providers within the PPO network.
Premium
The amount you or your employer pays in exchange
for insurance coverage.
Primary Care Physician
Usually your first contact for health care.
This is often a family physician or internist,
but some women use their gynecologist. A primary
care doctor monitors your health and diagnoses
and treats minor health problems, and refers
you to specialists if another level of care
is needed.
Provider
Any person (doctor or nurse) or institution
(hospital, clinic, or laboratory) that provides
medical care.
Third-Party Payer
Any payer of health care services other than
you. This can be an insurance company, an HMO,
a PPO, or the federal government.
Usual and Customary Charge
The amount a health plan will recognize for
payment for a particular medical procedure.
It is typically based on what is considered
"reasonable" for that procedure in
your service area.
Utilization Review
A cost control mechanism by which the appropriateness,
necessity, and quality of health care services
are monitored by both insurers and employers.
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