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Glossary of Common Insurance Terms

Below you will find a short definition for common insurance terms you may find thoughout the website or during a conversation with an insurance agent.

Accident and health insurance
Coverage that pays benefits in case of sickness, accidental injury or accidental death. It sometimes provides for loss of income or debt payment if taken out in connection with a loan.
Actuary
A person who calculates statistically risks, premiums, life expectancies and other factors for insurance firms.
Additional monthly benefit
Addendum to a disability income policy that provides an extra monthly stipend in the first year of injury, before Social Security benefits start.
Adult day care
Out-of-home care for disabled adults providing for physical and social needs.
Aftercare
Services provided after hospitalization and rehabilitation.
Allowable costs
Covered costs of a medical insurance plan.
Ambulatory benefits
Coverage for health care services provided while the insured is not confined to a hospital or institution. Could include home health care, physical therapy, emergency room care and pre-admission testing.
Ancillary services
All the extras that make that hospital stay special, excluding room, meals and nursing care. Ancillary services can include just about everything else: lab services, drugs, dressings, radiology, operating room services and anesthesiology. Could also cover these same services in a nonhospital setting.
Assignment of benefits
When an insured arranges for the plan to pay someone else directly, usually the physician or hospital.
Basic hospital expense insurance
Covers room, board and some miscellaneous expenses for a certain number of days.
Benefit levels
The maximum that a person can receive for a service or procedure under a policy.
Benefit package
What the insurer covers under a particular policy.
Billed claims
The amount a hospital or doctor bills the plan.
Blanket medical expense policy
A plan that pays all medical expenses on a claim without limiting any services or procedures up to a certain ceiling amount.
Board certified
A doctor who has passed an exam that qualifies him or her as a specialist in a certain field.
Board eligible
A doctor who is eligible to take the board exam that will make him or her board certified.
Broker
A person who represents the insurance buyer, not the insurance company or agent, and helps a buyer obtain the proper insurance coverage.
Capitation
A method of paying for health care services. A fixed amount per person guarantees access to specified medical services, whether plan members take advantage of them or not.
Carrier
The insurer.
Carry-over provision
Clause in medical policy that allows a person who has submitted no medical expenses in a year to apply, or carry over, expenses occurring in the last three months of the year toward the next year's deductible.
Claim
Request for payment under the terms of the policy. May be submitted by the insured or the health care or service provider.
Closed access
Also known as a gatekeeper model or closed panel. A plan that stipulates the insured will be reimbursed for initial visits to only one doctor, and that doctor must be the one to recommend more specialized care.
COBRA (Consolidated Omnibus Budget Reconciliation Act)
Federal legislation that requires businesses of a certain size to keep former employees and their dependents on the group health plan for a limited period, provided the ex-employee pays the premiums.
Co-insurance
In health insurance, the percentage of the claims that an individual must pay, less the deductible. In property and casualty insurance, a provision that requires the insured to maintain a specified amount of insurance based on the value of the property insured.
Comprehensive major medical
A policy with a low deductible and high maximum coverage limits, as well as a coinsurance provision, which combines basic coverage with major medical coverage.
Conditionally renewable
Gives the individual the right to renew coverage up to a certain age or specified date. If the company decides not to renew, it must be for specific reasons or conditions stated in the contract.
Continuation
Allows employees to continue their group health coverage under certain conditions. (See COBRA.)
Co-pay
The portion of a bill that the insured pays, usually at the time of service. Often expressed as a set fee for a specific service.
Credit health insurance
A policy that protects a creditor should the debtor become disabled.
Custodial care
Personal care administered with a doctor's recommendation but possibly carried out by nonmedical staff.
Deductible
The amount a policyholder agrees to pay toward the insurance loss. The deductible may apply to all claims made during a specified period, as with health insurance, or to each claim for a loss occurrence, such as an automobile accident.
Dependents
Usually includes a lawful spouse and unmarried children, adopted, step, foster or biological, up to a certain age.
Diagnosis Related Groups (DRGs)
A system used for classification and reimbursement of inpatient hospital services.
Disability income insurance
Health insurance that provides some payment to replace lost income if the insured becomes sick or disabled.
Dread disease policy
A policy with a high maximum limit to cover all the medical expenses associated with a particular disease.
Drug formulary
A list of drugs covered by the plan and supplied by participating pharmacies.
Duplicate Coverage Inquiry (DCI)
An inquiry by the insuring organization to determine whether an individual carries duplicate coverage.
Elective benefits
A lump sum that the insured can elect to take for some conditions, rather than collecting periodic reimbursements.
Emergency
A disease or injury that occurs suddenly and requires immediate (usually defined as within 24 hours) treatment.
Encounter
Each time a person receives medical services.
Enrollment period
The time period during which a person can join a health plan.
Entire contract clause
An addendum stipulating that everything in the insurer/insured relationship is spelled out in the contract. In other words, if it's not in writing, it doesn't exist.
Experimental or unproven procedures
Treatment that the plan deems medically unacceptable or scientifically unproven.
Explanation of benefits (EOB)
Paperwork sent by the insurer to the insured listing the cost of treatment, the charges paid by the plan and the remainder to be paid by the individual.
Extended coverage
An addendum specifying that if the insured has an ongoing condition, like a pregnancy, that began when the policy was in force, expenses associated with the condition will be covered even after the policy has expired.
Extension of benefits
A provision of some plans that extends coverage past the plan expiration date in certain situations, such as hospitalization and disability.
Flat maternity benefit
In some plans, the amount that will be paid for hospital maternity care, regardless of the actual cost.
Group insurance
Insurance coverage usually issued to an employer under a master policy for the benefit of employees.
Health Care Financing Administration (HCFA)
The federal agency that oversees Medicare and Medicaid, and sets certification standards for health care providers.
Health maintenance organization (HMO)
Prepaid medical plan in which members agree to use a specific network of providers.
Hospital indemnity insurance
Pays a set amount for a hospital stay based on daily, weekly or monthly limits, regardless of expenses.
Indemnity health plan
A traditional fee-for-service plan.
Inflation protection
Increases in benefits built into a policy to compensate for inflation.
Inside limits
Within a policy, ceilings on reimbursed benefits for certain services.
Invalidity
Illness.
Lapse
The termination or discontinuance of a policy, usually resulting from the insured's failure to pay the premium due.
Legend drug
Drug which federal law stipulates can only be obtained with a prescription.
Living benefits rider
Provision on a life insurance policy that allows the insured to tap into the benefits to cover long term care or expenses associated with a terminal illness.
Long-term care insurance
Health insurance coverage designed to cover the cost of custodial care in nursing homes or extended care facilities.
Major hospitalization policy
A policy that typically has high deductibles and high coverage limits. Similar to major medical coverage, except that it applies only to hospitalization.
Major medical policy
A policy that typically has high deductibles and high coverage limits. Sometimes called a catastrophic policy.
Mandated benefits
Benefits required by federal or state law.
Maximum allowable costs (MAC) list
Slate of drugs for which the reimbursement is based on the cost of the generic equivalent.
Maximum out-of-pocket costs
Limit the insured will have to pay out of pocket. Includes things like deductibles, coinsurance and co-payments.
Medicaid
A state and federal program providing some health care benefits for people who meet minimum income limits.
Medical Information Bureau (MIB)
Sort of like the credit bureau for medical information. This organization keeps health histories of people who have applied for life and health insurance and shares the information with subscribing insurers.
Medically necessary
Treatment that, if it were omitted, would negatively affect the patient's life.
Medicare
Federal program that provides health benefits for people who qualify
usually those over 65 and the disabled. Medicare Part A covers hospitalization, and is funded by the government. Part B, also called Supplemental Medical Insurance, covers basic medical expenses, and is paid jointly by the government and the insured.
Modified fee-for-service
Reimbursement is based on the actual cost of services, taking into account plan limits.
Nursing home
Licensed facility that cares for those who are chronically ill or unable to care for themselves. Sometimes called a long-term care facility.
Open access
Also called an open panel. A plan that allows individuals to see another medical professional in the network without a gatekeeper referral.
Optionally renewable
The insurer reserves the right to cancel the policy at specific times, such as when the premium is due or at any policy anniversary, but can't cancel at any other time.
Outpatient
Individual receiving services in a facility but not staying overnight.
Point-of-service plan
Allows an individual to choose between service from a provider in the plan network or outside of the network, with varying levels of reimbursement.
Portability
The ability to switch insurers seamlessly without pre-existing condition exclusions.
Pre-admission authorization
Also called pre-admission certification. In many plans, the insured must contact the company for permission to enter a hospital.
Pre-existing condition
A health-related situation that pre-dates the person's coverage under the policy or plan.
PPO (Preferred Provider Organization)
A plan that offers discounted rates on services to members who use providers in the network. Often, if the individual seeks care outside the network, a smaller portion of the charges is reimbursed.
Premium
The payment, or one of the periodic payments, for insurance coverage.
Primary care network
The slate of primary care doctors who serve health plan members.
Qualified Medicare beneficiary
Someone living below the federal poverty guidelines for whom the government is required to pick up premiums, deductibles and co-pay costs for Medicare Part B (basic medical) coverage.
Reasonable and customary charges
Fees for medical treatment or services that fall within the average for a specific geographic location.
Respite care
Designed to give family a short break from the duties of constant care.
Second surgical opinion
Many plans pay for a second opinion before surgery. Some require it.
Sickness
Conditions requiring care, including illness, disease and pregnancy. Often, mental illness is not included.
Supplemental Medical Insurance (SMI)
Also called Part B of Medicare. It covers basic medical expenses, and is paid jointly by the government and the insured.
Therapeutic alternatives
Drugs that may differ in chemical make up but are purported to have the same effect.
Third-Party Administrator (TPA)
Company that acts as a go-between for the members of a group plan and the insuring organization.
Third-party payer
Any company or entity that pays medical expenses for the insured. Typically an insurance company, HMO, etc.
Wellness program
Coverage for services aimed at maintaining good health. Could include such things as preventative care, health screenings or fitness programs.

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