Health Insurance

From A to Z

Health insurance is full of complicated terms. To save you time, we created a health insurance glossary consisting of frequently used terms and their definition. If you need more clarification, give us a call.

Health Insurance Glossary

Health Insurance Terms


Affordable Care Act (ACA) – The Patient Protection and Affordable Care Act (PPACA) is the official name of the Affordable Care Act (ACA), also known as Obamacare. It is health care reform signed into law on March 23, 2010. The ACA is meant to control health care costs, offer more affordable health insurance options, and make health care more available to everyone. In doing so, it mandates new benefits, rights, and protections for all Americans while creating new rules for health insurance companies.

Agent – a licensed individual who represents several insurance companies and sells their products.


Benefits – Medical “benefits” refer to the services that are included in your health insurance plan. When you receive care or fill prescriptions, your benefits kick in and help reduce your costs.

Brand-Name Drug – prescription drug which is marketed with a specific brand name by the company that manufactures it. May cost insured individuals a higher co-pay than generic drugs on some health plans. (see “generic.”)


Children’s Health Insurance Program (CHIP) – The Children’s Health Insurance Program, also referred to as “CHIP”, is a low- or no-cost health insurance plan offered by the government for kids of families who need help paying for health insurance. Children are eligible from age 0 to 19 and can signup through their state’s health insurance marketplace. Once your kids have a CHIP plan, they’ll have access to all the wellness visits and immunizations kids need while they’re growing as well as the care they need if they’re sick.

Claims – A health insurance claim is essentially an invoice that your provider sends to your health insurance company for services you received. Every time you visit your doctor, get lab work, or fill a prescription, a health insurance claim is created. It will contain line-by-line all the services you received and how much each one costs.

COBRA – COBRA is short for the Consolidated Omnibus Budget Reconciliation Act passed into law in 1985. It allows employees and their families to keep or continue their group health coverage for a limited period of time after the loss of a job by paying for it at their own expense. Learn more about COBRA at the Department of Labor’s website.

Co-insurance – the percentage of covered expenses an insured individual shares with the carrier. (i.e., for an 80/20 plan,the health plan member’s co-insurance is 20%.) If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan’s stop loss amount. (see “stop loss.”)

Co-pay/Co-payment – the amount an insured individual must pay toward the cost of a particular benefit. For example, a plan might require a $10 co-pay for each doctor’s office visit.

Covered California – Covered California is the health insurance marketplace for Californians who need to buy an individual health plan. Individuals must signup through Covered California if they need help paying the premiums and want to receive a subsidy.

Credit for Prior Coverage – any pre-existing condition waiting period met under an employer’s prior (qualifying) coverage will be credited to the current plan, if any interruption of coverage between the new and prior plans meets state guidelines.


Deductible – Your deductible is the dollar amount you have to pay out-of-pocket for covered services before your health insurance plan begins paying for your care.

Dependents – Anyone you claim on your income tax return for a given tax year is considered a dependent. Generally dependents are your spouse or domestic partner and/or any kids under 26 years old.


Effective Date – the date requested by an employer for insurance coverage to begin.

Exclusions – expenses which are not covered under an insurance plan. These are listed in the Certificate Booklet/Policy.

Explanation of Benefits (EOB) – An explanation of benefits (also known as an EOB) is a statement you receive from your insurance company after you receive care. It’s not a bill, but it breaks down the cost of the services you received. It lists how much will be paid by your health plan and any portion you may owe.


Generic Drug -­ the chemical equivalent to a “brand name drug.” These drugs cost less, and the savings is passed onto health plan members in the form of a lower co-pay.

Group Insurance – an insurance contract made with an employer or other entity that covers individuals in the group.


Health Maintenance Organization (HMO) – An alternative to commercial insurance that stresses preventive care, early diagnosis and treatment on an outpatient basis. HMOs are licensed by the state to provide care for enrollees by contracting with specific health care providers to provide specified benefits. Many HMOs require enrollees to see a particular primary care physician (PCP) who will refer them to a specialist if deemed necessary.

HIPAA – Health Insurance Portability and Accountability Act of 1996, P.L. 104-91. This law relates to underwriting, pre-existing limitations, guaranteed renewal, COBRA and certification requirements in the event someone terminates from the plan. The new law, commonly known as the “Kennedy-Kassebaum Bill,” establishes new requirements for self-funded, fully-insured group plans (including church plans) and Individual Health policies. The purpose of the law is to:

  • Improve portability and continuity of health insurance coverage in the group and individual markets
  • To combat waste, fraud and abuse in health insurance and health care delivery
  • To promote the use of medical savings accounts
  • To improve access to long-term care services and coverage
  • To simplify the administration of health insurance
  • Learn more about HIPAA at the Department of Labor’s website.

ID Card/Identification Card – card given to insured individuals which advises medical providers that a patient is covered by a particular health insurance plan.

Indemnity Insurance Plans – traditional insurance plans (not HMOs or PPOs) which permit insured individuals to choose their doctors and hospitals. Insured individuals do not have to choose doctors or hospitals from a specific list of providers. Also called “fee-for-service” plans.

In-Network – describes a provider or health care facility which is part of a health plan’s network. When applicable, insured individuals usually pay less when using an in-network provider.

Insurance Carrier – The insurance company or HMO insuring the health plan. These folks are responsible for paying your benefits.


Lifetime Maximum Benefit – the maximum amount a health plan will pay in benefits to an insured individual.

Limitations – a restriction on the amount of benefits paid out for a particular covered expense.

Long-Term Disability (LTD) – insurance which pays employees a percentage of monthly earnings in the event of disability.


Managed Care – the coordination of health care services in the attempt to produce high quality health care for the lowest possible cost. Examples are the use of primary care physicians as gatekeepers in HMO plans and pre-certification of care.

Multiple Employer Trust (MET) – an arrangement created to obtain health and other benefits for participating employer groups. Small employers can pool their contributions to receive the advantages of large group underwriting.


Network – a group of doctors, hospitals and other providers contracted to provide services to insured individuals for less than their usual fees. Provider networks can cover large geographic markets and/or a wide range of health care services. If a health plan uses a preferred provider network, insured individuals typically pay less for using a network provider.


Open Enrollment – Open Enrollment, usually from November 1 to January 31, is when individuals and families can enroll in health insurance plans. At this time, individuals and families can change health plans, enroll for the first time, or update their application to apply for subsidies from the government to help pay the health insurance premiums.

Out-of-Network – describes a provider or health care facility which is not part of a health plan’s network. Insured individuals usually pay more when using an out-of-network provider, if the plan uses a network.

Out-of-Pocket Maximum – Your out-of-pocket max is the most you could pay for covered health care in a calendar year aside from your monthly premium.


Plan Administration – overseeing the details and routine activities of installing and running a health plan, such as answering questions, enrolling new individuals for coverage, billing and collecting premiums, etc.

Point-of-Service (POS) – health plan which allows the enrollee to choose HMO, PPO or indemnity coverage at the point of service (time the services are received).

Pre-Approval – an insurance company requirement that an insured obtain pre-approval before being admitted to a hospital or receiving certain kinds of treatment.

Pre-Certification – Pre-admission review and approval of appropriateness and medical necessity of hospitalization or other medical treatment.

Pre-Existing Condition – an illness, injury or condition for which the insured individual received medical advice, treatment, services or supplies; had diagnostic tests done or recommended; had medicines prescribed or recommended; or had symptoms of typically within 12 months (time periods may vary depending on state laws) prior to the effective date of insurance coverage.

Preferred Provider Organization (PPO) – A network or panel of physicians and hospitals that agrees to discount its normal fees in exchange for a high volume of patients. The insured individual can choose from among the physicians on the panel.

Premiums – payments to an insurance company providing coverage.

Prescription Drug Tiers – Insurance companies classify drugs on their formulary into tiers based on industry standards:

  • Tier 1: Generic and low-cost brand-name drugs.
  • Tier 2: Preferred brand-name drugs. These are brand-name medications that do not have a generic equivalent and are typically more expensive than Tier 1 drugs.
  • Tier 3: Non-preferred brand-name drugs. These drugs are generally available as a less-expensive Tier 2 or Tier 1 drug. If you currently take a Tier 3 drug, it’s a good idea to ask your doctor if you can take a less expensive generic or brand-name drug on the Tier 1 or Tier 2 list.
  • Tier 4: Specialty drugs. These drugs are generally the most expensive.

Provider – any person or entity providing health care services, including hospitals, physicians, home health agencies and nursing homes. Usually licensed by the state.


Qualifying Life Event – A qualifying life event is an event in your life that qualifies you for a special enrollment period during which you can enroll yourself and any family members in a health insurance plan outside of Open Enrollment. View examples of qualifying life events.


Referral -­ within many managed care plans, transfer to specialty physician or specialty care by a primary care physician.

Rider – a modification to a Certificate of Insurance policy regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.


Short-Term Medical – temporary health coverage for an individual for a short period of time, usually from 30 days to six months.

Small Employer Group – groups with 1 ­ 99 employees. The definition of small employer group may vary between states.

Special Enrollment – Special Enrollment Period (SEP) begins when Open Enrollment ends. In order to enroll in a health insurance plan during a SEP, you’ll need to have a “qualifying life event,” or QLE. Some of these QLEs include: losing health coverage from your employer, moving into a new coverage area, getting married, or having a baby. When you have a QLE, you have a 60-day window called an SEP during which you can sign up for a plan. If you miss this window, you may have to wait until the next Open Enrollment Period to enroll in a health plan.

State Mandated Benefits – state laws requiring that commercial health insurance plans include specific benefits.

Stop-Loss – the dollar amount of claims filed for eligible expenses at which the insurance begins to pay at 100% per insured individual. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.


Third Party Administrator (TPA) – An organization responsible for marketing and administering small group and individual health plans. This includes collecting premiums, paying claims, providing administrative services and promoting products.


Underwriter – entity that assumes responsibility for the risk, issues insurance policies and receives premiums.


Waiver of Coverage – a section on the enrollment form which states that an employee was offered insurance coverage but opted to waive this coverage.

Workers’ Compensation Insurance – insurance coverage for work-related illness and injury. All states require employers to carry this insurance.


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