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Glossary of terms

Understanding health insurance   »   Glossary of terms
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A

Allowable amount OR Usual, customary and reasonable (UCR) charge

The dollar amount your health plan considers appropriate for a service provided in your area. In-network doctors have agreed to charge no more than the UCR rate. If you visit an out-of-network doctor, you will have to pay any portion of the fee above the UCR charge – typically in addition to a higher co-pay or co-insurance fee.
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C

Catastrophic-only coverage

A health insurance policy that covers the high costs of treating a severe illness. This policy usually begins coverage only after you reach a very high deductible or after your primary coverage reaches its maximum.
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COBRA

The Consolidated Omnibus Budget Reconciliation Act. This federal law allows corporate employees and their families to temporarily continue receiving employer-sponsored health coverage even after an employee leaves the firm. In general, COBRA applies to companies who provide a group health plan for 20 or more employees. The law does not require companies to subsidize the cost of the coverage.
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Co-pay or copayment

A flat fee you pay for each health care service or prescription.
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Co-insurance

A share of the bill for a health service covered by your plan. Many PPO plans require you to pay 20% of the bill if you visit an “in-network” doctor and a higher percentage if you visit an “out-of-network” doctor.
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Comprehensive Coverage

A health insurance policy that covers most of your health care expenses, from doctor visits and preventive services to hospitals stays and surgeries. These policies may have a low deductible, high maximum benefits and a co-insurance requirement.
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Covered Expenses

The health care services, procedures, and products your health insurance company agrees to pay for.
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Creditable Coverage

Previous health coverage that helps fulfill a new plan’s exclusion period requirements. Creditable coverage is usually defined as continuous health insurance coverage for a 12 to 18 month period (according to policy) prior to a member’s signing up for the new plan.
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D

Deductible

A specified yearly amount you must pay before your health plan starts paying all (or a portion of) your healthcare costs. Some plans have a deductible of $500. Deductibles may range from as low as $500 up to as high as $10,000.
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E

Exclusions

Health conditions for which an insurer declines to offer coverage, either permanently or for a specific period of time.
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Exclusion period

A waiting period, typically 12 months, during which an insurance company won’t cover a pre-existing condition. Under the HIPAA law, this period must be reduced or waived entirely if the member can prove creditable coverage.
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F

Fee-for-service plan

A type of health insurance plan, also known as a traditional indemnity plan, that covers a set range of services and allows you to choose your doctor or hospital with no (or minimal) restrictions.
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Flexible spending account (FSA)

A tax-free, employer-established account that reimburses you for qualified health care expenses. You must “use or lose” all the funds within the calendar year, and you cannot take funds with you if you leave the company.
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Formulary

An approved list of drugs established by a health plan. Your policy may pay only for drugs on the list, or it may require a higher co-pay for drugs not on the list.
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G

Group health insurance

An employer-based health insurance plan that covers a group of people, usually allowing employees to purchase a self-only or family policy. Union-sponsored employee plans are also considered group plans. Plans sponsored by associations or clubs may be considered group plans if they are sponsored by an employer.
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Guaranteed renewable policy

A policy which the insurer must renew regardless of any health changes (as long as premiums are paid on time).
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H

High-Deductible Health Plan (HDHP)

A health insurance plan, also known as a consumer-directed plan, with a higher deductible than traditional health plans. Some HDHPs qualify members to establish a tax-free Health Savings Account (HSA) to save for medical expenses.
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Health insurance policy

A contract between you and your insurance company that defines how much the company will pay for specific treatments. Policies differ widely in what expenses they cover.
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Health Insurance Portability and Accountability Act of 1996 (HIPAA)

A federal law that allows employees to temporarily continue health insurance coverage when they leave a job, whether their coverage was for an individual or family. HIPAA also sets standards for accepting new members into group plans, and for keeping medical information private. Learn more
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Health Maintenance Organization (HMO)

An insurer offering comprehensive health coverage. Unlike PPOs, HMOs may employ their own staff of health professionals, or they may contract with a network of preferred providers for health services. HMO members generally need pre-approval from their primary care doctor to see a specialist.
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Health reimbursement arrangement (HRA)

An account opened and funded by an employer, which gives employees tax breaks and reimburses them for health care expenses. The balance carries over from year to year, but most HRAs do not allow employees to take the funds with them if they leave the company.
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Health savings account (HSA)

A tax-free account that you own and control. You can open an HSA only if you enroll in a high-deductible health plan that meets specific requirements. Learn more
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High-risk pools

State health insurance plans designed to serve people who cannot obtain job-based or group health insurance and cannot find affordable coverage on their own.
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I

Individual health insurance

Insurance a consumer buys directly from an insurance company, rather than through a group plan. It can cover a single individual or a family.
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In-network

Services provided by hospitals and doctors with whom an insurance company has negotiated lower prices. If you see an “in-network” doctor, you will likely be responsible for a lower co-pay or co-insurance fee than if you visit an “out-of-network” provider.
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L

Lifetime maximum

The maximum amount a policy will pay in your lifetime. You are responsible for any costs above this amount. The policy maximums vary from one policy to another.
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M

Managed care

Health plans that adopt policies to control costs and quality. For example, PPOs give consumers a financial incentive to see doctors who are in the plan’s network. HMOs require members to get a referral from their primary “in-network” physician to see a specialist.
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Medical underwriting

A screening process in which health insurance companies examine an applicant’s health history and other factors to decide whether to offer coverage – and if so, for what conditions, and at what price.
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O

Open enrollment

A period during which you can select from the health plans your employer offers. Companies usually schedule open enrollment annually and for at least 30 days.
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Out-of-network

Services from a healthcare provider who is not in an insurance company’s network of preferred providers. Generally, members pay more for “out-of-network” care.
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Out-of-pocket limit

The maximum amount of money you are required to pay yearly in deductibles, copays, and co-insurance. After you reach the out-of-pocket limit, the plan pays all of your health care costs.
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P

Pre-existing condition

A health condition that exists prior to a member’s enrollment in a new health plan. If you have a pre-existing condition and are applying for individual insurance, insurers may decline your application, offer you insurance at a high price, or offer coverage that excludes some health conditions. If you enroll in a group plan sponsored by your employer, you cannot be rejected for a pre-existing condition, although you may need to complete an exclusion period first.
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Preferred provider organization (PPO)

An insurance group that has agreed to send members to certain qualified health care providers and hospitals in exchange for reduced rates. PPO participants pay less for visits to “in-network” doctors than those not on the approved list.
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Premium

The fixed amount you pay periodically, usually monthly, to a health insurance company for your plan.
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Q

Qualified health care expenses

Expenses that are eligible for reimbursement from a tax-preferred health account (HSA, FSA, or HRA) and may be deducted from your taxable income under certain circumstances. Learn more
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S

Special enrollment

The opportunity to enroll in a group health plan when certain life events occur, regardless of the plan’s regular enrollment dates. Typical changes meriting special enrollment would be marriage, loss of a spouse’s coverage, and adding a child to a family through birth or adoption.
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U

Usual, customary and reasonable (UCR) charge OR Allowable amount

The dollar amount your health plan considers appropriate for a service provided in your area. In-network doctors have agreed to charge no more than the UCR rate. If you visit an out-of-network doctor, you will have to pay any portion of the fee above the UCR charge – typically in addition to a higher co-pay or co-insurance fee.
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