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Health Insurance Glossary

Health Insurance Glossary

Health Insurance Glossary (Life Insurance Glossary)

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Acceleration Clause: The clause within a contract that defines the point at which loan may be declared due and payable.

Accidental Death Benefit: This is an additional benefit added to a life insurance policy.  It is paid to the beneficiary, should death occur due to an accident. Time and age limits may contribute to certain exclusions.

Active Participant: This is the person whose absence from a planned event could trigger a benefit if the event needs to be canceled or postponed.

Activities of Daily Living: These are defined as the actions that constitute day to day habitual activities.  These would include bathing, preparing and eating meals, moving from room to room, getting into and out of beds or chairs, dressing, using a toilet.

Actual Cash Value: This is the current value of property damaged, lost or destroyed.  Depreciation and obsolescence are factored in. For example, a 20-year-old carpet cannot be replaced at current full value because of a decade of depreciation.

Actuary: This is a highly specialized person in the field of the mathematics of insurance.  They are responsible for calculating rates, reserves, dividends and other statistics.

Admitting Privileges: These are privileges that are extended specifically to doctors, allowing them to admit patients to any particular hospital.

Advocacy: These are the motivational actions required to assist groups or individuals to obtain something specific that they need or want.

Agent: Those who represent one or more health insurance companies and present their products to consumers are known as agents. They are licensed salespersons.

Authorization: Primary health care physicians and or health plans (depending on the plan specifications) are required to give permission prior to patients receiving health care services, such as visiting specialists.


Balance Sheet: This refers to a listing of a company's assets, liabilities and surplus as of a specific date.  This is a common accounting term.

Benefit Period: In health insurance, the number of days for which benefits are paid to the named insured and his or her dependents.

Benefit: When the insured suffers a loss.  This is the amount payable by the insurance company to a claimant, assignee, or beneficiary.

Brand-Name Drug: This is a drug still under license and subject to patent privileges.  At the expiration of the patent mark, generic versions of many popular drugs are marketed at lower cost by other companies.

Broker: Licensed insurance salesperson who obtains quotes and plan from multiple sources information for clients.
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Carrier:The name of the insurance company offering a health plan. .

Catastrophic Illness: A major medical or life threatening condition or illness potentially fatal or causing life-long disability.

Certificate of Insurance: The documented description of what is covered, the dollar amounts of coverage, benefits and provisions all of which combine to form the contract.

Claim: A claim is a request for payment to a health provider by the insurance providers for services and benefits you have received.

Co-insurance: The share of health care premiums paid by an enrollee. This is generally found in conjunction with a deductible.

Co-payment: The specified portion or amount paid by the enrollee at the time of service such as office and emergency room visits. Health Maintenance Organizations and some Preferred Provider Organization (PPO) plans charge these.

COBRA: If you work for an insured employer group of 20 or more employees and your coverage is terminated or you lose you job, this Federal legislation allows you to continue to purchase health insurance for up to 18 months whilst you reposition yourself. To find out more, visit the Department of Labor.

Covered Benefit: Describes a health service or item that is included in your health plan and that is paid for either partially or fully.

Covered Charges: Similar to a covered benefit. Includes services or benefits that a health plan makes. These may be either partial or full payments.

Credit for Prior Coverage: If you switch employers or insurance plans, a pre-existing condition waiting period that was met while you were under qualifying coverage may be honored by your new plan if any interruption in the coverage between the new and old insurances, falls within the state guidelines.

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Deductible: The annual amount that has to be paid by the enrollee for services before the insurer will pay for services.

Denial Of Claim: Refusal by an insurance company to honor a request by an individual to pay for health care services obtained from a health care professional.

Dependents: Spouse and/or unmarried children (whether natural, adopted or step) of an insured.

Direct Premiums Written: The aggregate amount of recorded originated premiums, other than reinsurance, written during the year, whether collected or not, at the close of the year, plus retrospective audit premium collections, after deducting all return premiums.

Direct Writer: These are insurers who either make use of direct selling or are exclusively contracted to sell through a particular agency system.

Disease Management: This is a systematized, team grouping of health-care interventions and communications available to patients with specific illnesses or conditions.


Effective Date: The date upon which your coverage becomes active ie commences. Until this date, you are not covered.

Enroll: To join a health plan.

Exclusions: Medical services or medical conditions that are not covered by an individual's insurance policy.

Exclusive Provider Organization (EPO): With these plans, members must choose a primary care physician and are similar to an HMO plan. They administer the plan and pay providers directly. If specialty services are not authorized, the plan usually does not cover unauthorized specialty services.

Explanation of Benefits: The insurance company's written and sometimes detailed explanation of a claim. This indicates what they have paid and what the enrollee must pay. This is sometimes accompanied by a benefits check.


Gatekeeper: The primary care physician in a managed care plan through which all other care (e.g., visits to specialists and other providers, lab and radiology tests, hospitalizations, etc.), with the exception of emergencies, must be coordinated.

Generic Drug:
Upon expiration of a drug company’s patent, other drug companies are allowed to sell a duplicate of the original. These drugs are generally cheaper and termed generic. Most prescription and health plans reward clients for choosing generics.

Group Insurance: Coverage through an employer or other entity that covers all individuals within a group.

Guaranteed Issue Right: The right to purchase insurance without physical examination; the present and past physical condition of the applicant are not considered.

Guaranteed Renewable: Many products include a provision guaranteeing the policy owner the right or option, to renew their coverage at the policy’s anniversary date. Although the company does not have the right to refuse coverage except due to non payment of premiums, they do have the option to raise rates.

Guaranty Association: An organization of life insurance companies within a state responsible for covering the financial obligations of a member company that becomes insolvent.

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Health Care Decision Counseling: Services, sometimes provided by insurance companies or employers, that help individuals weigh the benefits, risks and costs of medical tests and treatments. Unlike case management, health care decision counseling is non-judgmental. The goal of health care decision counseling is to help individuals make more informed choices about their health and medical care needs, and to help them make decisions that are right for the individual's unique set of circumstances.

Health Insurance Discount Plan: A discount plan allows members to access health care providers, such as doctors and dentists, who have agreed to provide services to plan members at discounted rates. Such plans typically charge members a monthly membership fee. Discount plans are not a substitute for health insurance. They are not licensed, even when sold by insurance agents, and can be sold by anyone.

Health Maintenance Organizations (HMOs): Health maintenance organizations provide care through a specified network of doctors and hospitals. Members of HMOs select a primary care physician who coordinates all care. A co-payment is typically required for each office visit. Aside from the co-payment, the patient does not pay for services from a physician or hospital. However, the patient is responsible for the cost of services that are not covered benefits or the cost of unauthorized services that the patient elects to receive.

Health Savings Account (HSA): This savings account is an alternative to traditional health insurance. It was created by a Medicare bill signed by President Bush in December 2003 to provide a way for consumers to set aside pre-tax dollars for medical expenses, such as co-payments, deductibles and medication, and save for future medical expenses. You must be covered by a "high deductible health plan (HDHP)" to take advantage of HSAs. A high deductible health plan generally costs less than a traditional plan so the money you save on insurance can be put into the health savings account. For more information, visit the
U.S. Department of Treasury Web site.

HIPAA: A Federal law passed in 1996 (full name is "The Health Insurance Portability and Accountability Act of 1996.") that allows persons to qualify immediately for comparable health insurance coverage when they change their employment or relationships. It also creates the authority to mandate the use of standards for the electronic exchange of health care data; to specify what medical and administrative code sets should be used within those standards; to require the use of national identification systems for health care patients, providers, payers (or plans), and employers (or sponsors); and to specify the types of measures required to protect the security and privacy of personally identifiable health care.



In-network: This is a specified group of providers or health care facilities that form part of  a health plan network. Enrollees tend to pay less when using an in-network provider, because those networks have contracts with insurance companies, and can therefore provide services at a lower cost.

Indemnity: A traditional insurance medical plan that allows the enrollee to choose any provider and pays a portion of the medical bills. The enrollee pays a deductible and coinsurance.

Indemnity Health Plan: Indemnity health insurance plans are mostly health plans that existed before HMO’s, IPA’s and PPO’s came into being. The fees vary from physician to physician and are prescribed by the providers. For example the individual might pay 20% and the insurance company pays the other 80% . The upside is that the individual may select their own health care professionals.

Independent Practice Association (IPA): An organization of providers who have joined together for the purpose of entering into HMO contracts to provide medical care as a participating medical group.

Individual Health Insurance: Health insurance coverage on an individual, not group, basis. The premium is usually lower for an individual health insurance plan than for a group policy.

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Lifetime Maximum Benefit (or Maximum Lifetime Benefit): the maximum amount a health plan will pay in benefits to an insured individual during that individual's lifetime.

Limitations: a limit on the amount of benefits paid out for a particular covered expense, as disclosed on the Certificate of Insurance.

Long-Term Care Policy: Insurance policies that cover specified services for a specified period of time. Long-term care policies (and their prices) vary significantly. Covered services often include nursing care, home health care services, and custodial care.

Long-term Disability Insurance: Pays an insured a percentage of their monthly earnings if they become disabled.

LOS: LOS refers to the length of stay. It is a term used by insurance companies, case managers and/or employers to describe the amount of time an individual stays in a hospital or in-patient facility.


Managed Care: A medical delivery system that attempts to manage the quality and cost of medical services that individuals receive. Most managed care systems offer HMOs and PPOs that individuals are encouraged to use for their health care services. Some managed care plans attempt to improve health quality, by emphasizing prevention of disease.

Maximum Dollar Limit: The maximum amount of money that an insurance company will pay for claims within a specific time period.

Medigap Insurance Policies: Medigap insurance is offered by private insurance companies, not the government. It is not the same as Medicare or Medicaid. These policies are designed to pay for some of the costs that Medicare does not cover.

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Network: A group of doctors, hospitals and other health care providers contracted to provide services to insurance companies customers for less than their usual fees. Provider networks can cover a large geographic market or a wide range of health care services. Insured individuals typically pay less for using a network provider.



Out-of-Network: This phrase usually refers to physicians, hospitals or other health care providers who are considered nonparticipants in an insurance plan. Depending on an individual's health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual's insurance company.

Out-Of-Pocket Maximum: A predetermined limited amount of money that an individual must pay out of their own pocket, before an insurance company will pay 100 percent for an individual's health care expenses.

Outpatient: An individual (patient) who receives health care services (such as surgery) on an outpatient basis, meaning they do not stay overnight in a hospital or inpatient facility. Many insurance companies have identified a list of tests and procedures (including surgery) that will not be covered (paid for) unless they are performed on an outpatient basis. The term outpatient is also used synonymously with ambulatory to describe health care facilities where procedures are performed.


Pre-existing Conditions: A medical condition that is excluded from coverage by an insurance company, because the condition was believed to exist prior to the individual obtaining a policy from the particular insurance company.

Preferred Provider Organizations (PPOs): You receive discounted rates if you use doctors from a pre-selected group. If you use a physician outside the PPO plan, you must pay more for the medical care.

Primary Care Provider (PCP): A health care professional (usually a physician) who is responsible for monitoring an individual's overall health care needs.

Provider: Provider is a term used for health professionals who provide health care services. Sometimes, the term refers only to physicians. Often, however, the term also refers to other health care professionals such as hospitals, nurse practitioners, chiropractors, physical therapists, and others offering specialized health care services.

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Reasonable and Customary Fees: The average fee charged by a particular type of health care practitioner within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test or procedure.

Rider: A modification made to a Certificate of Insurance regarding the clauses and provisions of a policy (usually adding or excluding coverage).

Risk: The chance of loss, the degree of probability of loss or the amount of possible loss to the insuring company. For an individual, risk represents such probabilities as the likelihood of surgical complications, medications' side effects, exposure to infection, or the chance of suffering a medical problem because of a lifestyle or other choice.


Second Opinion: It is a medical opinion provided by a second physician or medical expert, when one physician provides a diagnosis or recommends surgery to an individual. Individuals are encouraged to obtain second opinions whenever a physician recommends surgery or presents an individual with a serious medical diagnosis.

Short-Term Disability: An injury or illness that keeps a person from working for a short time. The definition of short-term disability (and the time period over which coverage extends) differs among insurance companies and employers. Short-term disability insurance coverage is designed to protect an individual's full or partial wages during a time of injury or illness (that is not work-related) that would prohibit the individual from working.

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

State Mandated Benefits: When a state passes laws requiring that health insurance plans include specific benefits.

Stop-loss: The dollar amount of claims filed for eligible expenses at which point you've paid 100% of your out-of-pocket and the insurance begins to pay at 100%. Stop-loss is reached when an insured individual has paid the deductible and reached the out-of-pocket maximum amount of co-insurance.

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Underwriter: The company that assumes responsibility for the risk, issues insurance policies and receives premiums.

Usual, Customary and Reasonable (UCR) or Covered Expenses: An amount customarily charged for or covered for similar services and supplies which are medically necessary, recommended by a doctor, or required for treatment.


Waiting Period: A period of time when you are not covered by insurance for a particular problem.

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