Glossary of healthcare and health insurance terms

Accountable care organization (ACO)

A group of healthcare providers that gives coordinated care for chronic disease management with the goal of improving the quality of patient care. The “organization’s” payment is tied to achieving healthcare quality goals and outcomes that result in cost savings. ACOs can include various types of doctors—primary care, specialists, etc.—as well as other medical providers (nurses, physician’s assistants, etc.) and institutions (hospitals, multi-physician practices).

Accreditation 

This is the “seal of approval” given to a plan by an independent organization to show that the plan meets national quality standards.

Affordable Care Act (ACA)

Also known as the Patient Protection and Affordable Care Act (PPACA), healthcare reform (HCR), and Obamacare, it is the comprehensive healthcare reform law enacted in March 2010. The law was enacted in two parts: PPACA was signed into law on March 23, 2010. It was amended by the Healthcare and Education Reconciliation Act on March 30, 2010. Affordable Care Act refers to the final, amended version of the law.

Allowed amount

Discounted fees that insurers recognize and pay for covered services. Insurers negotiate these discounts with providers in their health plan network. Network providers agree to accept the allowed charge as payment in full. Each insurer has its own schedule of allowed charges.

Annual limit 

A cap on the benefits your insurance company will pay in a year while you’re enrolled in a health insurance plan. Annual caps are sometimes placed on particular services, such as prescriptions or hospitalizations. Annual limits may be placed on the dollar amount of covered services or on the number of visits for a particular service. After the annual limit is reached, you must pay all associated healthcare costs for the rest of the year.

Appeal

A request for a health insurer or plan to review a decision or a grievance again. See information on how to file an appeal.

Beneficiary

A person who is covered by a particular health insurance plan. This person may be the policy holder or a covered dependent.

Benefits

The healthcare items or services covered under a health insurance plan. Covered benefits and excluded services are defined in the health insurance plan’s coverage documents. In Medicaid or Children's Health Insurance Plan (CHIP), covered benefits and excluded services are defined in state program rules.

Biologic

A biologic (also known as a biological product) is a type of medication created from biological sources, such as donated plasma, cell culture, or bone marrow rather than being created chemically like drugs. Biologics can be composed of sugars, proteins, or nucleic acids, or complex combinations of these substances, or may be living entities, such as cells and tissues. Immunoglobulin, administered intravenously or subcutaneously, is a biologic. Gene therapy products are also biologics.

Biosimilar

A biosimilar is the “follow-on” or subsequent version of a biologic. Biosimilars and biologics have the same relationship that generic drugs have with brand name drugs, with an important distinction that due to their complexity, biosimilars are not identical to the original biologic. The Food and Drug Administration (FDA) lists recognized biosimilars available for a biologic. Note that no immunoglobulin product has an FDA-recognized biosimilar.

Bronze health plan

A plan in the health insurance marketplace/exchanges where the percentage the plan pays of the average overall cost of providing essential health benefits to members is 60%.

Care coordination

The process of organizing your treatment across several healthcare providers. Medical homes and accountable care organizations (ACOs, see definition above) are two common ways to coordinate care.

Catastrophic plan

A healthcare plan that only covers certain types of expensive care, like hospitalizations. May also include plans that have a high deductible, so that your plan begins to pay only after you’ve first paid up to a certain amount for covered services. You must be under 30 years old to purchase a catastrophic plan through a marketplace/exchange.

Centers for Disease Control and Prevention (CDC)

The federal public health agency responsible for protecting health and promoting quality of life through the prevention and control of disease, injury, and disability.

Centers for Medicare and Medicaid Services (CMS)

The federal agency that administers the Medicare, Medicaid, and Children’s Health Insurance Programs (CHIP), and implements many provisions of the Affordable Care Act (ACA) related to private health insurance marketplaces/exchanges.

Certified application counselor (CAC)

An individual (affiliated with a designated organization) who is trained to help consumers, small businesses, and their employees as they search for and enroll in health insurance options through the marketplace/exchanges. CAC services are free to consumers.

Children’s Health Insurance Program (CHIP)

Insurance program jointly funded by state and federal government that provides health insurance to low-income children. In some states, it covers pregnant women in families who earn too much income to qualify for Medicaid but cannot afford to purchase private health insurance coverage.

Claim

A request for payment that you or your healthcare provider submits to your health insurer after you receive covered items or services.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal law that may allow you to temporarily keep your employer-based health coverage if your employment ends, you lose coverage as a dependent of a covered employee, or if there is another qualifying event. COBRA requires you to pay 100% of the plan premiums, including the share the employer used to pay, plus a small administrative fee.

Coinsurance

A form of medical cost sharing in a health insurance plan that requires an insured person to pay a stated percentage (rather than a set dollar amount) of medical expenses after the deductible amount, if any, is paid. Coinsurance is laid out in health plan coverage documents.

Community health centers (CHC) 

Public and private nonprofit organizations provide comprehensive, culturally competent, quality primary and related healthcare services to medically underserved communities and vulnerable populations. The centers are managed and governed by a community board, which is primarily comprised of patients and community members. There are several different types of CHCs: Federally Qualified Health Centers (FQHCs), non-grant-supported health centers, and outpatient health programs/facilities operated by tribal organizations.

Consumer assistance program (CAP)

Programs in some states that assist consumers with problems or questions concerning healthcare coverage. 

Consumer operated and oriented plan (CO-OP)

A nonprofit health insurance organization for which insured people are also the owners. Cooperatives can be formed at a national, state, or local level and can include doctors, hospitals, and businesses as member-owners. 

Coordination of benefits (COB)

A way to figure out who pays first when two or more health insurance plans are responsible for paying the same medical claim.

Copayment or copay

A flat dollar amount you must pay for a covered benefit. For example, you may have to pay a $15 copayment for each covered visit to a primary care doctor. Copays are laid out in health plan coverage documents.

Cost sharing 

The share of costs for benefits covered by your insurance that you pay out of pocket. This share is commonly referred to as out-of-pocket (OOP) costs. Cost sharing includes deductibles, coinsurance, and copays, or similar charges, but it doesn’t include premiums, balance billing amounts for non-network providers, or the cost of non-covered services. Cost sharing in Medicaid and CHIP also includes premiums.

Cost-sharing reduction (CSR) 

A discount that lowers the amount you have to pay out-of-pocket for deductibles, coinsurance, and copays. You can get this reduction if you get health insurance through the marketplace/exchange, your income is below a certain level, and you choose a silver health plan. If you are a member of a federally recognized tribe, you may qualify for additional cost-sharing benefits.

Deductible 

The amount you must pay for covered care before your health insurance begins to pay. Insurers apply and structure deductibles differently. For example, under one plan, a comprehensive deductible might apply to all services, while another plan might have separate deductibles for prescription drug coverage.

Department of Health and Human Services (HHS) 

The federal agency is charged with protecting the health of all Americans. Its agencies include the Centers for Medicare and Medicaid Services (CMS), Centers for Disease Control and Prevention (CDC), the Health Resources and Services Administration (HRSA), the National Institutes of Health (NIH), and the Food and Drug Administration (FDA).

Dependent 

A child or other individual for whom a parent, relative, or other person may claim a personal exemption tax deduction. Under the Affordable Care Act, individuals may be able to claim a premium tax credit to help cover the cost of coverage for themselves and their dependents.

Dependent coverage 

Insurance coverage for family members of the policyholder, such as spouse, children, or partners.

Disability 

A limit in action, restriction, or impairment that can be physical and/or mental. Different state, federal, or private programs define disability differently and have different criteria.

Drug list

Also referred to as a formulary, it is a list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits.

Durable Medical Equipment (DME)

Equipment and supplies ordered by a healthcare provider for everyday or extended use. DME may be considered a separate category under a health insurance plan. Coverage for DME may include oxygen equipment, wheelchairs, crutches, or blood testing strips for diabetics.

Early periodic screening, diagnostic & treatment services (EPSDT)

 The comprehensive set of Medicaid benefits covered for children.

Electronic medical record (EMR)

A digital version of a paper chart that contains all of a patient’s medical history from one practice.

Employer mandate

The Affordable Care Act requires certain employers with at least 50 full-time employees (or equivalents) to offer health insurance coverage to their full-time employees (and their dependents) that meets certain minimum standards or to make a penalty tax payment.

Employer-sponsored insurance (ESI)

Sometimes called group health insurance, this is health insurance provided by an employer, who typically covers a portion of the costs. Plan options may include several types of plan structures.

Employee Retirement Income Security Act of 1974 (ERISA)

A federal law that establishes standards for some employer-sponsored health insurance, particularly for self-insured employer-sponsored plans. ERISA plans are only regulated by federal law, state health insurance laws don’t apply to them. ERISA plans are exempt from some of the Affordable Care Act reforms.

Essential community providers (ECP)

The Affordable Care Act designates certain providers that are included in section 340B(a)(4) of the Public Health Service Act as essential community providers. Plans offered through the marketplace/exchanges are required to include some ECPs in their networks.

Essential health benefits (EHB)

The Affordable Care Act defines essential health benefits, which must be covered by certain plans, as: 

• Ambulatory patient services. 
• Emergency services. 
• Hospitalization. 
• Maternity and newborn care. 
• Mental health and substance use disorder services, including behavioral health treatment. 
• Prescription drugs. 
• Rehabilitative and habilitative services and devices. 
• Laboratory services. 
• Preventive and wellness services and chronic disease management. 
• Pediatric services, including oral and vision care.

EHB are defined differently in each state, based on what was covered by a typical benchmark plan that existed in the state in 2014 or later. Private health insurance policies must cover these benefits in order to be certified and offered in marketplaces/exchanges. 

For the majority of health insurance plans, annual dollar limits on essential health benefits were completely phased out by 2014.

Exclusions

Items or services that are not covered under a contract for insurance and which an insurance company won’t pay.

Exclusive provider organization (EPO) plan

A managed care plan in which services are covered only if you go to doctors, specialists, or hospitals in the plan’s network (except in an emergency).

Explanation of benefits (EOB)

Documentation sent by an insurance company to a beneficiary that includes a summary of the claims processed, a summary of what the insurer paid for each claim and what the beneficiary’s responsibility may be, and a summary of the beneficiary's year-to-date costs in the plan.

External review

A review of a plan’s decision to deny coverage for or payment of a service by an independent third party not employed by the plan. If the plan denies an appeal, an external review can be requested. In urgent situations, an external review may be requested even if the internal appeals process isn’t yet completed. An external review either upholds the plan’s decision or overturns all or some of the plan’s decision. The plan must accept this decision.

How to appeal a denied claim

Federally-facilitated marketplace/federally-facilitated exchange (FFM/FFE)

One of the three types of marketplace/exchange options for states under the Affordable Care Act. States opting for an FFM/FFE have a marketplace/exchange that is run by the federal government through healthcare.gov.

Federal poverty level (FPL)

A measure of income level issued annually by the Department of Health and Human Services. FPL is used to determine eligibility for certain programs and benefits, including public health insurance programs. FPL is also used to calculate premium subsidies for those purchasing marketplace/exchange plans.

Federally qualified health centers (FQHC)

Federally funded nonprofit health centers or clinics that serve medically underserved areas and populations. FQHCs provide primary care services regardless of your ability to pay. Services are provided on a sliding scale fee.

Fee for service (FFS)

A reimbursement plan in which doctors and other healthcare providers are paid for each service performed, such as for individual tests and office visits.

Flexible benefits plan

Also known as a cafeteria plan or IRS 125 plan, these plans offer employees a choice between various benefits, including cash, life insurance, health insurance, vacations, retirement plans, and child care. Although a common core of benefits may be required, you can choose how your remaining benefit dollars will be allocated for each type of benefit from the total amount promised by the employer. Sometimes you can contribute more for additional coverage.

Flexible spending account (FSA)

Accounts offered and administered by employers that allow employees to set aside pre-tax dollars out of their paycheck to pay for the employee’s share of insurance premiums or medical expenses not covered by the employer’s health plan (ex., deductibles, copays, coinsurance). The employer may also make contributions to an FSA. Typically, benefits or cash must be used within the given benefit year, or the employee loses the money. However, employers can choose whether they want to allow a maximum amount set annually by the IRS to be rolled over to the following year or grant a 2.5 month grace period after the benefit year for employees to use the funds. FSAs can also be provided to cover dependent care expenses, but those accounts must be established separately from medical FSAs.

Formulary

Sometimes referred to as a “drug list,” it is a list of drugs your insurance plan covers and may include how much you pay for each drug. If the plan categorizes drugs into different groups with different copays, also known as tiers, then the formulary may list drugs by these tiers. Formularies can include both generic drugs and brand-name drugs.

Fully insured employer plan 

A plan in which the employer contracts with another organization to assume financial responsibility for the enrollees’ medical claims and all incurred administrative costs. 

Grandfathered health plan

As defined in the Affordable Care Act, a group health plan that was created—or an individual health insurance policy that was purchased—on or before March 23, 2010 is 'grandfathered' and is exempt from many ACA requirements.

Plans or policies may lose their grandfathered status if they make certain significant changes that reduce benefits or increase costs to consumers. A health plan must disclose in its plan materials if it is a grandfathered plan and advise consumers how to contact the U.S. Department of Labor or HHS with questions.

Grievance

A complaint a beneficiary communicates to their health insurer or plan.

Guaranteed issue

A requirement that health plans must permit you to enroll regardless of health status, age, gender, or other factors that might predict the use of health services. Except in some states, guaranteed issue doesn’t limit how much you can be charged if you enroll.

Guaranteed renewal

A requirement that your health insurance issuer must offer to renew your policy as long as you continue to pay premiums. Except in some states, guaranteed renewal doesn’t limit how much you can be charged if you renew your coverage.

Habilitative/habilitation services

Healthcare services that help you keep, learn, or improve skills and functioning for daily living. Examples include therapy for a child who is not walking or talking at the expected age. These services may include physical and occupational therapy, speech-language pathology, and other services for people with disabilities in various inpatient and/or outpatient settings. Habilitative services are one of the ten essential health benefits (EHBs).

Health insurance exchange/marketplace

These are transparent and competitive sites established under the Affordable Care Act where individuals and small businesses can buy qualified health plans that meet certain benefit and cost standards. Every state has a marketplace/exchange. Some states have their own marketplaces/exchanges while others use healthcare.gov.

Health Insurance Portability and Accountability Act (HIPAA)

HIPAA is a 1996 law that eliminated discrimination by health insurers for those with pre-existing medical conditions. It also sets important privacy and security standards for healthcare entities so that consumers’ health information is protected.

Health maintenance organization (HMO)

An insurance plan that limits coverage to care from doctors who work for or contract with the HMO. Generally won’t cover out-of-network care except in an emergency, and may require you to live or work in its service area to be eligible for coverage.

Health Resources and Services Administration (HRSA)

An agency of the U.S. Department of Health and Human Services (HHS) that works to improve access to healthcare services.

Health savings account (HSA)

A medical savings account available only to taxpayers who are enrolled in a high-deductible health plan. The funds contributed to the account aren’t subject to federal income tax at the time of deposit. Funds must be used to pay for qualified medical expenses. Unlike a Flexible Spending Account (FSA), funds roll over year to year if you don’t spend them.

Health status

Refers to your medical conditions (both physical and mental health), claims experience, receipt of healthcare, medical history, genetic information, evidence of insurability, and disability.

High-deductible health plan (HDHP)

A plan that features higher deductibles than traditional insurance plans as defined annually by the Internal Revenue Service (IRS). Outside of preventative care defined by the Affordable Care Act, HDHPs require you to meet the plan's deductible before benefits kick in, including other cost sharing like copays or coinsurance. HDHPs can be combined with a health savings account or a health reimbursement arrangement to allow you to pay for qualified out-of-pocket medical expenses on a pre-tax basis.

High-risk pool (HRP) plan

HRP plans offer health insurance coverage that is subsidized by state government. Many high-risk pool plans have been phased out following the implementation of pre-existing condition requirements of the Affordable Care Act, but some HRP plans still exist, mostly to cover those on Medicare under age 65 in states that do not require Medigap insurers to offer coverage to these individuals.

Home- and community-based services (HCBS)

Services and support provided by most state Medicaid programs in your home or community that help with such daily tasks as bathing or dressing. Covered when provided by care workers or, if your state permits it, by your family.

Home healthcare

Healthcare services and supplies in your home that a doctor prescribes.

Hospital readmission

A return by a patient to the hospital following discharge for the same or related care within 30, 60, or 90 days. Hospital readmissions are often used in part to measure the quality of hospital care.

Individual health insurance policy

Policies for people who aren’t connected to job-based coverage. Individual health insurance policies are regulated under state and federal law. Note that the phrase “individual policies” when used in this way—policies that are unconnected to employment—can be used for policies that cover a single person (the policyholder) or multiple people (the policyholder plus dependents).

In-network provider

A physician, certified nurse midwife, hospital, skilled nursing facility, home healthcare agency, or any other duly licensed or certified institution or healthcare professional under contract with your insurance provider. Copays or coinsurance for in-network providers are usually lower than for out-of-network providers. Some plans only cover in-network providers. 

Lifetime limit/cap

A cap on the total lifetime benefits your insurance policy will cover in dollars or quantity. As of September 2010, non-grandfathered health plans can no longer set lifetime dollar limits on essential health benefits (EHBs). Plans can continue to limit specific benefits by number (for example, covering only a certain number of visits).

Long-term care (LTC)

Medical and non-medical services provided to people who are unable to perform basic activities of daily living, such as dressing or bathing. Long-term support and services can be provided at home, in the community, in assisted living, or in nursing homes. Individuals may need long-term support and services at any age. Medicare and most health insurance plans don’t pay for long-term care.

Managed care plan

A plan that generally provides comprehensive health services to its members, and offers financial incentives for patients to use the providers who belong to the plan. Examples include health maintenance organizations (HMOs), preferred provider organizations (PPOs), exclusive provider organizations (EPOs), and point of service plans (POSs).

Managed care provisions

Features within health plans that provide insurers with a way to manage the cost, use, and quality of healthcare services received by group members. Examples of managed care provisions include:

• Preadmission certification: Authorization for hospital admission given by the insurance company to a healthcare provider prior to the hospitalization of the beneficiary. Failure to obtain a preadmission certification in non-emergencies reduces or eliminates the insurance company’s obligation to pay for services rendered.
• Utilization review: The process of reviewing the appropriateness and quality of care provided to patients. Utilization review may take place before, during, or after the services are rendered.
• Preadmission testing: Requirement designed to encourage patients to obtain necessary diagnostic services on an outpatient basis prior to non-emergency hospital admission. The testing is designed to reduce the length of a hospital stay.
• Non-emergency weekend admission restriction: A requirement that imposes limits on reimbursement to patients for non-emergency weekend hospital admissions.
• Second surgical opinion: A cost-management strategy that encourages or requires patients to obtain the opinion of another doctor after a physician has recommended that a non-emergency or elective surgery be performed. Programs may be voluntary or mandatory in that reimbursement is reduced or denied if the participant does not obtain the second opinion. Plans usually require that such opinions be obtained from board-certified specialists with no personal or financial interest in the outcome.

Medicaid

A state-administered health insurance program for low-income families and children, pregnant women, the elderly, people with disabilities, and in some states, other adults. The federal government provides a portion of the funding and sets guidelines. States also have choices in how they design their program, so Medicaid programs and eligibility vary from state to state and may have a different name in your state.

Medical loss ratio (MLR)

A financial tool that measures the percentage of premium dollars taken in by a health insurer that is spent on customers’ medical claims and quality improvement activities as compared to money spent on overhead expenses, including salaries, administrative costs, and agent commissions. The Affordable Care Act sets minimum medical loss ratios for different markets, as do some state laws. If your plan does not meet an applicable MLR, then you or your employer could receive a refund.

Medically necessary

Services or supplies that are needed for the diagnosis or treatment of your health condition and meet accepted standards of medical practice. A service is medically necessary if it meets any one of the following standards:

• The service or benefit will, or is reasonably expected to, prevent the onset of an illness, condition, or disability.
• The service or benefit will, or is reasonably expected to, reduce or ameliorate the physical, mental, or developmental effects of an illness, condition, or disability.
• The service or benefit will assist the individual to achieve or maintain maximum functional capacity in performing daily activities, taking into account both the functional capacity of the individual and those functional capacities that are appropriate for individuals of the same age.

Medical underwriting

A process used by insurance companies that uses your health status when you’re applying for health insurance coverage to determine whether to offer you coverage, at what price, and with what exclusions or limits. The Affordable Care Act eliminated medical underwriting in plans offered through marketplaces/exchanges.

Medicare

A federal health insurance program for people who are age 65 or older and certain younger people who qualify for Social Security disability benefits. It also covers people with end-state renal disease (ESRD) or amyotrophic lateral sclerosis (ALS). Medicare is composed of four parts:

• Medicare Part A: Hospital insurance that helps cover inpatient care in hospitals, skilled nursing facilities, hospice, and home care. Most beneficiaries are enrolled in Part A automatically.
• Medicare Part B: Medical coverage that helps to cover medically necessary services like doctors’ services, outpatient care, home health services, and other medical services. Part B also covers some preventive services and provider-administered drugs like immunoglobulin replacement therapy (IVIG) for patients with certain primary immunodeficiency diagnoses. Most beneficiaries are enrolled in Part B automatically. It covers all approved services up to 80% after the deductible has been met.
• Medicare Part C/Medicare Advantage (MA): A type of Medicare health plan offered by a private company that contracts with Medicare to provide you with all of your Medicare Part A and Part B benefits. There are many types of Medicare Advantage plans (MAP) including HMOs, PPOs, private fee-for-service plans, special needs plans, and Medicare medical savings account plans. If you’re enrolled in an MA plan, Medicare services are covered through the plan and aren’t paid for under Parts A and B. Most Medicare Advantage plans offer prescription drug coverage as well. If you choose an advantage plan, you are not eligible to obtain a secondary, or Medigap, policy.
• Medicare Part D: An optional program that provides prescription drug coverage. There are two ways to get Medicare prescription drug coverage: through a Medicare prescription drug plan or a Medicare Advantage plan that includes drug coverage. These plans are offered by insurance companies and other private companies approved by Medicare.
• Medicare Part F or G (Medigap): A secondary health plan to Medicare Part B that helps with the remaining 20% that Medicare Part B does not cover.

Make sure you understand the plan's coverage before enrolling. Since Medicare plans vary from state to state and even by counties within a state, you need to research what plans you are eligible for. You can contact your state health insurance assistance program (SHIP) to find trained counselors who can tell you the plans you are eligible for and assist you in finding the answers to your questions regarding coverage. 

Medicare donut hole

Most plans with Medicare prescription drug coverage (Part D) have a coverage gap, called a donut hole. After you have met your deductible for covered drugs, you have to pay up to 25% of your plan's costs out-of-pocket for your prescriptions up to a yearly limit. Once you have spent up to the yearly limit, your coverage gap ends and your drug plan helps pay for covered drugs again. The donut hole is being phased out by 2025.

Minimum essential coverage

The type of coverage an individual needs to have to meet the individual responsibility requirement under the Affordable Care Act. This includes individual market policies, job-based coverage, Medicare, Medicaid, CHIP, TRICARE, and certain other coverage.

Minimum value

A health plan meets this standard if it’s designed to pay at least 60% of the total cost of medical services for a standard population. Starting in 2014, individuals offered employer-sponsored coverage that provides minimum value and that’s affordable won’t be eligible for a premium tax credit if they choose to purchase health insurance through the marketplace/exchange.

Modified adjusted gross income (MAGI)

The figure compared to the federal poverty level (FPL) to determine eligibility for lower costs in the marketplace/exchange or for Medicaid and CHIP. Generally, modified adjusted gross income is your adjusted gross income plus any tax-exempt Social Security, interest, or foreign income you have.

Navigator

An individual or organization that’s trained to help consumers, small businesses, and their employees as they look for health coverage options through the Affordable Care Act marketplaces/exchanges. Navigators assist consumers with completing eligibility and enrollment forms. These individuals and organizations are required to be unbiased, and their services are free to consumers.

New plan

As referenced in the Affordable Care Act, a health plan that is not grandfathered and therefore subject to the reforms in the Affordable Care Act. In the individual health insurance market, this is a plan you are purchasing for the first time. In the group health insurance market, this is a plan that your employer is offering for the first time. New employees and new family members may be added to existing grandfathered group plans—so a plan that is new to you and your family may still be a grandfathered plan.

Open enrollment period (OEP)

The time period when you are allowed to choose from available plans, usually once a year. You may enroll in a plan, switch plans, or add dependents to a plan without a qualifying event during this period.

Out-of-network providers

A duly licensed or certified institution or health professional not under contract with your insurance provider. Some insurance plans will not pay claims from out-of-network providers, while others may have higher copays or coinsurance for out-of-networks providers than for in-network providers.

Out-of-pocket (OOP) limit

The maximum amount you are required to pay for covered services in a year before the plan covers 100% of all costs. Generally, this includes the deductible, coinsurance, and copays (varies from plan to plan), but not premiums. Plans can set different out-of-pocket limits for different services.  

Pharmacy benefit manager (PBM)

Health plans and sponsors contract with Pharmacy Benefit Managers to handle the claims processing and administrative functions involved with prescription drug programs. In addition to processing and paying claims, PBMs develop and maintain a drug formulary, contract with participating pharmacies, and negotiate discounts and rebates with drug manufacturers.

Plan/policy year

A 12-month period of benefits coverage under a group or individual health insurance plan. This 12-month period might differ from the calendar year, depending on when your health plan renews.

Point-of-service (POS) plan 

A type of plan in which you pay less if you use doctors, hospitals, and other healthcare providers that belong to the plan’s network. POS plans may also require you to get a referral from your primary care doctor in order to see a specialist.

Pre-existing condition

With certain limited exceptions, a pre-existing condition is any condition (physical, mental, or a disability) for which medical advice, diagnosis, care, or treatment was recommended or received within the 6 months before you enrolled in a health insurance plan. Before the passage of the Affordable Care Act, insurers could either not offer health insurance to you if you had a pre-existing condition or could refuse to cover any services related to a pre-existing condition (known as a pre-existing condition exclusion). 

Preferred provider organization (PPO)

A type of health plan that contracts with medical providers, such as hospitals and doctors, to create a network of participating providers. You pay less if you use providers who belong to the plan’s network. You can use doctors, hospitals, and providers outside of the network for an additional cost.

Premium

A monthly or annual payment you make to your insurer to get and keep insurance coverage. Premiums can be paid by employers, unions, employees, or individuals, or shared among different payers.

Prescription drug coverage

Health insurance or plan that helps pay for prescription drugs and medications.

Preventive services 

Routine healthcare that includes screenings, checkups, and patient counseling to prevent illnesses, diseases, or other health problems.

Primary care

Health services that cover a range of prevention, wellness, and treatment options for common illnesses. Primary care providers (PCP) include doctors, nurses, nurse practitioners, and physician assistants. They often maintain long-term relationships with you and advise and treat you on a range of health-related issues. They may also coordinate your care with specialists. Some health insurance plans require you to choose a PCP and/or to obtain referrals from your PCP to see specialists.

Prior authorization

Approval by your health insurer for a healthcare service, treatment plan, prescription drug, or durable medical equipment that you have not yet received. This is sometimes called preauthorization, prior approval, or precertification. Your plan may require prior authorization for certain services before you receive them, except in an emergency. Prior authorization, however, isn’t a promise your health insurance or plan will cover the cost. Typically, your healthcare provider or their office staff complete prior authorization on your behalf.

Get prior authorization tips

Qualified health plan (QHP)

Under the Affordable Care Act, an insurance plan that is certified by a marketplace/exchange, provides essential health benefits, follows established limits on cost sharing (like deductibles, copayments, and out-of-pocket maximum amounts), and meets other requirements. A qualified health plan will have a certification by each marketplace/exchange in which it is sold.

Qualifying event

Certain life events that make someone eligible to enroll in a health insurance plan, including a marketplace/exchange plan, outside of the plan's designated open enrollment period. A qualifying event can also refer to eligibility for COBRA benefits.

Rate review

A process that allows state insurance departments to review rate increases before insurance companies can apply them to you.

Referral

A written order from your primary care provider (PCP) for you to see a specialist or get certain medical services. In many health maintenance organizations (HMOs), you need to get a referral before you can get medical care from anyone except your PCP. If you don’t get a referral first, the plan may not pay for the services.

Rehabilitative/rehabilitation services

Healthcare services that help you keep, get back, or improve skills and functioning for daily living that has been lost or impaired because you were sick, hurt, or disabled. These services may include physical and occupational therapy, speech-language pathology, and psychiatric rehabilitation services in a variety of inpatient and/or outpatient settings.

Rescission

The retroactive cancellation of a health insurance policy. Insurance companies can retroactively cancel your entire policy if you provide incorrect information on your initial application when you buy an individual market insurance policy. Under the Affordable Care Act, rescission is illegal except in cases of fraud or intentional misrepresentation of material fact as prohibited by the terms of the plan or coverage.

Rider (exclusionary rider)

An amendment to an insurance policy. Some riders add coverage while other riders exclude coverage (known as exclusionary rider). Beginning January 1, 2014, no exclusionary riders are permitted in any health insurance plan.

Self-insured plan

Type of plan usually offered by larger companies where the employer itself collects premiums from enrollees and takes on the responsibility of paying employees’ and dependents’ medical claims. These employers can contract for insurance services such as enrollment, claims processing, and provider networks with a third-party administrator, or they can be self-administered.

Skilled nursing facility (SNF)

Skilled nursing care and rehabilitation services provided on a continuous, daily basis, in a healthcare facility. Patients may need SNF care after surgery or major illness before returning to their homes.

Small Business Health Options Program (SHOP)

The marketplace/exchange available to small businesses under the Affordable Care Act. Small businesses buying plans in the SHOP select the plan and decide how much they pay toward employee premiums. Participating small businesses may qualify for a small business health tax credit worth up to 50% of their premium costs.

Social security disability income (SSDI)

Income payed by the federal government to individuals who are determined to be disabled.

Special enrollment period (SEP)

A time outside of the open enrollment period during which you and your family have a right to sign up for job-based or marketplace/exchange health coverage. Job-based plans must provide a special enrollment period of 30 days following certain life events that involve a change in family status (such as marriage or birth of a child) or loss of other job-based health coverage.

Special healthcare need

The healthcare and related needs of children who have chronic physical, developmental, behavioral, or emotional conditions. Such needs are of a type or amount beyond that required by children generally.

Specialty pharmacy provider (SPP)

A pharmacy that is designated to provide specialized medication for complex, genetic, rare, and chronic health conditions. Specialty pharmacy providers may provide home health or nursing services.

State-based marketplace/State-based exchange (SBM/SBE)

One of the three types of marketplace/exchange options for states under the Affordable Care Act. States opting for an SBM/SBE manage their own marketplace/exchange in accordance with applicable federal laws.

State continuation coverage

A state-based requirement similar to COBRA that applies to group health insurance policies of employers with fewer than 20 employees. In some states, state continuation coverage rules also apply to larger group insurance policies and add to COBRA protections. For example, in some states, if you’re leaving a job-based plan, you must be allowed to continue your coverage until you reach the age of Medicare eligibility.

State partnership marketplace/State partnership exchange (SPM/SPE)

One of the three types of marketplace/exchange options for states under the Affordable Care Act. States opting for an SPM/SPE have a marketplace/exchange that is run by the federal and state government jointly.

Summary of benefits and coverage (SBC)

The Affordable Care Act requires plans to offer this easy-to-read summary that lets you compare costs and coverage between health plans. You’ll get the SBC when you shop for coverage on your own or through your job, renew or change coverage, or request an SBC from the health insurance company.

Supplemental security income (SSI)

A monthly benefit paid by Social Security to people with limited income and resources who are disabled, blind, or 65 or older. SSI benefits are different than Social Security retirement or disability benefits.

Third-party administrator (TPA)

An individual or firm hired by an employer to handle claims processing, pay providers, and manage other functions related to the operation of health insurance. The TPA is not the policyholder or the insurer. The TPA may often be a company you associate with health insurance, such as Aetna or Blue Cross, but in this role, it is not the actual insurer but simply managing the plan on behalf of the employer.

TRICARE

A healthcare program for active-duty and retired uniformed service members and their families.

Urgent care

Care for an illness, injury, or condition serious enough that a reasonable person would seek care right away, but not so severe as to require emergency room care.

Usual, customary, and reasonable (UCR) charges

A healthcare provider’s usual fee for a service that does not exceed the typical fee in that geographic area, and is reasonable based on the circumstances. Instead of UCR charges, PPO plans often operate based on a negotiated (fixed) schedule of fees that recognize charges for covered services up to a negotiated fixed dollar amount. Conventional indemnity plans typically operate based on UCR charges.

Veteran’s health benefits

Veterans may be eligible for a broad range of services, including healthcare benefits, through the Veteran’s Administration.

Waiting period (employer coverage)

The time that must pass before coverage becomes effective for an employee or dependent, who is otherwise eligible for coverage under a job-based health plan. Applies to all new employees, and is not based on health status. This is different than a pre-existing condition exclusion period, which is applied to individual employees and is based on health status.

Well-baby/Well-child visits

Routine doctor visits for comprehensive preventive health services that occur when a baby is young and annual visits until a child reaches age 21. Services include physical exams and measurements, vision and hearing screening, and oral health risk assessments.

Wellness program

A program intended to improve and promote health and fitness that’s usually offered through the workplace, although insurance plans can offer them directly to their enrollees. The program allows your employer or plans to offer you premium discounts, cash rewards, gym memberships, and other incentives to participate. Examples include wellness programs that help you stop smoking, diabetes management programs, weight loss programs, and preventive health screenings.