Glossary of health insurance terms

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Arguably the most vital coverage to have, health insurance can mean the difference between life and death. If terms on your policy confuse you, look up the definition here.

1. 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.

2. Co-payment — An arrangement splitting the cost of medical services. The client pays a flat fee for service including prescriptions, tests and X-rays and the insurance company pays the rest.

3. Consumer directed plan — A relatively new addition to the health insurance world, consumer directed plans or consumer driven plans are often a good choice for rich, healthy people. They have a high deductible and are attached to a health savings account that can be used to pay for covered medical expenses.

4. Covered expenses — The medical services and procedures that your insurance company will pay for.

5. Federal Insurance Contributions Act — The Federal Insurance Contributions Act, or FICA, consists of payments to the Social Security retirement supplement system and the Medicare hospital insurance program. A tax for each component is levied on employers, employees and certain self-employed individuals. These taxes are taken out of your paycheck separately from your income taxes.

6. Flexible spending account — A plan to which you contribute money each pay period to cover additional medical insurance coverage or child care. Under this plan, you then receive medical insurance and child care tax-free.

7. Group insurance — Insurance coverage usually issued to an employer under a master policy for the benefit of employees.

8. HMO — Health Maintenance Organization. Prepaid medical plan in which members agree to use a specific network of providers.

9. Hospital indemnity insurance — Pays a set amount for a hospital stay based on daily, weekly or monthly limits, regardless of expenses.

10. HSA or health savings account — A tax-advantaged savings account that allows policyholders to use pretax money on covered medical expenses. They are accompanied by a high-deductible insurance plan and contributions can be made by an employer or the employee. Cash withdrawals are subject to taxation and may be penalized.

11. Indemnity (fee for service) — A traditional health care plan where all doctors are covered. The insurer pays 80 percent while the policyholder pays 20 percent co-insurance as well as any amount the doctor charges over the reasonable and customary rate.

12. Managed care — A health care system whose main function is to control costs. The goal is quality, cost-effective health care.

13. Maximum out-of-pocket costs — Limit that the insured will have to pay out of pocket. Includes things like deductibles, co-insurance and co-payments.

14. Medical savings account — Similar to an IRA, a medical savings account, or MSA, is intended to help self-employed people and employees of certain small businesses to save for and pay their medical expenses that are not covered by health insurance.

15. Medicare — 1. Federal program that provides health benefits for people who qualify — usually those over 65 and the disabled. 2. Payroll taxes from employers and employees go to pay for the program. 3. 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.

16. Portability — The ability to switch insurers seamlessly without pre-existing condition exclusions.

17. POS — Point of service plan. An insurance plan that falls somewhere between an HMO and a PPO. Policyholders receive benefits for care from in-network and out-of-network doctors. The level of benefits is usually highest when seeking treatment through the referral of a primary care doctor and lowest when seeking treatment without a referral.

18. 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.

19. Pre-existing condition — A health-related situation that predates the person’s coverage under the policy or plan.

20. Supplemental medical insurance — Supplemental medical insurance is additional coverage not included in a consumer’s main health insurance package. When the main insurance package is Medicare, supplemental medical insurance is known as Part B of Medicare; it covers basic medical expenses, and is paid jointly by the government and the insured.

21. Third-party payer — Any company or entity that pays medical expenses for the insured. Typically an insurance company, HMO, etc.