Health insurance policies read a little bit like a Greek dictionary. Here’s a straightforward explanation of some basic terms.
A health insurance claim is the bill that your doctor or healthcare provider will send to your insurance company asking for payment after a visit or other service is provided. Your insurance will compare the claim to your benefits, and if the services are covered under your insurance, your insurance provider will pay all or part of the bill and will alert you as to what portion of the bill (if any) is your responsibility.
The amount you’re expected to pay for a medical expense at the time of your visit or the amount you’re expected to pay for a prescription drug. This is usually for services for which your deductible doesn’t apply. For instance, you may owe a $25 co-pay for a routine doctor’s visit or a $10 co-pay for a generic drug prescription. You insurance plan will cover the rest of the cost.
The Consolidated Omnibus Budget Reconciliation Act (COBRA) requires that group health plans sponsored by employers (with 20 or more employees) give workers and their families the choice to temporarily extend their health coverage in certain instances where coverage would normally stop, including voluntary or involuntary job loss or reduction in hours, among others. For more information visit the Department of Labor website.
The percentage of medical costs you have to pay after you’ve met your deductible. For instance, after you’ve met a $500 out-of-pocket deductible, you might be responsible for 20 percent of your medical costs while your insurer pays the other 80 percent.
The amount of money that you’re expected to pay out-of-pocket before your insurance coverage kicks in. For instance, if your deductible is $500, you would pay 100 percent of your medical costs until you reach $500 in expenses. Money spent on preventive care typically cannot be applied towards paying your deductible.
Explanation of Benefits
This is the document that your insurance provider sends out after reviewing a claim explaining what was covered. The document will include the following information:
- what services were rendered
- what the healthcare provider who rendered those services charged
- the amount of the charges covered and not covered under your insurance plan
- the amount that was paid to the provider
- what amount you are responsible to pay
Flexible Savings Account (FSA)
A savings account into which an employee can put part of his or her earnings to pay for certain IRS-approved medical expenses. Any money deducted from payroll and put into an FSA is not subject to payroll taxes. Money in an FSA must be spent within the “coverage period,” as defined by your plan. Unused money in an FSA is surrendered at the end of the period; it does not carry over to the next coverage period.
Health Savings Account (HSA)
A savings account into which you deposit pretax money to be used for medical expenses. An HSA must be paired with a high-deductible health plan. Any money you don’t use throughout the year for medical expenses rolls over for use the next year (or the year after that, etc.).
The HIPAA is a set of privacy rules that gives individuals the rights to their health information, sets limits on who can access that information, and sets guidelines as to how that information can be used. All health insurance providers and most healthcare providers are required to follow HIPAA regulations. Visit the Department of Health and Human Services website for more information.
This is a federal health insurance program for all Americans over 65 years old, as well as younger people with permanent disabilities or a few specific diseases (including end-stage renal diseases and amytrophic lateral sclerosis [ALS]).
A group of healthcare providers (such as doctors and/or hospitals) that have a contract with an insurance company to provide that company’s customers with services at a lower cost than their normal fees. Some insurance plans only cover healthcare services provided by in-network doctors. Some might cover (fully or partially) services provided by out-of-network doctors.
The absolute maximum amount of money you’ll pay for medical costs annually, including co-pays, coinsurance, and deductibles.
Outpatient services are healthcare services provided to a patient at a hospital or clinic that do not require overnight hospitalization. Many insurance plans include a list of procedures and tests that will not be paid for unless they are performed as an outpatient service.
Personal Health Record (PHR)
A PHR is a health record maintained and managed by an individual. It can take many different forms, ranging from physical documents to online record management systems.
This is a medical condition that exists before an individual secures an insurance policy. In many cases, insurance companies will exclude preexisting conditions from coverage.
What you pay (usually per month) for your insurance. If you have insurance through your employer, this amount is usually pretax.
In certain cases, part of an employee’s earnings can be put into a special savings account (such as an HSA or FSA) on a “pretax” basis to pay for healthcare services. The employee does not have to pay income tax the pretax savings, and it lowers the individual’s taxable income, reducing the amount of tax responsibility for the calendar year. However, there are some restrictions on most pretax benefits. For example, money that is put into an HSA can only be used for certain items and services.