Insurance & Healthcare Terms

Insurance & Healthcare Terms

This page is compiled and provided by Associations Marketing Group, Inc. to provide you with a glossary of terms encountered while shopping for insurance. It’s just one of the many ways AMGI provides “value added services” to their customers. Use the letters in the alphabet below to help you index the term you are looking for.

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Click the underlined letter to the term beginning with that character.

Actuary: Professionally trained individual, usually with experience or education in insurance, who conducts statistical studies such as determining insurance policy rates, dividend reserves and dividends, as well as conducts various other statistical studies. A capitated health provider would not accept or contract for capitated rates, or agree to a capitated contract without an actuarial determining the reasonableness of the rates.

Acute Care: A pattern of health care in which a patient is treated for an acute (immediate and severe) episode of illness, for the subsequent treatment of injuries related to an accident or other trauma, or during recovery from surgery. Specialized personnel using complex and sophisticated technical equipment and materials usually give acute care in a hospital. Unlike chronic care, acute care is often necessary for only a short time.

Adjusted Average Per Capita Cost (AAPCC): Health Care Financing Administration (HCFA) basis of payment to HMO’s and CMPs.

Adjusted Community Rate (ACR): Uniform capitation rate charged to all enrollees in a plan based on adjustments for risk factors such as age and sex.

Administrative Services Organization (ASO): A contract between an insurance company and a self-funded plan where the insurance company performs administrative services only and the self-funded entity assumes all risk.

Admission Certification: A method of assuring that only those patients who need hospital care is admitted. Certification can be granted before admission (pre-admission) or shortly after (concurrent). Length-of-stay for the patient’s diagnosed problem is usually assigned upon admission under a certification program.

Admitting Privileges: The right granted to a doctor to admit patients to a particular hospital.

Advocacy: Any activity done to help a person or group get something the person or group needs or wants.


Age/Sex rates (ASR): Also called table rates, they are given group products set of rates where each grouping, by age and sex, has its own rates. Rates are used to calculate premiums for group billing and demographic changes are adjusted automatically in the group.

Aid to Families with Dependent Children (AFDC): Public assistance program of social payments to families with children 18 years of age and under who have income below a defined poverty line.

Allowed Amount: Maximum dollar amount assigned for a procedure based on various pricing mechanisms. Also known as a maximum allowable.

Ancillary Services (Ancillary Charges): Supplemental services, including laboratory, radiology, physical therapy, and inhalation therapy, that are provided in conjunction with medical or hospital care.

ANSI: The American National Standards Institute. A national organization founded to develop voluntary business standards in the United States.

Approved health care facility, hospital or program: A facility or program authorized to provide health services and allowed by a given health plan to provide services stipulated in contract.

Assignment of Benefits: Method used when a claimant directs that payment be made directly to the health care provider by the health plan.

Association: A group of people associated typically with a common interest. The combined power of the Association creates group-buying power.


Average Length of Stay: One measure of use of health facilities, reported as an average number of inpatient days spent in a hospital or other healthcare facility per admission or discharge. It is calculated as follows: total number of days in the facility for all admissions occurring during a period divided by the number of days in the facility for all admissions during that same period. Average lengths of stay vary and are measured for patients based on age, specific diagnosis, or sources of payment.


Balance Billing: Practice by providers of billing patients for all charges over the physician rate paid by insurers. Many managed care plans prohibit the use of balance billing and may use sanctions against providers who balance bill.

Benchmark: Point of comparison between desired clinical outcome and actual practice.

Beneficiary: Any person eligible as either a subscriber or a dependent for a managed care service in accordance with a contract. An individual who receives benefits from or is covered by an insurance policy or other health care financing program.

Benefit: Benefits are specific areas of Plan coverage’s, i.e., outpatient visits, hospitalization and so forth, that make up the range of medical services that a payer markets to its subscribers. Also, a contractual agreement specified in an Evidence of Coverage, determining covered services provided by insurers to members.

Benefit Limitations: Any provision, other than an exclusion, which restricts coverage in the Evidence of Coverage, regardless of medical necessity.

Benefit Limitations: Any provision, other than an exclusion, which restricts coverage in the Evidence of Coverage, regardless of medical necessity.

Benefit Package: The services a payer offers to a group or individual.

Benefit Payment Schedule: List of amounts an insurance plan will pay for covered health care services.


Billed Claims: Fees submitted by a health care provider for services rendered to a covered person.


Cafeteria Plan: An arrangement under which employees may choose their own benefit structure. Sometimes these are varying benefit plans or add-ons provided through the same insurer or 3rd party administrator. Other times this refers to the offering of different plans or HMOs that are provided by different managed care or insurance companies.

Capitation: Capitation represents a set dollar limit that you or your employer pay to a health maintenance organization (HMO), regardless of how much you use (or don’t use) the services offered by the health maintenance providers.

Carrier: An insurer, an underwriter of risk that finances health care. Also refers to any organization, which underwrites or administers life, health or other insurance programs. This is the company you buy your insurance policy from.

Carve-Out: Term used to describe certain services not included in capitated benefits that are paid for separately on a predetermined fee-for-service basis.

Case Management: A system embraced by employers and insurance companies to ensure that individuals receive appropriate, reasonable health care services. Designed to accommodate the specific health services needed by an individual through a coordinated effort to achieve the desired health outcome in a cost-effective manner. The monitoring and coordination of treatment rendered to patients with specific diagnosis or requiring high-cost or extensive services. The process by which all health-related matters of a case are managed by a physician or nurse or designated health professional. Physician case managers coordinate designated components of health care, such as appropriate referral to consultants, specialists, hospitals, ancillary providers and services.


Catastrophic health insurance: Health insurance that provides protection against the high cost of treating severe or lengthy illnesses or disability. Generally such policies cover all, or a specified percentage of, medical expenses above an amount that is the responsibility of another insurance policy up to a maximum limit of liability.

Certificate of Authority (COA): Issued by state governments, it gives health maintenance organizations or insurance companies the license to operate within the state.

CHAMPUS: See Civilian Health and Medical Program of the Uniformed Services (CHAMPUS).

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS): Federal program providing cost-sharing health benefits for dependents and survivors of active duty personnel and for retirees and their dependents and survivors.

Claim: A request by an individual (or their provider) to an individual’s insurance company for the insurance company to pay for services obtained from a health care professional.

Closed Panel: Managed care plans that contract with physicians on an exclusive basis to provide health services to enrollees. Non-plan physicians are excluded from participation.

COA: See – Certificate of Authority

COBRA: Consolidation Omnibus Budget Reconciliation Act (COBRA). A 1985 act requiring group health plans with 20 or more employees continued health coverage for up to 18 months or more after leaving a job. The insured must pay the premium plus a two- percent administration charge.

Co-Insurance: Co-insurance refers to money that an individual is required to pay for services, after a deductible has been paid. In some health care plans, co-insurance is called “co-payment” Co-insurance is often specified by a percentage. For example, the employee pays 20 percent toward the charges for a service and the employer or Insurance Company pays 80 percent.

Community Rated: Method of developing group-specific capitation rates by a health plan that generally does not account for unique characteristics of the group. The rate is based on the total experience of a given geographic area or “community”.

Competitive Medical Plans (CMPS): Health care organization that meets specific government criteria for Medicare risks contracting but is not necessarily an HMO.


Concurrent Review: Method of utilization review that takes place on-site when a patient is confined to a hospital.

Co-Payment: Co-payment is a predetermined (flat) fee that an individual pays for health care services, in addition to what the insurance covers. For example, some HMOs require a $10 “co-payment” for each office visit, regardless of the type or level of services provided during the visit. Co-payments are not usually specified by percentages.

Coordination of Benefits: Method of integrating benefits payable under more than one health insurance plan so that the insureds benefit from all sources do not exceed allowable medical expenses or eliminate appropriate patient incentives to contain costs.

Co-Payment: See Co-insurance.

Cost Shifting: Transfer of health care provider’s costs that are not adequately reimbursed by one payor to other payors.

CPT: See Current Procedural Terminology.

Credentialing: Review and documentation of professional providers including licensure, malpractice history, analysis of practice patterns, and certification.


Current Procedural Terminology (CPT): Set of five-digit codes describing medical services delivered that are used for billing by professional providers. CPT codes set a standard that can be used for billing and insurance claims throughout the medical industry.


Deductible: The amount an individual must pay for health care expenses before insurance (or a self-insured company) covers the costs. Often, insurance plans are based on yearly deductible amounts.

Defensive Medicine: Extensive use of laboratory tests, increased hospital admissions, and extended hospital stays for the principal purpose of reducing the possibility of malpractice suits by patients or providing a good legal defense in the event of such lawsuits.

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

Dependent Worker: A worker in a family in which someone else has greater personal income.

Diagnosis Related Groups (DRG): System of determining specific reimbursement fees based on the medical diagnosis of a patient.


Discharge Planning: Assessment of an inpatient’s medical condition for the purpose of arranging appropriate continuing care upon leaving the facility. This planning includes how long the patient will be in the hospital, the expected outcome, and whether there are special needs or requirements on the discharge.


Employee Assistance Programs (EAPs): Mental health counseling services that are sometimes offered by insurance companies or employers. Typically, individuals or employers do not have to directly pay for services provided through an employee assistance program.


Exclusions: Medical services that are not covered by an individual’s insurance policy.


Fee-for-Service: A payment system for health care where the provider is paid for each service rendered.


HCFA 1500: The Health Care Finance Administration’s standard form for submitting provider service claims to third party (insurance) companies or carriers.

Health: The state of complete physical, mental, and social well being and not merely the absence of disease or infirmity. It is recognized, however, that health has many dimensions (anatomical, physiological, and mental) and is largely culturally defined.

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 Care Financing Administration (HCFA): The federal government agency within the Department of Health and Human Services which directs and oversees the Medicare and Medicaid programs (Titles XVIII and XIX of the Social Security Act) and conducts research to support those programs. Generally it oversees the state’s administrations of Medicaid, while directly administering Medicare.

Health Level Seven (HL7): A data interchange protocol for health care computer applications that simplifies the ability of different vendor-supplied IS systems to interconnect. Although not a software program in itself, HL7 requires healthcare software vendors to program an HL7 interface for their products.

Health Maintenance Organizations (HMO’s): represent “pre-paid” or “capitated” insurance plan in which individuals or their employers pay a fixed monthly fee for services, instead of a separate charge for each visit or service. The monthly fees remain the same, regardless of types or levels of services provided, Services are provided by physicians who are employed by, or under contract with, the HMO. HMOs vary in design. Depending on the type of the HMO, services may be provided in a central facility, or in a physician’s own office (as with IPAs.)


HMO: See – Health Maintenance Organization


Indemnity Health Plan: Indemnity health insurance plans are also called “fee-for-service”. These are the types of plans that primarily existed before the rise of HMOs, IPAs, and PPOs. With indemnity plans, the individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other percentage. For example, an individual might pay 20 percent for services and the insurance company pays 80 percent. The fees for services are defined by the providers and vary from physician to physician. Indemnity health plans offer individuals the freedom to choose their health care professionals.


Independent Practice Associations: IPAs are similar to HMOs, except that individuals receive care in a physician’s own office, rather than in an HMO facility.


Lifetime Limit: A cap on benefits paid under a policy. Many policies have a lifetime limit of say $1 million. Which means that the insurer agrees to cover up to $1 million in covered services over the life of the policy.

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.

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.


LOS: See – Length of Stay.


Managed Care: A medical delivery system that attempts to manage the quality and cost of medical services received. 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 amounts of money that an insurance company (or self-insured company) will pay for claims within a specific time period. Maximum dollar limits vary greatly. They may be based on or specified in terms of types of illnesses or types of services. Sometimes they are specified in terms of lifetime, sometimes for a year.

Medicaid: A joint federal and state health insurance program that is run by the state and covers certain low-income people.

Medical Savings Account (MSA): Health insurance plan providing incentives for individuals to replace high premium, low deductible policies with affordable, high deductible catastrophic coverage. Premiums for this coverage are lower and the savings may be used to fund a tax-preferred medical savings account from which you can pay on a pre-tax basis for qualified medical care and expenses, including annual deductibles and co-payments.

Medicare: Federally sponsored health insurance program of hospital and medical insurance primarily for people age 65 and over.


Medigap Insurance Policies: private insurance companies, not the government, offer Medigap insurance. 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.


Open-ended HMOs: HMOs which allow enrolled individuals to use out-of-plan providers and still receive partial or full coverage and payment for the professional’s services under a traditional indemnity plan.

Out-Of-Plan: This phrase usually refers to physicians, hospitals or other health care providers who are considered nonparticipants in an insurance plan (usually an HMO or PPO). 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 savings, before an insurance company or (self-insured employer) 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.


Point of Service (POS) Plan: A managed care plan combining features of HMO’s and PPOs, in which individuals decide whether to go to a network provider and pay a flat dollar co-payment (like $10), or to an out-of-network provider and pay a deductible and/or coinsurance charge.

Portability: The ability for an individual to transfer from one health insurer to another with a pre-existing condition or other risk factor.

Pre-Admission Certification: Also called pre-certification review, or pre-admission review. Approval granted by a case manager or insurance company representative (usually a nurse), for a person to be admitted to a hospital or in-patient facility prior to the admittance. The individual often must obtain pre-admission certification. Sometimes, however, physicians will contact the appropriate individual. The goal of pre-admission certification is to ensure that individuals are not exposed to inappropriate health care services (services that are medically unnecessary).

Pre-Admission Review: A review of an individual’s health care status or condition, prior to an individual being admitted to an inpatient health care facility, such as a hospital. Case managers or insurance company representatives (usually nurses), often conduct pre-admission reviews with the individual, his or her physician or health care provider, and hospitals.

Pre-admission Testing: Medical tests that are completed for an individual prior to being admitted to a hospital or inpatient health care facility.

Pre-authorization: A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to hospitalization or surgery and receive authorization for the service.


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 or your employer receives 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.

Premium: The amount an employee, employer, or individual pays in exchange for insurance coverage.

Primary Care Physician: See Primary Care Provider.

Primary Care Provider (PCP): A health care professional who is responsible for monitoring an individual’s overall health care needs. Typically, a PCP serves as “quarterback” for an individual’s medical care, referring the individual to specialized physicians for specialist care.


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.


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 that they will approve for a specific test or procedure. If the fees are higher than the approved amount, the individual receiving the service is responsible for paying the difference. Sometimes, however, if an individual questions his or her physician about the fee, the provider will reduce the charge to the amount that the insurance company has defined as reasonable and customary.


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. For example, an individual increases his or her risk of getting cancer if he or she chooses to smoke cigarettes.


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.

Second Surgical Opinion: These are now standard benefits in many health insurance plans. It is an opinion provided by a second physician, when one physician recommends surgery to an individual.


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.



Third Party Payer: Any payer of health care services other than you. This can be an insurance company, HMO, PPO, or the federal government.


Triple-Option: Insurance plans that offer three options from which an individual may choose. Usually, the three options are traditional indemnity, an HMO, and a PPO.


Underwriter: One that underwrites a policy of insurance. One who selects risks to be solicited or rates the acceptability of risks solicited.

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.


Utilization Review: A cost control mechanism by which the appropriateness, necessity, and quality of health care services are monitored by both insurers and employers.


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


Zero Balance Reimbursement Account (ZEBRA): A flexible spending arrangement in which amounts are allocated to the account only when an expense is incurred. The employee is then reimbursed by the employer by subtracting the amount of the covered expensed from his or her taxable income at the end of the year. These arrangements are specifically forbidden in cafeteria plans.