Your Coverage & Care
Your Coverage & Care
 
Understanding Health Coverage

Health Care and Insurance Terms

These are commonly used health coverage and medical terms and definitions. This is not a complete list and should be used for general information purposes only. Your insurance plan documents may use variations of these terms.

Allowed Amount

The maximum amount a plan will pay for a covered health care service. May also be called “eligible expense,” “payment allowance,” or “negotiated rate.” If your provider charges more than the plan’s allowed amount, you may have to pay the difference.

Annual Deductible Combined

Usually in health savings account (HSA) eligible plans, the total amount that family members on a plan must pay out-of-pocket for health care or prescription drugs before the health plan begins to pay.

Annual Limit

A cap on the benefits your insurance company will pay in a year. Annual limits may be placed on the dollar amount of non-essential covered services or on the number of visits for a particular service. After an annual limit is reached, you may need to pay health care costs for that service for the rest of the year.

Appeal

A request for your insurer to review a decision that denies a benefit or payment.

Association Health Plan

Under the Department of Labor's rule, a group of employers or associations can form an AHP based on common geography or industry to provide health coverage to their employees.

Balance Billing

When a provider bills you for the difference between the provider’s charge and the allowed amount. For example, if the provider’s charge is $100 and the allowed amount is $70, the provider may bill you for the remaining $30. 

Benefit Year

Also known as “policy year,” it’s the 12-month period of benefits coverage under an individual health insurance plan. This 12-month period may not be the same as the calendar year. To find out when your policy year begins, you can check your policy documents or contact your insurer. (Note: In group health plans, this 12-month period is called a “plan year”).

Benefits

The health care 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 CHIP, covered benefits and excluded services are defined in state program rules.

Claim

A request for payment that you or your health care provider submits to your health insurer when you get items or services you think are covered.

COBRA

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

Coinsurance

The percentage of costs of a covered health care service you pay (20%, for example) after you've paid your deductible. Let's say your health insurance plan's allowed amount for an office visit is $100 and your coinsurance is 20%. If you've paid your deductible: You pay 20% of $100, or $20. The insurance company pays the rest. If you haven't met your deductible: You pay the full allowed amount, $100.

Coordination of Benefits

A way to determine who pays for a claim when the patient has multiple insurance plans.

Copayment

A fixed amount ($20, for example) you pay for a covered health care service after you've paid your deductible. Copayments (sometimes called “copays”) can vary for different services within the same plan, like drugs, lab tests, and visits to specialists.

Cost Sharing

The portion of costs covered by your insurance that you pay out of your own pocket. This term generally includes deductibles, coinsurance and copayments, 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.

Deductible

The amount you pay for covered health care services before your insurance plan starts to pay. After you pay your deductible, you usually pay only a copayment or coinsurance for covered services. Your insurance company pays the rest. Many plans pay for certain services, like a checkup or disease management program, before you've met your deductible. Some plans have separate deductibles for certain services, like prescription drugs. Family plans often have both an individual deductible, which applies to each person, and a family deductible, which applies to all family members.

Donut Hole

Most plans with Medicare prescription drug coverage (Part D) have a coverage gap (called a “donut hole”). This means that after you and your drug plan have spent a certain amount of money for covered drugs, you have to pay all 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.

Drug Tier

Many drug plans place prescription medicines into different categories or “tiers.” Drugs in each tier have a different copay or coinsurance. 

Eligible Expense

The maximum amount a plan will pay for a covered health care service. May also be called “allowed amount,” “payment allowance,” or “negotiated rate.” If your provider charges more than the plan’s eligible expense, you may have to pay the difference.

Emergency Medical Condition

An illness, injury, symptom (including severe pain), or condition severe enough to risk serious danger to your health if you don’t get medical attention right away. If you don’t get immediate medical attention you could reasonably expect one of the following: 1) Your health would be put in serious danger; or 2) You would have serious problems with your bodily functions; or 3) You would have serious damage to any part or organ of your body.

Essential Health Benefits

A set of 10 categories of services health insurance plans must cover under the Affordable Care Act. These include doctors’ services, inpatient and outpatient hospital care, prescription drug coverage, pregnancy and childbirth, mental health services, and more. Some plans cover more services. Marketplace plans must offer dental coverage for children. Dental benefits for adults are optional.

Exchange

Another term for the Health Insurance Marketplace.

Excluded Services

Health care services or products that your health insurance or plan doesn’t pay for or cover. Examples of common exclusions include elected cosmetic surgery, gastric bypass surgery, treatment in clinical trials or treatment that is deemed experimental.

External Review

A review of a plan's decision to deny coverage for or payment of a service by a panel that is not affiliated with the insurer. In urgent situations, an external review may be requested even if the internal appeals process isn't yet complete. External review is available when the plan denies treatment based on medical necessity, appropriateness, health care setting, level of care, or effectiveness of a covered benefit; when the plan determines that the care is experimental and/or investigational; or for cancellation of coverage. 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.

Fail First

Also known as “step therapy,” it is the practice by insurers of requiring patients to test use of a safe lower-cost drug or service before permitting more expensive drugs or services. Step therapy is an established tool used by commercial carriers, self-insured employers, Medicare Advantage/Part D programs and Medicaid.

Flexible Spending Account (FSA)

An arrangement you set up through your employer to pay for many of your out-of-pocket medical expenses with tax-free dollars. These expenses include insurance copayments and deductibles, and qualified prescription drugs, insulin and medical devices. You decide how much of your pre-tax wages you want taken out of your paycheck and put into an FSA. You don’t have to pay taxes on this money. Your employer’s plan sets a limit on the amount you can put into an FSA each year. Any FSA funds that you set aside but don’t spend by the end of the plan year can’t be used for expenses in the next year. 

Formulary

A list of prescription drugs covered by a prescription drug plan or another insurance plan offering prescription drug benefits. Also called a drug list.

Generic Drugs

A drug that has the same active-ingredient formula as a brand-name drug. Generic drugs usually cost less than brand-name drugs. The Food and Drug Administration (FDA) rates these drugs to be as safe and effective as brand-name drugs.

Grandfathered Plans

A health insurance plan that is not required to comply with most of the changes mandated by the Affordable Care Act. This covers plans in existence before March 23, 2010 that haven’t made significant changes to the plan design. If a plan is grandfathered, it must disclose this status. New people and their dependents can be added to a grandfathered plan.

Grievance

A complaint that you communicate to your health insurer or plan.

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.

Health Insurance Marketplace

The Health Insurance Marketplace (also known as the “Marketplace” or “exchange”) provides health plan shopping and enrollment services. The federal government operates the Marketplace, available at HealthCare.gov, for most states. Some states run their own Marketplaces.

Health Reimbursement Account (HRA)

HRAs are employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses up to a fixed dollar amount per year. Unused amounts may be rolled over to be used in subsequent years. The employer funds and owns the account. HRAs are sometimes called “health reimbursement arrangements.”

Health Savings Account (HSA)

A type of savings account that allows you to set aside money on a pre-tax basis to pay for qualified medical expenses if you have a high deductible health insurance plan. Combining a high deductible health plan with an HSA allows you to pay for certain medical expenses, like your deductible and copayments, with untaxed dollars. High-deductible plans usually have lower monthly premiums than plans with lower deductibles. Unlike a flexible spending account (FSA), HSA funds roll over year to year if you don't spend them. You can take the funds with you if you change jobs or leave the work force. Your HSA may also earn interest.

Lifetime Limit

A cap on the total lifetime benefits you may get from your insurance company. Under health care reform, lifetime limits on most benefits are banned in any health plan or insurance policy issued or renewed on or after Sept. 23, 2010. Grandfathered health insurance plans are not required to follow the rules on lifetime limits. 

Mail Order Prescriptions

A program that supplies prescription medications, usually a 90-day supply, for a discounted price. The insured typically receives a 3-month supply of drug for the cost of a 1.5–2 month supply.

Mandatory Generic Programs

This program requires patients to pay the difference as an out of pocket expenses if they select a brand name drug when there is a generic drug available for a prescription. 

Maximum Out-of-pocket Limit

The most each individual or family can be required to pay in cost sharing during the plan year for covered, in-network services. After you reach this amount, your plan begins to pay 100%of the allowed amount for covered services. The out-of-pocket limit doesn't include your monthly premiums. It also doesn't include anything you may spend for services your plan doesn't cover.

Medically Necessary

Health care services or supplies needed to diagnose or treat an illness, injury, condition, disease or its symptoms and that meet accepted standards of medicine.

Medicare

A federal health insurance program for people 65 and older and certain younger people with disabilities. It also covers people with permanent kidney failure requiring dialysis or a transplant. 

Negotiated Rate

The maximum amount a plan will pay for a covered health care service. May also be called “allowed amount,” “eligible expense” or “payment allowance.” If your provider charges more than the plan’s negotiated rate, you may have to pay the difference.

Minimum Essential Coverage

The level of coverage that will meet the individual responsibility requirement. Generally includes health insurance available through individual market policies, Medicare, Medicaid, CHIP, and TRICARE.

Network Provider

The facilities, providers and suppliers your health insurer or plan has contracted with to provide health care services.

Network Plan

A health plan that contracts with doctors, hospitals, pharmacies and other health care providers to provide members of the plan with services and supplies at a discounted price.

Obamacare

An informal name sometimes used to refer to the health coverage plans available through the Health Insurance Marketplace. Obamacare often also refers to the Affordable Care Act.

Open Enrollment Period

The yearly period when people can enroll in a health insurance plan. Outside the open enrollment period, you generally can enroll in a health insurance plan only if you qualify for a special enrollment period. Certain life events – like getting married, having a baby, or losing other health coverage – qualify for special enrollment.

Out-of-Pocket Costs

Your expenses for medical care that aren't reimbursed by insurance. Out-of-pocket costs include deductibles, coinsurance and copayments for covered services plus all costs for services that aren't covered.

Payment Allowance

The maximum amount a plan will pay for a covered health care service. May also be called “allowed amount,” “eligible expense” or “negotiated rate.” If your provider charges more than the plan’s payment allowance, you may have to pay the difference.

Policy Year

Also known as “benefit year,” it’s the 12-month period of benefits coverage under an individual health insurance plan. This 12-month period may not be the same as the calendar year. To find out when your policy year begins, you can check your policy documents or contact your insurer. (Note: In group health plans, this 12-month period is called a “plan year”).

Pre-Existing Condition

A health problem you had before the date that new health coverage starts.

Preauthorization

A decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called “prior authorization,” “prior approval” or “precertification.” Your health insurance or plan may require preauthorization for certain services before you receive them, except in an emergency. Preauthorization isn’t a promise your health insurance or plan will cover the cost.

Precertification

A decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called “preauthorization,” “prior authorization” or “prior approval.” Your health insurance or plan may require precertification for certain services before you receive them, except in an emergency. Precertification isn’t a promise your health insurance or plan will cover the cost.

Premium

The amount you pay for your health insurance every month. In addition to your premium, you usually have to pay other costs for your health care, including a deductible, copayments and coinsurance.

Preventive Services

Routine health care that includes screenings, check-ups and patient counseling to prevent illnesses, disease or other health problems.

Prior Approval

A decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called “preauthorization,” “prior authorization” or “precertification.” Your health insurance or plan may require prior approval for certain services before you receive them, except in an emergency. Prior approval isn’t a promise your health insurance or plan will cover the cost.

Prior Authorization

A decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called “preauthorization,” “prior approval” or “precertification.” Your health insurance or plan may require prior authorization for certain services before you receive them, except in an emergency. Prior authorization isn’t a promise your health insurance or plan will cover the cost.

Qualifying Life Event (QLE)

A change in your situation – like getting married, having a baby or losing health coverage – that can make you eligible for a special enrollment period, allowing you to enroll in health insurance outside the yearly open enrollment period.

Referral

A written order from your primary care doctor 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 primary care doctor. If you don’t get a referral first, the plan may not pay for the services.

Short-Term Plans

A health plan you can purchase from an insurer that provides coverage for three months. A health condition you develop during one three-month policy could potentially be considered a pre-existing condition in future ones because these plans do not need to comply with the Affordable Care Act.

Special Enrollment Period (SEP)

A time outside the yearly open enrollment period when you can sign up for health insurance. You qualify for a special enrollment period if you’ve had certain life events, including losing health coverage, moving, getting married, having a baby or adopting a child.

Specialty Drug

A type of prescription drug that, in general, requires special handling or ongoing monitoring and assessment by a health care professional, or is relatively difficult to dispense. Generally, specialty drugs are the most expensive drugs on a formulary.

State Insurance Department

A state agency that regulates insurance and can provide information about health coverage in its state.

State Medical Assistance Office

A state agency in charge of the state's Medicaid program and can give information about programs in its state that help pay medical bills for people with limited income and resources.

Step Therapy

Also known as “fail first,” it is the practice by insurers of requiring patients to test use of a safe lower-cost drug or service before permitting more expensive drugs or services. Step therapy is an established tool used by commercial carriers, self-insured employers, Medicare Advantage/Part D programs and Medicaid.

Subsidized Coverage

Health coverage available at reduced or no cost for people with incomes below certain levels. Examples of subsidized coverage include Medicaid and the Children’s Health Insurance Program (CHIP). Marketplace insurance plans with premium tax credits are sometimes known as subsidized coverage too.

Summary of Benefits and Coverage (SBC)

This document summarizes the key features of a health plan, including what benefits are covered, how much you should expect to pay when you seek care and the services or products that insurer excludes or limits use of. The information should help a consumer make apples-to-apples comparisons of costs and coverage between health plans. 

Total Cost Estimate (for health coverage)

The total amount you may have to pay for health plan coverage, which is estimated before you actually have the coverage and have health expenses under the coverage.

Usual, Customary and Reasonable (UCR)

The amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service. The UCR amount sometimes is used to determine the allowed amount.

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