Insurance Terminology

To effectively manage insurance billing, it’s crucial to understand key insurance terms. These terms define how costs are shared between the insurer and the insured, and how coverage works.

Insurance Terminology

• Deductibles: The amount the insured must pay out-of-pocket before the insurance company starts to pay its share of covered services.
• Copayments (Copays): A fixed amount the insured pays for a covered healthcare service, usually at the time of service.
• Coinsurance: The percentage of costs the insured pays after meeting their deductible.
• Premiums: The amount paid (usually monthly) for insurance coverage.
• In-Network: Providers or healthcare facilities that are part of an insurance plan’s network of preferred providers, usually offering lower out-of-pocket costs.
• Out-of-Network: Providers or facilities not in the insurance plan’s network, often resulting in higher out-of-pocket costs for the insured.
• Prior Authorization: A requirement that the insured obtains approval from the insurance company before receiving a particular service or medication to ensure it is covered.
• Explanation of Benefits (EOB): A statement from the insurance company explaining what medical treatments and services were paid for on the insured’s behalf.

Understanding Insurance Terminology

To effectively navigate the world of health insurance, it’s crucial to familiarize yourself with common terminology. Here are key terms you need to know:

Key Insurance Terms

1. Premium:
   • Definition: The amount paid (usually monthly) for an insurance policy.
   • Example: A monthly premium of $200 for health coverage.
2. Deductible:
   • Definition: The amount the insured must pay out-of-pocket before the insurance company starts covering expenses.
   • Example: A $1,000 deductible means the insured pays the first $1,000 of covered services.
3. Copayment (Copay):
   • Definition: A fixed amount paid by the insured for each medical service, such as a doctor’s visit.
   • Example: A $20 copay for a primary care visit.
4. Coinsurance:
   • Definition: The percentage of costs the insured pays after meeting the deductible.
   • Example: If the coinsurance is 20%, the insured pays 20% of the remaining costs after the deductible is met.
5. Out-of-Pocket Maximum:
   • Definition: The maximum amount the insured pays in a policy period before the insurance covers 100% of the remaining costs.
   • Example: An out-of-pocket maximum of $5,000.
6. Explanation of Benefits (EOB):
   • Definition: A statement from the insurance company detailing what was covered, what the insurance paid, and what the insured owes.
   • Example: An EOB for a doctor’s visit showing the amount billed, insurance payment, and the patient’s responsibility.
7. Network:
   • Definition: A group of healthcare providers and facilities that have agreed to provide services at negotiated rates.
   • Example: An HMO network of doctors and hospitals.
8. In-Network vs. Out-of-Network:
   • In-Network: Providers that are part of the insurance company’s network, often resulting in lower costs for services.
   • Out-of-Network: Providers not in the network, often resulting in higher costs for services.
   • Example: Visiting an in-network doctor typically costs less than seeing an out-of-network doctor.
9. Preauthorization (Prior Authorization):
   • Definition: Approval from the insurance company before a specific service is provided to ensure coverage.
   • Example: Preauthorization for an MRI scan.
10. Formulary:
    • Definition: A list of prescription drugs covered by an insurance plan.
    • Example: A drug formulary that includes generic and brand-name medications.
11. Claim:
    • Definition: A request for payment submitted to the insurance company for services rendered.
    • Example: A claim submitted for a patient’s office visit.
12. Provider:
    • Definition: A healthcare professional or facility that offers medical services.
    • Example: Doctors, hospitals, and clinics.
13. Policyholder:
    • Definition: The individual who owns the insurance policy.
    • Example: The person who purchased the health insurance plan.
14. Beneficiary:
    • Definition: The person who receives benefits from the insurance policy.
    • Example: A family member covered under a policy.
15. Primary Care Physician (PCP):
    • Definition: A healthcare provider who serves as the main point of contact for a patient’s medical needs.
    • Example: The family doctor managing overall health.
16. Specialist:
    • Definition: A healthcare provider focused on a specific area of medicine.
    • Example: A cardiologist or dermatologist.
17. Referral:
    • Definition: A written order from a PCP for a patient to see a specialist.
    • Example: A referral to see an orthopedic surgeon.
18. Coordination of Benefits (COB):
    • Definition: The process of determining which insurance company pays first when multiple policies cover the same claim.
    • Example: COB between a primary and secondary health plan.
19. Network Provider:
    • Definition: A healthcare provider who has a contract with the insurance company to provide services at pre-negotiated rates.
    • Example: A doctor within an HMO network.
20. Exclusion:
    • Definition: Services or conditions not covered by an insurance policy.
    • Example: Cosmetic surgery often being excluded from coverage.

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