Glossary of Insurance Terms

Billing and insurance can be confusing. This easy-to-understand list is designed to help you better understand the typical types of insurance plans and common insurance and billing terms.

Types of Insurance Plans

Today, most people are insured through one of three types of insurance programs:

  • Health maintenance organization (HMO)
  • Preferred provider organization (PPO)
  • Point-of-service (POS) plan

Health Maintenance Organization (HMO)

HMOs are one of the most common types of insurance. An HMO plan has a network of providers (physicians, hospitals, and medical facilities) that plan members must use in order to have their medical treatment covered by insurance. HMO plans generally cost less but limit your choices.

HMO plans typically require you to:

  • Pay no deductible
  • See a physician within the HMO network, usually after referral from your primary care physician
  • Pay for medical care outside the HMO network

Preferred Provider Organization (PPO)

A PPO plan offers tiered benefits with more choices. The typical PPO requires you to pay a deductible, but offers you a trade-off in terms of selecting your physician.

You have the option to:

  • Reduce your out-of-pocket expense by choosing a preferred provider
  • Go outside the list of preferred providers and pay a higher out-of-pocket fee

Point-of-Service (POS) Plan

A POS plan has elements of both the HMO and PPO. Your monthly premium is usually higher than a straight HMO, but you have the flexibility of receiving benefits both in and out of the network. You are usually required to obtain a referral from your primary care physician to see a specialist.

In most cases, a POS plan allows you to:

  • Choose within the POS network of physicians and hospitals and pay less
  • Receive complete or nearly complete coverage when your primary care physician refers you outside the network
  • Receive partial coverage when you refer yourself outside the network

Other Types Of Insurance Plans

Medicare: A federal program that provides health care coverage for individuals who are over the age of 65 or are disabled.

Medicaid: A state/federal program that provides health care insurance to low-income Americans who qualify under state-defined guidelines.

Worker's Compensation: Insurance coverage provided by an employer to pay for health care services resulting from work-related injuries and illnesses.

Other Insurance And Billing Terms

Account Number: A number (usually eight or 11 digits) assigned to each patient visit. This number is used to track a patient in the hospital computer system.

Activities of Daily Living (ADLs): Activities performed as part of your daily routine of self-care, such as bathing, dressing, and eating.

Allowed Expenses: The maximum amount a health care plan pays for a covered service.

Ambulatory Care: Medical services provided on an outpatient basis.

Ambulatory Patient Classifications (APCs): How outpatient services and procedures are identified and defined for coding and billing purposes.

Beneficiary: A person receiving benefits under an insurance policy or plan, or who is eligible to do so.

Carrier: An insurance company or third-party administrator that receives and processes bills and pays for the services covered.

Claim: A notice to the insurance company that you have received care covered by the plan. A claim is also a request for payment.

Coding: How physician services are identified and defined for billing purposes.

Coordination of Benefits (COB): How insurance companies decide which company is the primary payer if you are covered by more than one.

Co-Insurance: A shared payment between you and your insurance company (the percent that you are expected to pay).

Co-Payment: The amount you are expected to pay as determined by your insurance plan; for example, physician visits or prescriptions.

Coverage: When your health care costs are paid by either your insurance company or by the government, you are said to have coverage.

Covered Expenses: What the insurance company will pay for as defined in the insurance contract. For example, under some plans generic prescriptions are covered expenses, while brand-name prescriptions are not.

Date of Service (DOS): The date health care services were provided to the patient.

Deductible: The amount you or your family must pay for health care services before the insurance policy begins making payments. The health insurance policy sets this amount and it usually resets every year.

Durable Medical Equipment (DME): Equipment that can stand repeated use, serves a medical purpose, and is appropriate for use at home. Examples include hospital beds, wheelchairs and oxygen equipment.

Explanation of Benefits (EOB): A summary of how a claim has been processed in the insurance company's system. A copy of the EOB is usually mailed to the patient and to the hospital.

Fiscal Intermediary: An organization acting as an agent for a government program like Medicare or Medicaid. This agent receives and processes claims, and then processes payments for services covered by the government program.

Guarantor: The person financially responsible for paying the patient's medical bills.

Maximum Out-of-Pocket: The most money you can expect to pay for covered expenses. The maximum limit varies from plan to plan. Once this limit has been met, the health plan will pay 100 percent of certain covered expenses.

Network: Physicians, hospitals and other health care providers that an HMO, PPO or other managed care network has selected to provide care for its members.

Non-covered Services: Charges/services that the insurance company does not cover. These charges/services are normally the financial responsibility of the patient or guarantor.

Out-of-Network (OON): Most managed care insurance plans are contracted with a specific group of health care providers who provide service to you as a plan member. If you request health care from a provider who is not in this network, you may be financially responsible for some or all of the cost of the care received. This is determined by the insurance carrier.

Out-of-Pocket Costs/Expenses (OOPs): The portion of fees for covered health services that you, as the patient, are required to pay. This includes co-payments, co-insurance and deductible.

Participating Provider: A health care provider who has a contractual arrangement with a health plan to deliver medical services to the plan's members.

Preauthorization: An insurance plan requirement in which you or your primary care physician needs to notify the insurance company in advance about certain medical procedures (like outpatient surgery) in order for those procedures to be considered a covered expense.

Pre-certification: Authorization given by a health plan for a member to obtain services from a health care provider. This is often required for hospital services.

Prevailing Charge: What the Medicare payment system defines as a physician's payment for a particular service.

Primary Care Physician (PCP): A physician who specializes in internal medicine, family/general practice or pediatrics.

Referral: Approval or consent by a primary care physician for a patient to be referred to a specialist.

Secondary Insurance: Any insurance that supplements Medicare coverage. The three main sources for secondary insurance are employers, privately purchased Medigap plans and Medicaid.

Self-Pay (Private Pay): A patient who does not have insurance, or whose insurance plan does not cover the provider performing the medical services.

Specialist: A physician who specializes in a specific area of medicine.