Understanding Insurance Terms
Annual Limit
The cap on benefits your insurance plan will pay in a year
Benefits Verification
The process that confirms your benefits and eligibility or your insurance coverage for a prescription or medical service
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Claim
An itemized statement of healthcare services and their costs provided by a hospital, physician's office or other provider facility. Claims are submitted to the insurer by either the plan member or the provider for payment of the costs incurred.
Co-Insurance
The percentage of cost that you will have to pay for a medical service or prescription. Example: You may pay 25% and the insurance pays 75%
Co-Pay
Your share of the cost for a medical service or prescription that is a fixed amount. Example: You pay $25.
Deductible
The amount you will have to pay for your health care costs before your insurance starts paying.
Explanation of Benefits (EOB)
A statement from the insurance administrator that tells you what portion of the provider charges are eligible for benefits under your insurance.
Formulary
The list of medications that your health insurance plan will pay for or cover.
Flex Spending Account (FSA)
An FSA is an employer-sponsored benefits program that enables employees to deduct pre-tax dollars from their paychecks to pay for qualified medical expenses for themselves, their spouses, and their dependents. FSAs are generally use it or lose it plans. This means that amounts in the FSA at the end of the plan year generally cannot be carried over to the next year
Health Maintenance Organization (HMO)
HMO is a health care system that assumes or shares both the financial risks and the delivery risks associated with providing comprehensive medical services to a voluntarily enrolled population in a particular geographic area, usually in return for a fixed, prepaid fee.
Health Savings Account (HSA)
An account that allows you to set aside pretax dollars to pay for yearly health care expenses. To be eligible to open an HSA you must have a high deductible health plan.
High Deductible Health Plan
A plan that has a higher deductible than a traditional health insurance plan. This means you pay a greater amount each year before your medical expenses are covered. But typically, your yearly premium is lower.
Lifetime Limit
A cap on the total lifetime benefits you may recieve from your insurance plan.
Open Enrollment
An annual period during which people can enroll in a health insurance plan. In employer based plans the employer determines when this period is. For individual coverage this period is from November 1st through December 15th.
Out-of-Pocket Maximum
The most you have to pay for covered services in a plan year before your insurance plan begins paying 100%
Patient Out-of-Pocket Costs
The shared health care costs between the insurance company and the patient. Cost-sharing methods include: Co-insurance and Co-pay.
Pharmacy Benefit
Covered prescription drugs, usually self-administered such as oral, injectable, or in other ways taken outside the physician's office.
Preferred Provider Organization (PPO)
A PPO is an arrangement designed to supply health care services at a discounted cost by providing incentives for members to use designated health providers (who contract with the PPO at a discount), but which also provides coverage for services rendered by health care providers who are not part of the PPO network
Pre-existing Condition
This is generally a condition for which an individual received medical care during the twelve months immediately prior to the effective date of coverage.
Premium
The amount that you pay for your health insurance every month.
Prior Authorization (PA)
Many insurance plans require a prior authorization or approval. This means your health care provider must provide additional information to your insurance before they will cover a service/medication.