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Affordable health Insurance: Understanding Common Terms

Armen Hareyan's picture

In order to shop for affordable health insurance, you need first be familiar with the language used in the health insurance industry. Here are some of the terms you will hear most often.

Ancillary Services -- Services, other than those provided by a physician or hospital, which are related to a patient's care. Some examples are laboratory work, x-rays and anesthesia.

Calendar Year -- The period January 1 through December 31 of any year.

Case Management -- A process whereby a covered person with specific health care needs has his/her care coordinated among various health care providers.

Certificate of Coverage -- A document given to an insured person that describes the benefits, limitations and exclusions of coverage provided by an insurance company.

Claim -- Information a medical provider or insured person submits to an insurance company to request payment for medical services provided to the insured.

Coinsurance -- The portion of covered health care costs for which the insured person has a financial responsibility. Coinsurance usually applies after the insured person meets his/her deductible.

Consolidated Omnibus Budget Reconciliation Act (COBRA) -- A federal law that requires employers to offer continued health insurance coverage to certain employees (and their dependents) whose group health insurance has been terminated by a qualifying event, i.e. layoff, reduction in hours, etc.

Contract Year -- The period of time from the effective date of the contract to the expiration date of the contract.

Coordination of Benefits (COB) -- A provision in the contract that applies when a person is covered under more than one medical plan. It establishes the order in which plans pay claims when more than one source exists. The goal is to prevent over-insurance or duplication of benefits.

Co-payment -- A cost-sharing arrangement in which an insured person pays a specified charge for a specified service, such as $10 for an office visit. The insured is usually responsible for payment at the time the service is rendered. This charge may be in addition to certain coinsurance and deductible payments.

Covered Person -- An individual who meets eligibility requirements and for whom premium payments are paid for specified benefits of the contractual agreement.

Deductible -- The amount of eligible expenses a covered person must pay each year from his/her own pocket before the plan will make payment for eligible benefits.

Deductible Carry Over Credit -- Charges applied to the deductible for services during the last 3 months of a calendar year that may be used to satisfy the following year's deductible.

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Dependent -- One who obtains health coverage through a spouse, parent or grandparent who is covered under a plan.

Effective Date -- The date insurance coverage begins.

Eligible Dependent -- A dependent of a covered person (spouse, child, or other dependent) who meets all requirements specified in the contract to qualify for coverage and for whom premium payment is made.

Eligible Expenses -- The lower of the reasonable and customary charges or the agreed upon health services fee for health services and supplies covered under a health plan.

Explanation of Benefits (EOB) -- The statement sent to an insured person by their health insurance company listing services provided, amounts billed, eligible expenses and payments made by the health insurance company.

Insured -- A person who has obtained health insurance coverage under a health insurance plan.

Managed Care -- A health care system under which physicians, hospitals, and other health care professionals are organized into a group or "network" in order to manage the cost, quality and access to health care. Managed care organizations include Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs).

Out-of-Pocket Maximum -- The total payments that must be paid by a covered person (i.e., deductibles and coinsurance) as defined by the contract. Once this limit is reached, covered health services are paid at 100% for health services received during the rest of that calendar year.

Participating Provider -- A medical provider who has been contracted to render medical services or supplies to policyholder at a pre-negotiated fee. Providers include hospitals, physicians, and other medical facilities.

Preferred Provider Organization (PPO) -- A health care delivery arrangement which offers policyholders access to participating providers at reduced costs. PPOs provide insured persons incentives, such as lower deductibles and co-payments, to use providers in the network. Network providers agree to negotiated fees in exchange for their preferred provider status.

Provider -- A physician, hospital, health professional or other entity that provides a health care service.

Primary Care Physician (PCP) -- A physician that is responsible for providing, prescribing, authorizing and coordinating all medical care and treatment.

Reasonable and Customary (R & C) -- A term used to refer to the commonly charged or prevailing fees for health services within a geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community.

Underwriting -- The act of reviewing and evaluating prospective insured persons for risk assessment and determining the appropriate premium.

Prices for the same coverage can vary by hundreds of dollars, so it pays to receive several personal health insurance price quotes.

About the Author
With over 20 years of experience as a personal financial educator and counselor, Vernon Williams has developed in depth knowledge of what it takes to achieve financial success. Today, he is a sought after trainer and speaker by organizations from both the public and private sector. He is the author of 425 Ways to Stretch Your $$$$ and 3 Rules that Guarantee Financial Success. Visit him at http://www.howtocutexpenses.com