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Health Insurance Glossary

Agent
A party authorized by another party, the principal, to act on the principal's behalf in contractual dealings with third parties.

Agent-Brokers
Career agents who place business with companies other than their primary companies. Also known as agents of other companies, surplus brokers, or simply brokers.

Applicant
The party applying for an insurance policy.

Application
A form that must be completed by an individual or other party who is seeking insurance coverage. This form provides the insurance company with much of the information it will need to decide whether to accept or reject the risk.

Backdating
A procedure for making the effective date of a policy earlier than the application date. Backdating is often used to make the age at issue lower than it actually was in order to get a lower premium. State laws often limit to six months the time to which policies can be backdated.

Case Management
Determining a course of care, based on the needs of the patient, to make sure the most appropriate treatment happens in the best setting.

Centers of Excellence
Hospitals that specialize in treating specific diseases or conditions, or that perform a particular type of care, such as cancer treatment or organ transplants.

Classified Insurance
Life or Health Insurance risks which do not meet the standards for the regular manual rate. See also Substandard.

COBRA
The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, requires group health plans with 20 or more employees to offer continued health coverage for you and your dependents for 18 months after you leave your job. Longer durations of continuance are available under certain circumstances. If you opt to continue coverage, you must pay the entire premium, plus a two percent administration charge.

Coinsurance
The amount you are required to pay for medical care in a fee-for-service plan or preferred provider organization (PPO) after you have met your deductible. The coinsurance rate is usually expressed as a percentage of charges. For example, if the insurance company pays 80 percent of the claim, you pay 20 percent.

Coinsurance Provision
A stipulation found in most health insurance policies that requires an insured to pay a stated percentage, in excess of the deductible, of all eligible medical expenses.

Combination Company
Life and health insurance company that sells both industrial and ordinary insurance products.

Combination Clause
A clause in a disability income contract that specifies a point at which the definition of total disability will no longer be based on the inability of the insured to perform his or her "own occupation" but on his/her inability to perform "any occupation."

Combination Dental Plan
A dental plan which contains features of both scheduled and nonscheduled plans. Typically, combination plans cover preventive and diagnostic procedures on a nonscheduled basis and other services on a scheduled basis. See also nonscheduled dental plan and scheduled dental plan.

Conditional Binding Receipt
This is the more exact terminology for what is often called a binding receipt. It provides that if a premium accompanies an application, the coverage will be in force from the date of application or medical examination, if any, whichever is later, provided the insurer would have issued the coverage on the basis of the facts revealed on the application, medical examination and other usual sources of underwriting information. A Life and Health Insurance policy without a conditional binding receipt is not effective until it is delivered to the insured and the premium is paid.

Contributory
A general term used to describe a plan of employee coverage in which the employee pays at least part of the premium.

Conversion Privilege
This is the right of an individual to convert a Group Health or Life policy to an individual policy should the individual cease to be a member of the group. Usually this can be done without a physical examination.

Coordination of Benefits (COB)
A group policy provision which helps determine the primary carrier in situations where an insured is covered by more than one policy. This provision prevents an insured from receiving claims overpayments.

Copayment
A cost sharing arrangement in which a person pays a specific charge for a specific medical service.

Deductible
The amount of health care costs that the patient must pay before the insurance company pays covered expenses. For example, you have a $250 deductible, after which your insurance company pays 80 percent of covered expenses. An emergency room visit costs $600. You will pay your $250 deductible, plus 20 percent of the additional cost, which makes a total of $320. Your insurance picks up coverage after the $250 deductible, and pays 80 percent of the remaining $350, that is $280.

Dental Maintenance Organization
An organization, like an HMO, that provides only dental care.

Dentist-Consultant
A licensed dentist who understands the underwriting intent of dental plan language as well as the accepted standards of dental practice, and who advises insurers as to the appropriateness of dental treatment.

Effective Coverage
Indicates when the insurance actually starts. Waiting periods are common, especially with sickness benefits, and range from 5 to 30 days after a policy is issued. The longer the waiting period, the lower the cost of insurance.

Employee Benefit Program
Benefits offered an employee at his place of work by his employer, covering such contingencies as medical expenses, disability, retirement, and death, usually paid for wholly or in part by the employer. These benefits are usually insured.

Exclusion Clauses
They eliminate certain conditions from coverage in a policy. Examples might be alcoholism, drug addiction, and pregnancy.

Explanation of Benefits (EOB)
A statement from the insurance company showing the patient what charges have been filed on behalf of a medical provider, how much the insurance company paid, how much of costs for which the insured is responsible, and any reason the insurance company did not cover particular services performed by the provider.

Free Look
A period of time (usually 10, 20 or 30 days) during which a policyholder may examine a newly issued individual policy of life or health insurance, and surrender it in exchange for a full refund of premium if not satisfied for any reason.

Grace Period
The length of time (usually 31 days) after a premium is due and unpaid during which the policy, including all riders, remains in force. If a premium is paid during the grace period, the premium is considered paid on time.

Guaranteed Insurability
An option in Life and Health Insurance contracts that permits the insured to buy additional prescribed amounts of insurance at prescribed future time intervals without evidence of insurability.

Health insurance
Insurance that covers medical expenses or income loss resulting from injury or sickness. Health insurance is a general category that includes many different types of insurance coverage, including hospital confinement insurance, hospital expense insurance, surgical expense insurance, major medical insurance, disability income insurance, dental expense insurance, prescription drug insurance, and vision care insurance. See also disability income insurance and medical expense insurance.

Health Maintenance Organization (HMO)
Prepaid health plans in which you pay a monthly premium and the HMO covers your necessary medical treatment. You must choose a primary care physician from within the network to coordinate all of your care. All specialty referrals need to be authorized by your primary care physician.

Hospital Confinement Insurance
A type of health insurance that provides a predetermined flat benefit amount for each day an insured is hospitalized. The benefit amount does not vary according to the amount of medical expenses the insured incurs, although some policies provide higher benefit amounts if the insured is in an intensive or cardiac care unit. Also called hospital indemnity insurance.

In-Force Business
Life or Health Insurance for which premiums are being paid or one for which premiums have been fully paid. The term refers to the total face amount of a Life insurer's portfolio of business. In Health Insurance it refers to the total premium volume of an insurer's portfolio of business.

Insurance
A system of protection against loss in which a number of individuals agree to pay certain sums of money, called premiums, to create a pool of money which will guarantee that the individuals will be compensated for losses caused by events such as fire, accident, illness, or death.

Insurance Agent
A representative of an insurance company who sells insurance. An insurance agent locates prospective insurance customers, determines the insurance needs of each customer, and assists the customer in applying for insurance. Typically, an insurance agent will deliver the policy when the application is approved, will collect the initial premium, and will provide customer service to policy owners. Also called an agent, a field underwriter, or a life underwriter.

Integrated Dental Plan
A dental plan that is part of a major medical policy.

Major Medical Insurance
A type of medical expense insurance that provides broad coverage for most of the expenses associated with treating a covered illness or injury.

Managed Care
An organized way to manage costs, use, and quality of the health care system. The major types of managed care plans are Health Maintenance Organizations (HMOs), Point-of-Service (POS) plans, and Preferred Provider Organizations (PPOs).

Maximum Out-of-Pocket Expenses
The amount of deductibles and co-payments a patient will be responsible for during a fixed period of time, usually a year. After the insured reaches the maximum out-of-pocket amount, the insurance company pays covered expenses at 100 percent of reasonable and customary expenses.

Medicaid
A joint federal-state health insurance program that is run by the states and covers certain low-income people (especially children and pregnant women) and disabled people.

Medical Application
An application for insurance in which the proposed insured is required to undergo some type of medical examination. The results of the medical examination are then reported to the insurance company.

Medical Examination
The examination of an applicant for insurance or a claimant by a physician who acts in the capacity of the insurer's agent.

Medical Expense Insurance
Any of several types of health insurance designed to pay for part or all of the health care expenses of the insured, such as hospital room and board, surgeon's fees, visits to doctors' offices, prescribed drugs, treatments, and nursing care. See also hospital confinement insurance, hospital-surgical expense insurance, major medical insurance, and specified expense coverage.

Medical History and Present Health
Medical history and present health are usually reviewed before a company issues a policy. If a person has certain defects or diseases, it may not be possible to get health insurance. In some cases, coverage is available but an extra amount is charged to cover the added risk, or a restricted type of coverage may be offered.

Medical Information Bureau (MIB)
A data pool service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life and Health insurers subscribe to this bureau to get more complete underwriting information.

Medicare
The federally sponsored health insurance program of hospital and medical insurance primarily for people aged 65 and older.

Medicare Supplement
Medical expense coverage that provides benefits for certain expenses not covered under Medicare. This coverage is available only to individuals who are covered by Medicare and can be purchased by individuals or by employers to cover retired employees.

Medical Savings Account (MSA)
A high-deductible health insurance plan that allows insured employees to have a pre-determined amount deducted from their pay before taxes.

Nonscheduled Dental Plan
A dental plan which pays benefits for procedures based on the dentist's actual charges, as long as the charges are usual, customary, and reasonable.

Point-of-Service (POS) Plan
A type of managed care plan combining features of health maintenance organizations (HMOs) and preferred provider organizations (PPOs), in which individuals decide whether to go to a network provider and pay a flat dollar copayment, or to an out-of-network provider and pay a deductible and/or a coinsurance charge.

Policy
A written document that serves as evidence of an insurance contract and contains the pertinent facts about the policy owner: the insurance coverage, the insured, and the insurer.

Pre-admission Certification
Review by the insurance company before surgery to determine if the procedure is necessary and if it could be done on an outpatient basis. Most insurance companies will not cover surgical procedures without a pre-admission certification.

Pre-existing Condition
Any medical conditions that have been diagnosed before the insured was covered by his current insurance policy

Preferred Provider Organization (PPO)
A network of health care providers, with which a health insurer has negotiated contracts for its insured population to receive health services at discounted costs. Health care decisions generally remain with the patient as he or she selects providers and determines his or her own need for services. Patients have financial incentives to select providers within the PPO network.

Premium
The monthly amount you or your employer pays in exchange for insurance coverage.

Present Health
See Medical history.

Primary Care Physician
Usually your first contact for health care under a health maintenance organization (HMO) or a point-of-service (POS) plan. This is often a family physician, internist, or pediatrician. A primary care physician monitors your health, treats most health problems, and authorizes referrals to specialists, if necessary.

Provider
Any person (doctor, nurse) or institution (hospital, clinic, laboratory) that provides medical care.

Reasonable or Customary Charges
Amounts health care providers charge that are consistent with charges from similar providers for identical or similar services in a particular part of the country.

Special Benefit Networks
A group of health care providers that offer specific services, such as mental health, substance abuse or prescription drugs.

Standard Provisions
(1) Provisions prescribed by state law that must appear in all policies issued in that jurisdiction. (2) Provisions adopted by the NAIC to apply to group Life Insurance as minimum protection. They are required by law in most states. (3) Formerly, a set of prescribed provisions regulating the operating conditions of a Health Insurance policy required by law in most jurisdictions between about 1912 and 1950. They are now superseded by uniform provisions for Individual Accident and Health Insurance policies that contain an NAIC model bill. These have been enacted in virtually all jurisdictions.

Third-Party Administrator (TPA)
A consultant to the insured employer that maintains all records about employees covered under the health care plan.

Underwriting
How an insurer determines whom it will accept for insurance coverage. Underwriters generally review the medical histories of people applying for individual polices or group plans.


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