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Common Health Insurance Terms


The process of finding Health Insurance can be very confusing and tiring. There are a lot of terms that get thrown around that you may be unfamiliar with. This may make the process more mind boggling. Well SkyBlue Insurance is here to help. Below, we list some of the most common health insurance terms you’ll encounter when searching for Healthcare Insurance.

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Allowable- This is the dollar amount considered by a health insurance company to be a reasonable charge for medical services or supplies based on your local rates.

ASO (Administrative Services Only)- An arrangement in which an employer hires a third party to deliver administrative services to the employer such as claims processing and billing; the employer bears the risk for claims.

Benefit­- The amount payable by the insurance company to a plan member for medical costs.

Benefit level- The maximum amount that a health insurance company has agreed to pay for a covered benefit.

Benefit year- The 12-month period for which health insurance benefits are calculated.

Claim- A request by a plan member, or a plan member's health care provider, for the insurance company to pay for medical services.

Coinsurance- The amount you pay to share the cost of covered services after your deductible has been paid. The coinsurance rate is usually a percentage.

Conventional Indemnity Plan- An indemnity that allows the participant the choice of any provider without effect on reimbursement.

Coordination of benefits- A system used in group health plans to eliminate duplication of benefits when you are covered under more than one group plan.

Copayment- One of the ways you share in your medical costs. You pay a flat fee for certain medical expenses, while your insurance company pays the rest.

Deductible- The amount of money you must pay each year to cover eligible medical expenses before your insurance policy starts paying.

Dependent- Any individual, either spouse or child, that is covered by the primary insured member’s pan.

Drug Formulary- A list of prescription medications covered by your plan.

Effective Date- The date on which a policyholder's coverage begins.

Exclusion or Limitation- Any specific situation, condition, or treatment that a health insurance plan does not cover.

Exclusive Provider Organization (EPO) Plan- A more restrictive type of preferred provider organization plan under which employees must use providers from the specified network of physicians and hospitals to receive coverage.

Explanation of Benefits- The health insurance company's written explanation of how a medical claim was paid.

Flexible Spending Accounts or Arrangements (FSA)- Accounts offered and administered by employers that provide a way for employees to set aside, out of their paycheck, pretax dollars to pay for the employee’s share of insurance premiums or medical expenses not covered by the employer’s health plan. The employer may also make contributions to a FSA.

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Fully Insured Plan- A plan where the employer contracts with another organization to  assume financial responsibility for the enrollees’ medical claims and for all incurred administrative costs.

Gatekeeper- Under some health insurance arrangements, a gatekeeper is responsible for the administration of the patient’s treatment; the gatekeeper coordinates and authorizes all medical services, laboratory studies, specialty referrals and hospitalizations.

Group Purchasing Arrangement- Any of a wide array of arrangements in which two or more small employers purchase health insurance collectively, often through a common intermediary who acts on their collective behalf.

Group Health Insurance- A coverage plan offered by an employer or other organization that covers the individuals in that group and their dependents under a single policy.

Health Maintenance Organization (HMO)- A health care financing and delivery system that provides comprehensive health care services for enrollees in a particular geographic area. HMOs require the use of specific, in-network plan providers.

Health Savings Account (HSA)- A personal savings account that allows participants to pay for medical expenses with pre-tax dollars. HSAs are designed to complement a special type of health insurance called an HSA-qualified high-deductible health plan (HDHP). HDHPs typically offer lower monthly premiums than traditional health plans.

Indemnity Plan- A type of medical plan that reimburses the patient and/or provider as expenses are incurred.

In-network Provider- A health care professional, hospital, or pharmacy that is part of a health plan’s network of preferred providers.

Individual Health Insurance- Health insurance plans purchased by individuals to cover themselves and their families.

Medicaid- A health insurance program created in 1965 that provides health benefits to low-income individuals who cannot afford Medicare or other commercial plans. M

Medicare- The federal health insurance program that provides health benefits to Americans age 65 and older. Medicare has two parts; Part A, which covers hospital services, and Part B, which covers doctor services.

Medicare Supplement Plans- Plans offered by private insurance companies to help fill the "gaps" in Medicare coverage.

Network­- The group of doctors, hospitals, and other health care providers that insurance companies contract with to provide services at discounted rates.

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Out-of-Network Provider- A health care professional, hospital, or pharmacy that is not part of a health plan's network of preferred providers.

Out-of-Pocket Maximum- The most money you will pay during a year for coverage. It includes deductibles, copayments, and coinsurance, but is in addition to your regular premiums.

Payer- The health insurance company whose plan pays to help cover the cost of your care. Also known as a carrier.

Pre-Existing Condition- A health problem that has been diagnosed, or for which you have been treated, before buying a health insurance plan.

Preferred Provider Organization (PPO)- A health insurance plan that offers greater freedom of choice than HMO (health maintenance organization) plans. Members of PPOs are free to receive care from both in-network or out-of-network (non-preferred) providers, but will receive the highest level of benefits when they use providers inside the network.

Premium- The amount you or your employer pays each month in exchange for insurance coverage.

Provider- Any person (i.e., doctor, nurse, dentist) or institution (i.e., hospital or clinic) that provides medical care.

Rider- Coverage options that enable you to expand your basic insurance plan for an additional premium.

Underwriting- The process by which health insurance companies determine whether to extend coverage to an applicant and/or set the policy's premium.

Waiting Period- The period of time that an employer makes a new employee wait before he or she becomes eligible for coverage under the company's health plan.

Hopefully, knowing these common health insurance terms will make it easier to find the insurance you need. If you have any questions, contact one of our reliable SkyBlue Insurance agents at 1-800-771-7758 and get the Health Insurance you need. If you’re ready to start finding the best rates, go online now and get a Health Insurance quote for free.

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Common Health Insurance Terms


Health Insurance Terms | Health Insurance Terms Explained