Insurance Glossary

Quite simply, when you incur a health expense that is covered by your health insurance policy, your medical provider submits a “claim” to the insurance company. It’s basically their request for payment. When the insurance company pays the claim, you’ll receive a form called an “explanation of benefits.”

In most traditional plans, once you reach your annual deductible, you enter into coinsurance, where the company will pay some percentage of subsequent claims and the client pays the rest (usually an 80/20 or 70/30 split). There is typically a cap on what the client will pay, called your “out-of-pocket maximum.” Once you reach that cap, the insurance company will pay all claims.

Some health insurance plans allow you to visit the doctor and pay a predetermined fee for services, which is called a copay. The insurance company then pays the remainder of the cost of the visit. A copay typically covers expenses that take place in that office on that day. Some plans limit the number of copays a client may use in one year.

Your deductible is basically the portion of your health expenses that you will be responsible for each year before the health insurance company begins paying benefits. As a general rule, the higher your deductible, the lower your monthly premium.

The date your plan takes effect.

Sometimes, after reviewing an application, an insurance company will offer coverage with certain limitations – they may exclude certain pre-existing conditions from coverage, meaning that they would not pay claims related to that condition. Often you can apply to have an exclusion reconsidered after 1-3 years.

Health Savings Accounts are a rather new option that function much the same as an IRA, the retirement account many people are more familiar with. You are eligible to open an HSA when you are covered by a high deductible health insurance plan that meets federally mandated requirements. These plans generally provide good major medical protection with a higher deductible and lower premiums. You can establish your health savings account at the bank of your choosing and deposit pre-tax money to fund health-related expenses. The money you place in the account is not taxable income. (For this reason, the IRS sets annual limits on maximum contributions.) The idea is that you take the money you save on monthly premiums and put some of it into this account to fund medical expenses – so you’re saving (with interest) and controlling your health dollars rather than sending them on to the insurance company whether you need it or not. Again, this money is yours and rolls over year to year (not a use it or lose it situation). The tradeoff is that you are typically responsible for your healthcare costs up to the deductible amount. You will, of course, benefit from provider discounts when you stay in network.

There is a cap on the benefits your coverage will pay over the life of the plan, but it is usually at least $1 million, and often much more.

In most traditional plans, once you reach your annual deductible, you enter into coinsurance, where the company will pay some percentage of subsequent claims and the client pays the rest (usually an 80/20 or 70/30 split). There is typically a cap on what the client will pay, called your “out-of-pocket maximum.” Once you reach that cap, the insurance company will pay all claims.

Any condition that you has been diagnosed or for which a reasonable person would have sought medical advice or treatment.

Your monthly bill.

Routine healthcare examinations such as physicals, vaccinations, mammograms, and annual OBGYN exams.

An estimate of what a particular health insurance plan will cost, usually generated by a client’s date of birth and zip code (though it may also consider other factors such as height/weight and tobacco use). A quote is a “ballpark” estimate that is particularly useful in comparing how plans and providers stack up. The actual premium you would pay would be determined by your application and the specifics of your case. Quotes are particularly useful in comparing plans against one another.

A change or addition that may be included in your policy, often involving an exclusion.

A basic insurance policy that will bridge the gap when you have recently lost group coverage and anticipate getting on a group health insurance plan fairly soon. These plans are designed for those who are between jobs and for recent graduates who no longer qualify as dependents on their parents’ plan.

Life insurance that is in force for a defined period of time (most commonly for 10, 20, or 30 years). After the policy period is over, the policy ends (though it can usually be converted to a more expensive permanent policy at that point). Term life insurance is not an investment product, and is significantly less expensive than whole or universal life insurance.

The process whereby the health insurance company reviews an application and gathers information before making a final decision on an applicant. Often, a member of an underwriting team will call an applicant to gather more information or ask follow-up questions related to information in the application. The task of an underwriter is essentially to assess the risk of insuring each applicant.