A Health Care Insurance Glossary

The industry terms used by health care insurance professionals often leave casual consumers confused. In this glossary, the professionals of Stokely Health Insurance explain some of the most common health care insurance terms.

Annual Deductibles: The sum of money that you as a health insurance policyholder are required to contribute toward your annual medical expenses before your health care insurance provider assumes responsibility for paying healthcare expenses. Various health care insurance policies require policyholders to pay different deductible amounts. Typically a policy with a higher deductible will have a smaller premium; and a policy with smaller deductible will have a higher premium. Stokely Health Insurance will help you choose a health insurance policy with the ideal balance between premiums and deductibles.

Coinsurance: The portion of a medical expense often expressed as a percentage that the health care insurance policyholder must pay. The health care insurance company must pay the remaining percentage of the medical bill.

Co-payment: The flat fee that the health care insurance policyholder must pay for a given health service, such as a doctor office visit or a prescription drug purchase.

Covered Medical Expense: Any medical expense payable to a doctor, clinic, hospital, laboratory, or pharmacy that a health insurance provider is required by a policy to pay.

Effective Date: The date specified by a health insurance policy that coverage begins.

Exclusion: A medical expense not covered under a health care insurance policy.

Flexible Spending Arrangement (FSA): A health insurance benefit plan offered by an employer that enables an employee to set aside a portion of their earnings to use for medical expenses. The funds in an FSA are sheltered from payroll taxes. FSA funds may be used to pay the medical expenses of qualified dependents. The money in an FSA account must be used within the plan year (plus a grace period) or are forfeited to the federal government.

Generic Medication: A drug made with the same chemical ingredients in the same proportions as a brand name drug. Generic drugs cost considerably less than brand name drugs, yet they are as effective and safe as the better known medications.

Group Health Insurance: A health insurance plan offered to members of a group rather than to an individual or family. Most group health insurance in the United States is provided through employers. Insurance providers cannot deny or delay coverage to members of a group plan due to preexisting medical conditions.

Health Maintenance Organization (HMO): An alternative form of health insurance that stresses wellness, preventive care, early diagnosis, and medical care on an outpatient basis. HMOs are licensed by a state government to provide healthcare to enrollees by contracting with certain healthcare providers to supply specified medical benefits. Almost all HMOs require plan members to visit a "primary care" physician (PCP) before seeking medical services elsewhere. The PCP will provide diagnosis and treatment or will refer the plan member to a specialist when necessary.

Health savings account (HSA): A payroll plan similar to a Flexible Savings Arrangement (FSA), a Health Savings Account allows an individual to set aside a portion of their earnings to use for medical expenses. As with an FSA, the funds deposited in an HSA are sheltered from payroll taxes. Unlike the money in an FSA, the funds deposited in an HSA are not forfeited if they are not spent within a plan year. Instead, the HSA funds roll over from year to year, until the FSA account holder turns 65. At that point, FSA funds can be withdrawn for any purpose without tax liability or IRS penalties. To be eligible for an HSA, an individual must be enrolled in a High Deductible Health Plan (HDHP).

Indemnity Health Insurance: Also called fee-for-service health insurance, indemnity health insurance reimburses the policyholder for a set percentage of his or her medical expenses. The insurance provider reserves the right to pay only a percentage of what it considers the "usual and customary rates" for a particular medical test, treatment, medication, or procedure. If the healthcare provider charges more than the usual and customary rates, then the indemnity policyholder is obligated to make up the difference. The policyholder may obtain service from any doctor, clinic, hospital, lab, or pharmacy.

Lifetime Maximum Benefit: The total amount of money that a health insurance company will pay for a policyholder's medical care over the course of his or her lifetime. Caps on lifetime benefits were eliminated for health insurance policies that were written or renewed after September 23, 2010, according to a provision of the Patient Protection and Affordable Care Act of 2010.

Medical Savings Account: A special, tax-advantaged savings account that allows small business owners and self-employed individuals to set aside funds to pay for medical expenses that are not covered by their health insurance policy.

Medicare: A federal government program funded with payroll taxes that provides health care insurance to people aged 65 and up. Medicare is organized into two health insurance plans: Medicare Parts A and B. Medicare Part A is paid for entirely by payroll taxes; the plan member pays nothing. Medicare Part A covers medical expenses charged by hospitals, hospices, and skilled nursing facilities. By contrast, Medicare Part B is paid for in part by payroll taxes, but it also requires plan members to pay a premium. Medicare Part B pays for doctor office visits, outpatient treatment, physical therapy, and some types of in-home care.

Point-of-service health insurance (POS): A form of managed healthcare that, like a PPO or an HMO, a POS requires plan members to obtain medical care from a network of health care providers. As with an HMO and PPO, POS care is managed by a doctor: the "point-of-service" physician, who oversees care, provides treatment, and refers patients to specialists and labs as necessary. Like a PPO, a POS will cover a portion of the cost of medical services obtained outside the network of POS providers. Unlike a PPO, a POS requires the policyholder to manage the paperwork associated with the out-of-network care.

Portability:The ability of a health insurance consumer to change health insurance plans without being subjected to waiting times and exclusions due to a preexisting medical condition.

Preferred Provider Organization (PPO): Like an HMO and a POS, a Preferred Provider Organization manages healthcare through a network of healthcare professionals. As with a POS, a PPO covers a percentage of the cost of medical services obtained outside a network of preferred healthcare providers. Unlike a POS, however, a PPO does not require the health insurance plan member to document and manage the paperwork associated with the out-of-network care.

Preexisting condition: A medical condition, often a chronic disease, that a person has been diagnosed as having before enrolling in a health insurance plan. The Patient Protection and Affordable Care Act of 2010 has eliminated waiting periods and exclusions for children with preexisting medical conditions, but California law still allows health insurance companies to delay or deny coverage for some preexisting conditions for adult individual health insurance plan policyholders. By law, benefits cannot be denied or delayed to members of group health insurance plans who have preexisting conditions.

Supplemental Health Insurance: A limited health insurance policy that pays only for medical expenses that are not covered by a primary health insurance policy. The most popular supplemental health insurance plans are designed for seniors who need to supplement the coverage of Medicare.