Glossary of Terms

Allowable charge

The maximum amount a health plan will pay for a covered service or for a product, such as a drug. Participating providers have agreed to accept the allowable charge. An "actual charge" is the participating provider's full price for a covered service or a product before any negotiated discounts are applied.

COBRA

COBRA stands for the Consolidated Omnibus Budget Reconciliation Act of 1985. This act requires that continuation of group insurance coverage be offered to covered persons who lose health or dental coverage due to a qualifying event as defined in the act. See also Qualifying event.

Co-payment

A cost-sharing arrangement in which an insured pays a specified charge for a specified service. Also called a "co-pay."

Co-payment maximum

The most money in co-payments a subscriber would pay each year before an insurance plan begins to pay the entire allowable charge for covered expenses.

Coinsurance

The portion of covered healthcare costs that the insured has to pay. It is usually a fixed percentage. Coinsurance usually applies after the insured meets his/her deductible.

Coinsurance maximum

The coinsurance maximum is the most money a subscriber would pay in coinsurance each year, not including co-payments and deductibles, before an insurance plan begins to pay 100 percent of the allowable charge for covered expenses. The insurance plan may require that the services be performed using their in-network providers. This does not apply to the Medicare Supplemental Plan.

Coordination of benefits

This refers to a system to eliminate duplication of benefits when a person is covered under more than one health insurance plan. Benefits paid under two or more plans may not exceed 100 percent of the claim.

Covered medical expense

A covered medical expense is a medical expense that is considered medically necessary and is not excluded by any term, condition, limitation or exclusion of the plan.

Covered person

A person (employee, retiree, survivor, COBRA participant or dependent) is considered covered if they have met the eligibility requirements and are enrolled in an insurance plan. See also Subscriber.

Deductible

The amount a subscriber must pay each year, if it is an annual deductible, or each time a service is received, if it is a per-occurrence deductible. The insured is required to pay for covered expenses up to the level of the deductible before the insurance plan begins to pay benefits.

Dependent spouse

A lawful spouse of a subscriber, or a former spouse who is required to be covered by a divorce decree or court order, but not both spouses. If a spouse is also eligible for coverage or benefits as an employee of a participating employer, the spouse may not be covered as a dependent.

Exclusion

A specific condition or circumstance for which an insurance plan or policy will not provide benefits.

HSA tax year

An HSA (Health Savings Account) tax year is defined by the IRS as the federal tax year. For most people, this is the calendar year.

Health Maintenance Organization (HMO)

An HMO is a managed care plan that has contracts with healthcare providers (doctors, hospitals, etc.) that form a provider network. HMO subscribers are required to see only providers within this network. If a subscriber receives care outside of the network, the HMO will not pay benefits for these services unless the care was pre-authorized or deemed an emergency. A subscriber chooses a primary care provider (PCP) who coordinates all aspects of their healthcare.

Health Savings Account (HSA)

A Health Savings Account is a special type of tax-advantaged account that is designed to help you pay for medical expenses. You may be eligible to open an HSA if you are enrolled in an HSA-compatible HDHP.

High Deductible Health Plan (HDHP)

For a health plan's deductible to be defined as "high" for HSA purposes, it must be $1,200 or more for individuals, $2,400 or more for families for 2011 and 2012. These amounts are subject to change each year based on cost of living adjustments.

Incurred expense

An expense is considered incurred on the date services were provided or supplies were received.

Open enrollment

A period during which eligible employees, retirees, survivors and COBRA subscribers may enroll in or drop their own coverage and add or drop eligible dependents to/from a health plan without regard to any special eligibility situations.

Out-of-pocket maximum

The most money a covered person will be required to pay each year in deductibles, co-payments, and coinsurance. The out-of-pocket maximums are set by each insurance plan, with caps established by the IRS.

Per-occurrence deductible

The amount a covered person must pay each time he visits a physician's office or receives an emergency room, inpatient or outpatient hospital service before the health plan begins to pay benefits.

Point of Service (POS)

A managed-care plan that allows a subscriber to choose providers or specialists from within the plan's network as referred by their primary care physician, or from outside the network. If a subscriber uses out-of-network services, benefits are paid at a reduced level.

Premium

Cost for medical benefits over a specific time period.

Prescription drug

Any drug or medicine required to bear the following wording, "Caution: Federal law prohibits dispensing without prescription." Insulin or drugs licensed or accepted for a specific diagnosis as listed in the U.S. Pharmacopoeia Publication, Drug Information for Health Care Professionals, are also considered prescription drugs. Drugs in FDA phase I, II, or III testing are not covered.

Primary Care Provider (PCP)

A PCP is usually the first contact for healthcare. This is often a family physician, internist, pediatrician, nurse practitioner, or in some cases, a gynecologist. A primary care provider monitors the patient's health, diagnoses and treats minor health problems, and refers the patient to specialists if another level of care is necessary.

Provider

A provider is any person (e.g., doctor, nurse, dentist, etc.) or facility (e.g., hospital or clinic) that provides healthcare, acting within the scope of their license.

Qualified medical expenses

Under IRS Section 213(d), the definition of qualified medical expenses for an HSA is generally the same as the definition for medical expenses that qualify as itemized deductions on an individual's federal income tax return. Insurance premiums (other than while on COBRA or while receiving unemployment benefits) generally will not qualify. IRS Publication 502 provides a partial list of qualified medical expenses.

Qualifying event

A qualifying event is one that causes a loss of health and/or dental insurance and allows an extension of coverage for an employee, a spouse, or a dependent. Such events include loss of a job, a reduction in hours that makes an employee ineligible for coverage, death, divorce or legal separation, loss of a dependent's eligibility for coverage, or eligibility for Medicare by a covered employee or a parent of an eligible dependent child. See also COBRA.

Subscriber

A subscriber is an active or retired employee, survivor or COBRA subscriber of a state agency, public school district, participating county or other eligible employer, and their dependents who are enrolled in a benefits plan. See also Covered person.

Glossary Sources: IRS Section 213(d), IRS Publications 969 and 502, and Finity Communications Research.