Health Care Insurance Terminology
Copay – A predetermined flat fee that an individual must pay for medical services. This payment is not usually subject to the deductible. There may be separate co-pays for different services.
Coinsurance – A specified percentage of medical expenses that an individual must pay after the deductible (if any) has been met.
COB (Coordination of Benefits) – This is the process by which a health insurance company determines if it should be the primary or secondary payer of medical claims for a patient who has coverage from more than one health insurance policy.
Deductible – A fixed dollar amount during a benefit period (usually a year) that an individual pays before the insurance plan starts to make payments for covered medical expenses.
Out of Pocket Max – After the patient has met their out of pocket maximum, they no longer have to pay anything (copay, coinsurance, or deductible). Typically happens towards the end of the year.
Network – Groups of physicians, hospitals and other health care providers contracted with a health plan to offer care at negotiated rates.
Preferred Provider Organization (PPO) – A health insurance plan where coverage is provided to individuals through a network of selected health care providers. The insured may go outside the network but will incur larger costs in the form of higher deductibles and coinsurances, or non-discounted charges from the providers.
Health Maintenance Organization (HMO) – A health insurance plan where individuals must choose a primary care physician (PCP) who coordinates all care and makes referrals to any specialists that may be required. Individuals MUST use in network providers; there is no coverage for care received from a non-network provider except in an emergency situation.
Exclusive Provider Organization (EPO) – A more restrictive type of PPO where individuals MUST use in network providers; there is no coverage for care received from a non-network provider except in an emergency situation.
Point-of-Service (POS) – A POS plan is an “HMO/PPO” hybrid; sometimes referred to as an “open-ended” HMO when offered by an HMO. POS plans resemble HMOs for in-network services, but for all services received outside of the network payment is made based on a fee schedule or usual and customary charges.
Physician-Hospital Organization (PHO) – A plan created by alliances between physicians and hospitals to help providers attain market share, improve bargaining power, and reduce administrative costs.
Network Provider – Physicians, hospitals or other providers of medical services that have agreed to participate in a network, to offer their services at negotiated rates, and to meet other negotiated contractual provisions. Also referred to as “participating provider.”
Out-of-Network – Health care services received outside the HMO or PPO network.
An authorization, or precertification, is used by healthcare providers and the insurance company to ensure medical necessity of services. This is only required for certain procedures and varies by insurance company. The rendering provider or specialist will submit auth or precertification requests to the insurance company prior to the services being rendered. These requests include the patient’s demographic info, potential CPT codes for procedures to be rendered, diagnosis codes, and the service dates. Once approved, the insurance company will send the provider a confirmation and an auth number to be submitted with the claim. Without this, services will not be paid for.
A referral is used when a patient is sent to another healthcare provider – usually by a primary care physician (PCP) referring to a specialist. Some insurance plans require an electronic referral number from the PCP before the specialist can see the patient. The specialist typically cannot obtain a referral without the PCP requesting it. Referrals may need to be updated occasionally, since some are only good for certain time frames or visits.
An ABN, or Advance Beneficiary Notice, is a waiver of liability that is signed by the Medicare patient prior to receiving certain services. By law, Medicare will only pay for services that are determined to be “reasonable and necessary.” Based on Medicare coverage guidelines, if it is unlikely the procedure will be paid for due to medical necessity, this must be completed prior to treatment. Payment is collected at time of service.
Medical necessity is defined as accepted health care services and supplied provided by health care entities, appropriate to the evaluation and treatment of a disease, condition, illness or injury and consistent with the applicable standard of care.
Notice of Non-Covered Service waiver that is similar to the Medicare ABN for patients with commercial insurance plans for similar procedures that may not be covered.