The health insurance industry is full of jargon and acronyms and can be somewhat confusing to most. Here is a simplified explanation for most of the terminology you may encounter in regard to choosing and understanding your health insurance coverage.
Types of health plans
HMO – Health Maintenance Organization
An HMO provides you with extensive comprehensive health services including annual physicals, preventive care screenings, childhood immunizations, specialty care, emergent care and hospitalization. Most physician office visits and outpatient care only require that you pay a co-payment per visit. Co-payments typically range between $5.00 and $40.00 depending on your particular plan. There are no claim forms for you to complete.
An HMO policy requires that you obtain services through a designated network of physicians, ancillary facilities and hospitals. (The network would be your IPA or Medical Group).
You will be required to select a Primary Care Physician (PCP). The Primary Care Physician that you select determines the network (IPA or Medical Group) through which you will obtain your services.
POS – Point of Service
A Point of Service plan allows you to select from two options whenever you access health care services. Option one is to use your insurance like an HMO plan, within the designated network through your PCP and pay the set co-payment. Using the HMO benefits of the plan requires you to obtain the appropriate referrals and authorizations for specialty care and certain tests and treatments. Alternatively, you may choose to obtain care from an in-network or out-of-network provider or facility without coordinating these services through your primary care physician. In doing so, you will usually be responsible for a deductible as well as a percentage of the cost of service.
PPO – Preferred Provider Organization
Providers of health care services can elect to contract to provide health care as part of a Preferred Provider Organization for a predetermined rate. With a PPO plan you may obtain treatment from any provider you choose. However, if the provider is not part of the PPO network your out-of pocket expenses will be far greater than if you were cared for by a participating provider. Most PPO plans have an annual deductible, co-payments and or co-insurance amounts.
Indemnity Insurance (also referred to as Fee-for-Service)
An indemnity insurance plan covers most health care; however, preventive care such as physicals, well child care and immunizations are usually not covered under this type of plan. You may access care anywhere that will accept the insurance but this type of insurance coverage usually does not cover the total cost of the care but a percentage. Premiums on indemnity plans are usually higher than premiums for other types of coverage.
Other common terms
Benefits
Services available to you which are covered and paid for by your insurance plan. Payment from the insurance plan excludes any co-payment, co-insurance or deductibles that are the responsibility of the patient according to their health insurance benefit policy.
Co-payment
A co-payment is a set amount of money to be paid at the time of each office visit. A co-payment of a larger amount than the office co-payment may apply for emergency room care, inpatient, outpatient, diagnostic and surgical services.
Co-insurance
Co-insurance refers to the amount that the insured pays toward any health care service received. The co-insurance is usually a percentage and may be in addition to any deductible amounts due.
Covered Expenses
Health related services and prescriptions that are covered by a particular health insurance policy.
Deductible
A deductible is the amount of money that the insured person would need to pay for health care services received before any payment could be made from the insurance company.
Deductibles are usually annually based. This could be calendar year or based on insurance policy effective date. Therefore, each year the insured will be required to pay the deductible amount again.
Managed Care
Usually refers to an HMO, POS or PPO plan but actually refers to any health plan that has particular requirements and designations or preferred networks of physicians and facilities that allows for better coordination of care through a selected primary care physician.
Out-of Network Services
This refers to care received from a healthcare provider (physician or facility) that is not part of your selected network. For PPO plans, out–of-network services cost the insured a lot more than accessing care in-network.
For HMO plans, all out-of network services must be authorized by your medical group or health plan otherwise service received will not be covered.
Out-of-Pocket
This is the cost one would pay out of pocket. This can refer to co-payment, co-insurance, deductible or a combination of these. Maximum out-of-pocket refers to the maximum amount of money one could expect to have to spend for healthcare deductibles, co-payments and co-insurance in a given period of time. Once the maximum out-of-pocket for the time period has been met, the health insurance plan will pay 100% of the covered expenses. This does not include premiums paid to have the health insurance coverage.
Pre-authorization
In order for certain treatments, testing, surgery or specialty care to be considered a covered benefit a pre-authorization may be required for most health plan types including PPO plans. The primary care physician or referring physician contacts the health plan or medical group administrative offices in advance to obtain an authorization for the requested service.
Last Reviewed: February 2008