Health Insurance Glossary

Date Posted

October 25, 2019


Health Insurance Glossary scaled

Health Insurance Glossary

Affordable Care Act (ACA): Officially titled the and Patient Protection and Affordable Care Act but informally called “Obamacare,” it is the law that restructured and increased access to health care in the U.S.

Allowed Amount: The dollar amount that insurance companies pay providers for each covered service, according to the contract between the insurer and the provider.

Appeal: A formal request to review an insurance company decision to deny coverage or the amount of payment. Internal appeals are reviews within the insurance company. External appeals are conducted by a third party. Appeals have strict deadlines and requirements, so act quickly. Read notices that you receive, your plan, and the insurance company’s website, or call the member service line or state Division of Insurance.

Association Health Plan: Generally disallowed under the Affordable Care Act, this non-ACA-compliant type of health plan provided through employer groups may allow for different premium rates based on gender and may not cover one or more of the 10 Essential Health Benefits.

Balance Billing: When a provider expects an insured person to pay the difference between the amount paid by insurance and the amount that the provider charges. The issue arises most often with out-of-network providers. Check with your state’s division of insurance about state protections.

Children’s Health Insurance Program (CHIP): This program provides low-cost health coverage to children (and, in some states, pregnant women) in families whose income is too high to qualify for Medicaid but cannot afford private insurance.

 Health-Insurance-Glossary-Claim-scaledClaim: A request to the insurance company for payment for services or medications, made by a provider or by an insured person.

Co-Insurance: A percentage of the cost of covered services that the insured person is responsible for paying. Not every plan has a co-insurance requirement, and some impose a co-insurance requirement only for certain covered services, such as for in-patient care.

Co-Pay: A set amount payable by the insured person as a contribution toward the covered service, e.g., $20 for a sick visit to the doctor.

COBRA: An opportunity to continue health care coverage through your former employer if you lose your job.

Cost-Sharing: The division of the cost of covered services so that the insured person pays a portion and the insurer pays the remainder. Cost-sharing includes co-pays, co-insurance, and deductibles, but not premiums, services by out-of-network providers, or fees paid for services that are not covered. (Note: for Medicaid, cost-sharing does include premium payments.)

Deductible: The amount that the insured person is responsible for paying each year before the insurance company begins to pay. Generally, the higher a plan’s deductible, the lower the premium. With a high deductible, you hope not to need a lot of covered services, because you will have to pay a large amount out-of-pocket before the insurance company pays for covered services.

Essential Health Benefits: Certain areas of health care that must be covered under the ACA: outpatient services, emergency services, hospitalization, maternity and newborn care, mental health and substance use disorder services, prescription drugs, rehabilitative and habilitative and devices, laboratory services, preventive and wellness services and chronic disease management, and pediatric services, including oral and vision care.

Formulary: The insurance company’s approved drug list for each health plan, listing each medication that is covered and at what price.

Health [Insurance] Plan: The terms of coverage offered by an insurance company in exchange for payment of a set premium. An insurance company may offer several plans with different premiums, deductibles, out-of-pocket limits, networks, and scope of coverage.

Marketplace (also “Health Insurance Marketplace” or “Exchange”): the shopping and enrollment service for purchasing ACA-compliant health plans, including state-based marketplaces and the marketplace managed by the federal government at

Mental Health Parity: The requirement that financial, treatment, and care management limits on mental health care benefits cannot be more restrictive than limits on similar medical or surgical benefits.

Metal Categories: The Marketplace offers four categories of plans: bronze, silver, gold, and platinum. Although the quality of care is the same regardless of metal level, the cost-sharing differs between the insurance company and the insured family or individual, with bronze placing the lowest share on the insurance company (60%) and platinum placing the highest (90%).

Network: The group of providers and facilities that participate in the plan. An In-Network Provider is someone who has contracted with the insurance company to provide certain services for the allowed amounts, while an Out-of-Network Provider has not made an agreement with the insurance company to accept a certain payment for providing services to people covered by the plan.

Out-of-Pocket: The total amount of co-pays, deductibles, and co-insurance payments that an insured person can be required to pay for services in a plan year. After reaching the out-of-pocket limit, the insurance company must pay for all costs incurred for covered services through the end of the plan year.

Pre-Existing Condition: Any health condition that was diagnosed or treated before the current plan year benefits take effect. The ACA prohibits health insurance companies from denying medical coverage or raising rates due to a pre-existing condition.

Premium: The monthly amount paid by an insured person for their health plan.

Primary Care Provider (PCP): The health care provider – such as a family physician, pediatrician, or nurse practitioner – who is the main point of contact for a person’s medical care. In addition to conducting an annual physical examination and attending to a person at sick visits, the PCP can also be responsible for approving referrals.,

Prior Authorization: The requirement that a provider obtain approval from a health plan to prescribe a specific medication or treatment.

Provider Charges: The fees that a doctor or other medical or mental health service provider would bill for their services. However, an in-network provider will generally have contracted with the insurance company to accept a lesser “allowed amount” for their services.

Referral: The approval by one provider, usually a person’s Primary Care Provider, for an insured person to see a professional who provides specialized care, such as a psychiatrist, surgeon, or physical therapist. Frequently, insured persons are not required to obtain a referral for mental health care.

Specialist: A provider that offers care pertaining to one part of the body, a particular disease, or otherwise more specific than general health care.

Step Therapy: Also known as “fail first,” this is the requirement that insured people try one or more lower-priced medications before receiving approval for more expensive medications or other treatments.

Tiers: This can refer to a few things, but it means different rates being charged. This often applies to medications, depending on whether the drug is generic or brand-name, or services, depending on where they are provided, such as at a more expensive hospital than another.