Insurance Terms & Definitions


These are some of the most common insurance terms and industry jargon. This is a basic list.
If you would like a concept or term explained don't hesitate to contact IME and ask.

Activities of Daily Living - Activities individuals must do every day such as moving about, getting dressed, eating, bathing, etc.

Adverse Selection - The tendency of people who present risks with higher probability of loss to purchase and maintain insurance more often than the people with risks who present lower probability.

Ancillary - Additional, miscellaneous services provided by a hospital, such as x-rays, anesthesia, lab work, etc., but not hospital room and board.

Cash Value - The amount of money a policy owner is entitled if the policy is cancelled before maturity.

Certificate of Insurance - A written document that indicates that an insurance policy has been issued and that states both the amounts and types of insurance provided.

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985) - Requires any employer with 20 or more employees to extend group health coverage to terminated employees and their families after a qualifying event. Qualifying events include: voluntary termination of employment; termination of employment for reasons other than gross misconduct (i.e. company downsizing); employment status change - from full-time to part-time. Coverage for the terminated employee is extended up to 18 months. The terminated employee must exercise extension of benefits under COBRA within 60 days of separation. The group may charge an additional two percent on the premium rates to cover administrative costs for continued coverage. Coverage for dependents of the terminated employee is extended up to 36 months.

Co-Insurance (also commonly referred to as Out-of-Pocket or OOP) - An agreement between an insurer and insured in which both parties are expected to pay a certain portion of the potential loss and other expenses. The insured usually covers smaller claims, while the insurer covers the majority of large claims.

Connect for Health Colorado (shorthand: C4HC) - this is the Colorado state specific marketplace create by health care reform, the Patient Protection and Affordable Care Act. When shopping for insurance via C4HC, individuals, families and businesses have access to several carriers. Tax Credits (aka subsidies) are only available when purchasing insurance through C4HC.

Co-pay - An arrangement in which an insured must pay a specified amount for services "up front" and the insurer pays the remainder of the cost.

CoverColorado - A non-profit entity created by the state of Colorado which provides comprehensive major medical insurance for eligible Colorado residents who, because of a pre-existing medical condition, are unable to get coverage from private insurers. CoverColorado offers a statewide PPO network plan. As of 1/1/2014 this is organization is no longer functioning. See Connect for Health Colorado.

Death Benefit - The amount payable upon the death of the person whose life is insured.

Deductible - The portion of the loss that is to be paid by the insured before any claim will be paid by the insurer.

EOB (Explanation of Benefits) - A statement that outlines what services were rendered, how much the insurer paid and how much the insured was billed.

Eligibility Period - The period of time in which an employee may enroll in a group health care plan without having to provide evidence of insurability.

Elimination Period - A waiting period that is imposed on the insured from the onset of disability until benefit payments begin.

Evidence of Insurability - Proof of the acceptability of an applicant who meets an insurance company's underwriting requirements for coverage.

Explanation of Benefits (EOB) - A statement that outlines what services were rendered, how much the insurer paid, and how much the insured was billed. Commonly confusing for the insured - THIS IS NOT A BILL, simply a statement of how costs were incurred and who is responsible for paying different portions of the bill based on the insured's policy.

FSA (Flexible Spending Account) - A salary reduction cafeteria plan that uses employee funds to provide various types of health care benefits.

Guaranteed Issue - Applies to group coverage and the underwriting of such policies. When a group policy is written, every eligible member of the group must be covered regardless of physical condition, age, sex or occupation. Therefore, the underwriting process focuses on the group as a whole and guarantees coverage to all members if a policy is issued.

This term also applies to new employees: if a new employee meets the coverage requirements of a group policy, pre-determined by the employer, the employer must offer coverage on a guarantee issue basis.

HMO (Health Maintenance Organization) - A prepaid medical service plan in which specified medical service providers contract with the HMO to provide services. The focus of the HMO is preventive medicine. These plans use a "gatekeeper" model that uses the insured's primary care physician (the gatekeeper) as the initial contact for the patient for medical care and for referrals.

HRA (Health Reimbursement Account) - Plans that allow employers to set aside funds for reimbursing employees for qualified medical expenses.

HSA (Health Savings Account) - Plans designed to help individuals save for qualified health expenses.

In-network - Using preferred physicians and health care facilities which are pre-determined by insurers' established networks.

Insurability - The acceptability of an applicant who meets an insurance company's underwriting requirements for insurance.

Medical Information Bureau (MIB) - An information database that stores the health histories of individuals who have applied for insurance in the past. Most insurance companies subscribe to this database for underwriting purposes.

Medicare Supplement Insurance - A type of individual or group insurance that fills the gaps in the protection provided by Medicare, but that cannot duplicate any Medicare benefits. Often simply referred to as a Medicare Supplement or MedSupp.

Out-of-Network - Using physicians and health care facilities which are not recognized as preferred providers by the insurers' established networks.

Out-of-Pocket (OOP) Maximum - Amounts an insured must pay for coinsurance and deductibles before the insurer will pay its portion.

PPO (Preferred Provider Organization) - An organization of medical professionals and hospitals who provide services to an insurance company's clients for a set fee. These plans use a network model in which the insured must know their network and obtain care through a network approved facility or provider in order pay the agreed upon set fees. Seeking non-emergency care outside of one's network usually results in much higher costs for the insured because there are no previous arrangements for discounted or controlled pricing.

Pre-Existing (Health) Conditions - A physical condition that existed before the effective date of the policy, usually excluded from coverage. After 1/1/2014 these conditions became less of an issue as applicants can't be declined for pre-existing issues.

Premiums - A periodic payment to the insurance company to keep a policy in force - usually paid monthly, quarterly or semi-annually.

Rider - Any supplemental agreement attached to and made a part of a policy indicating the policy expansion by additional coverage, or a waiver of a coverage or condition.

Skilled Nursing Care - Daily nursing care or skilled care, such as administration of medication, diagnosis, or minor surgery that is performed by or under the supervision of a skilled professional.

State Continuation - The same coverage provided by COBRA, but applied to employers with less than 20 employees. It requires employers to extend group health coverage to terminated employees and their families after a qualifying event. Qualifying events include: voluntary termination of employment; termination of employment for reasons other than gross misconduct (i.e. company downsizing); employment status change - from full-time to part-time. Coverage for the terminated employee is extended up to 18 months. The terminated employee must exercise extension of benefits under State Continuation within 60 days of separation. Coverage for dependents of the terminated employee is extended up to 36 months.

Underwriting - The process of reviewing, accepting or rejecting applications for insurance through a process of evaluating and classifying the risk associated with an applicant.

Voluntary products - Benefit products an employee can buy through their employer at a deep discount. Such as: Accident, Critical Illness, Dental, Disability, Long-Term-Care, Vision. Voluntary benefit products are paid by the employee.

Waiver or Declination of Coverage - The voluntary abandonment of a known or legal right to coverage.

Workers Compensation - Benefits required by state law to be paid to an employee by an employer in the case of injury, disability or death as the result of an on-the-job hazard.

Work Site Benefits - Benefit products an employee can buy through their employer at a deep discount. Such as: Accident, Critical Illness, Dental, Disability, Long-Term-Care, Vision. Work Site benefit products can be paid by either the employer, employee or both.

 
 
 

 

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