As an insurance agent, you know that the language of insurance can be full of complex terms that leave clients feeling confused. Whether it’s explaining “deductibles,” “premiums,” or “exclusions,” these concepts can be overwhelming for someone without a background in the industry.

In this blog, we’ll explore how you can use clear, simple explanations of common insurance terms to empower your clients. By breaking down these terms in a way they can understand, you’ll help them feel more confident in their decisions and build stronger, trust-based relationships.

Let’s work together to make insurance less confusing and more approachable! Here are some terms and definitions that are helpful to share with your clients:

 

 

Allowed Amount – The maximum payment the plan will pay for a covered health care service. Health care providers are permitted to charge other than this amount. A network provider agrees to accept the allowed amount as payment in full.

Appeal – A request that the health insurer or plan review a decision that denies a benefit or payment (either in whole or in part).

Balance Billing – When a provider invoices the member for the difference between the actual charge amount and the allowed amount. Participating network providers are not able to balance bill their patients since they have agreed to accept the allowed amount as payment in full. Providers are able to bill for cost sharing amounts, which is separate from balance billing.

Charge – The dollar amount a provider establishes for services rendered.

Claim – A request for a benefit (including reimbursement of a health care expense) made by the member or their health care provider to the health insurer for items or services the member believes are covered.

Coinsurance – The member’s share of the costs of a covered health care service, calculated as a percentage (for example, 20%) of the allowed amount for the service.

Copayment – A fixed amount paid for a covered health care service, usually when the member receives the service. The amount can vary by the type of covered health care service.

Cost Sharing – The share of costs for services a plan covers that the member must pay out of their own pocket (sometimes called “out-of-pocket costs”). Some examples of cost sharing are copayments, deductibles, and coinsurance.

Cost-sharing Reductions – Discounts that reduce the amount paid for certain services covered by an individual plan bought through the Marketplace, if income is below a certain level or the member belongs to a federally recognized group.

Deductible – Amount owed during a coverage period (usually one year) for covered health care services before the plan begins to pay. An overall deductible applies to all or almost all covered items and services. A plan may also have separate deductibles that apply to specific services.

Emergency Medical Condition – An illness, injury, symptom or condition severe enough to risk serious danger to the member’s health if they didn’t get medical attention right away.

Emergency Medical Transportation – Ambulance services for an emergency medical condition. Types of emergency medical transportation may include transportation by air, land, or sea.

Emergency Room Care / Emergency Services – Services to check for an emergency medical condition and treatment to keep an emergency medical condition from getting worse.

EOB (Explanation of Benefits) – A statement from your insurer about coverage and payments.

Excluded Services – Health care services that the plan doesn’t cover.

Fee for Service – A method in which doctors and other health care providers are paid for each service performed. Examples of services include tests and office visits.

Family Deductible – A family deductible is typically higher than an individual deductible and is the combined total that all family members contribute before the insurance starts covering everyone.  Most family plans have embedded deductibles, meaning that if an individual within the family meets their individual deductible, their benefits begin, even if the family deductible hasn’t been met yet.

Formulary – A list of drugs the plan covers. A formulary may include the share of the cost for each drug. A plan may put drugs in different cost sharing levels or tiers.

Fully-insured Plan – A group health plan in which the employer or association purchases health insurance from a commercial insurer in order to provide coverage for its employees or association members.

HMO (Health Maintenance Organization) – A plan requiring in-network care and referrals for specialists

Individual Deductible – Applies to a single person within a health insurance plan.

In-network Coinsurance – The member’s share (for example, 20%) of the allowed amount for covered health care services. The share is usually lower for in-network covered services.

In-network Copayment – A fixed amount (for example, $15) the member pays for covered health care services to providers who contract with their health insurance or plan. In-network copayments usually are less than out-of-network copayments.

Marketplace – A marketplace for health insurance where individuals, families, and small businesses can learn about their plan options; compare plans based on costs, benefits, and other important features; apply for and receive financial help with premiums and cost sharing based on income; and choose a plan and enroll in coverage.

Maximum Out-of-pocket Limit – Yearly amount the federal government sets as the most each individual or family can be required to pay in cost sharing during the plan year for covered, in-network services. Applies to most types of health plans and insurance. This amount may be higher than the out-of-pocket limits stated for a member’s plan.

Medically Necessary – Describes health care services or supplies needed to prevent, diagnose, or treat an illness, injury, condition, disease, or its symptoms, including habilitation, and that meet accepted standards of medicine.

Network – The facilities, providers, and suppliers the health insurer or plan has contracted with to provide health care services.

Network Provider (Preferred Provider) – A provider who has a contract with a health insurer or plan who has agreed to provide services to members of a plan. Members will pay less if they see a provider in the network. Also called “preferred provider” or “participating provider.”

Open Enrollment Period – The time of year when individuals can enroll or make changes to their health insurance plan.

Qualifying Life Event (QLE) – A significant change in life circumstances (e.g., marriage, birth, job loss), that allows you to enroll in health insurance outside the open enrollment period

Out-of-network Coinsurance – The member’s share (for example, 40%) of the allowed amount for covered health care services to providers who don’t contract with the health insurance or plan. Out-of-network coinsurance usually costs more than in-network coinsurance.

Out-of-network Copayment – A fixed amount (for example, $30) the member pays for covered health care services from providers who do not contract with their health insurance or plan. Out-of-network copayments usually are more than in-network copayments.

Out-of-network Provider (Non-preferred Provider) – A provider who doesn’t have a contract with the plan to provide services. If your plan covers out-of-network services, you’ll usually pay more to see an out-of-network provider than a preferred provider. The policy will explain what those costs may be. May also be called “non-preferred” or “non-participating” instead of “out-of-network provider.”

Out-of-pocket Limit – The most the member could pay during a coverage period (usually one year) for their share of the costs of covered services. After meeting this limit, the plan will usually pay 100% of the allowed amount. Some plans don’t count all copayments, deductibles, coinsurance payments, out-of-network payments, or other expenses toward this limit.

Pharmacy Benefit Managers (PBMs) – Third-party administrators for prescription drug programs for health plans. Their roles include negotiating discounts and rebates with drug manufacturers, developing and maintaining drug formularies, developing and managing pharmacy networks, examining claims, and other functions.

Physician Services – Health care services a licensed medical physician, including an M.D. (Medical Doctor) or D.O. (Doctor of Osteopathic Medicine), provides or coordinates.

Plan – Health coverage issued to the member directly (individual plan) or through an employer, union, or other group sponsor (employer group plan) that provides coverage for certain health care costs. Also called health insurance plan, policy, health insurance policy, or health insurance.

POS (Point of Service) – A plan that gives you the flexibility to choose your care provider, keeping costs low when using in-network doctors and hospitals.

PPO (Preferred Provider Organization) – A plan with flexibility to see out-of-network providers at higher cost without needing referrals.

Prior Authorization – A decision by the health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment (DME) is medically necessary. Sometimes called preauthorization, prior approval, or precertification. The health insurance or plan may require prior authorization for certain services before the member receives them, except in an emergency.

Premium – The amount that must be paid for the health insurance per month.

Premium Tax Credits – Financial help that lowers the member’s taxes to help them pay for private health insurance, if the health insurance is purchased through the Marketplace and the member’s income is below a certain level. Above the income thresholds, the individual’s premium is limited to a percentage of income.

Prescription Drug Coverage – Coverage under a plan that helps pay for prescription drugs. If the plan’s formulary uses “tiers” (levels), prescription drugs are grouped together by type or cost. The amount paid in cost sharing will be different for each “tier” of covered prescription drugs.

Preventive Care (Preventive Service) – Routine health care, including screenings, check-ups, and patient counseling, to prevent or discover illness, disease, or other health problems.

Primary Care Provider – A healthcare professional, including an M.D., Doctor of Osteopathic Medicine, Physician Assistant, or Nurse Practitioner who provides or coordinates health care services for the member.

Provider – An individual or facility that provides health care services. Some examples of a provider include a doctor, nurse, chiropractor, physician assistant, hospital, surgical center, skilled nursing facility, or rehabilitation center.

Referral – A written order from your primary care doctor to see a specialist, required by some insurance plans.

Screening – Preventive care that includes tests or exams to detect the presence of something, usually performed when the member has no symptoms, signs, or prevailing medical history of a disease or condition.

Self-insured Plan – A health plan, also known as a self-funded plan, offered by an employer or association in which the employer or association takes on the risk involved with providing coverage, instead of purchasing coverage from an insurance company.

Specialist – A provider focusing on a specific area of medicine or a group of patients to diagnose, manage, prevent, or treat certain types of symptoms and conditions.

Specialty Drug – A type of prescription drug that requires special handling or ongoing monitoring and assessment by a health care professional, or is relatively difficult to dispense. Generally, specialty drugs are the most expensive drugs on a formulary.

Special Enrollment Period – The time outside the Open Enrollment Period when individuals can enroll in a health insurance plan.  This period is triggered by a Qualifying Life Event (QLE).

Urgent Care – Care for an illness, injury, or condition serious enough that a reasonable person would seek care right away, but not so severe as to require emergency room care.