Insurance Terms To Know Before Open Enrollment

If you’re preparing for open enrollment, you’ve likely seen words like “claims,” “deductibles,” and “copay” at every turn. It’s important to get familiar with common insurance terminology before signing onto a plan so you can better understand your benefits and coverage.

Below, you’ll find basic insurance terms and definitions you should know before open enrollment. Read on for some of the most frequently used insurance lingo, plus clear examples that can help you understand exactly what your policy offers.

Allowable charge   

An allowable charge is the top dollar amount your insurance company considers to be reasonable for a specific medical service. Allowable charges are often set based on market value. They are also known as allowed amounts, usual, customary, and reasonable (UCR) charges, and maximum allowable charges.

Example: If a physician or hospital is part of your insurance company’s network of providers, they may be required to accept a flat dollar amount as payment for services rendered. For instance, if your insurance company’s allowable charge for an ultrasound is $100, the clinic must accept $100 as full payment for the service.

Beneficiary

In a life insurance policy, a beneficiary is the person or people you choose to receive money—known as a death benefit—when you die. A death benefit is often transferred in one lump sum following your death.

Generally, beneficiaries are the spouse, children, or parents of the policy owner. That said, you can name virtually anyone as your beneficiary.

Benefit

Benefits are the medical services or items covered under an insurance policy. Your plan’s covered benefits and exclusions will be defined in the terms of your policy.

Benefit level

A benefit level is the maximum amount an insurance provider has agreed to pay for a specific covered benefit.

Benefit period

A benefit period, or benefit year, describes the length of time your plan will cover services. Most benefit periods are for one year, though they don’t necessarily line up with the calendar year.

Claim

An insurance claim is a request for an insurance company to cover payments. Claims are often made by the policyholder or a provider.       

Coinsurance

Coinsurance is the percentage of costs you agree to pay each benefit year after meeting your plan’s deductible. Coinsurance only applies to covered medical services. You may still have to make a copay as well.

Example: If your insurance company pays 85% of a claim, your coinsurance will be 15%.

Comprehensive coverage

Comprehensive coverage is a type of health insurance plan that includes benefits for a wide range of medical services, such as:

• Doctor’s visits
• Hospitalizations
• Emergency services
• Ambulance rides
• Maternity care
• Prescriptions
• Chronic disease management
• Preventative care

Comprehensive coverage is also known as major medical health insurance. 

Condition

A condition is any type of injury, illness, disease, or disorder diagnosed before or after enrolling in an insurance policy.   

Copayment

Also known as a copay, a copayment is the predetermined amount you pay a healthcare provider after receiving medical services. You may have to pay a copay at the time you receive care. Some plans require you to pay a copay for each covered healthcare service. Others don’t require you to pay a copay at all. Copays may be required in addition to coinsurance charges.                    

Example: Your policy may require you to make a $25 copay every time you see a general physician, a $100 copay every time you visit the emergency room, or a $10 copay for each prescription. 

Covered charges

Covered charges include any costs paid for by your insurance plan. Some plans limit covered charges if they’re incurred from providers outside of your plan’s network.

Covered person

A covered person is anyone covered by an insurance plan, including the policy owner and their dependents.

Covered service

A covered service is any healthcare service or supplies covered by an insurance plan. Covered services will be outlined in your insurance policy terms.

Death benefit

A death benefit is the amount of money a beneficiary will receive when a person with a life insurance policy dies. A death benefit is also known as a life insurance payout. Policy owners choose their death benefit amount when they buy their policies.

Deductible

A deductible is the amount of money you pay for covered services or supplies before your insurance company begins paying. Deductibles are often based on your benefit year and will update at the end of your coverage period.

Example: If your insurance plan has a $1,500 deductible, you will need to pay the first $1,500 of medical costs out-of-pocket. After you reach the $1,500 mark, your insurance provider will pay the remaining amount for expenses that apply to covered services. When your benefit period resets, your deductible will reset as well.

Dependent

A dependent is an individual covered by the primary insurance holder’s plan, such as a spouse or child.

Effective date

The effective date is the date on which insurance coverage begins.

Emergency medical condition

Emergency medical conditions include any medical problem with severe or life-threatening symptoms that require immediate treatment. Generally, an emergency scenario is defined as one in which a person with no medical training may expect the issue to:

• Put a person or unborn child’s health at serious risk
• Result in serious or lasting bodily injury
• Result in severe or lasting organ damage

Exclusion

Exclusions are conditions or treatments that aren’t covered by a health insurance plan.

Explanation of benefits

An explanation of benefits is an insurance company’s breakdown of how a claim was paid. It includes information about what the provider paid and what portion of the cost the policyholder is responsible for, if any.

Flexible spending account (FSA)

A flexible spending account, or FSA, is usually set up through an employer-sponsored insurance plan. With an FSA, you can set aside pre-tax money for medical services, dependent care, or healthcare supplies.

You must use FSA funds before the end of your benefit year. If not, they may revert to your employer. Your human resources representative may be able to provide you with a list of covered costs you can purchase using your FSA. Examples of these costs include: 

• Co-pays for healthcare services
• Physical therapy or rehabilitation
• Dental services
• Inpatient medical services
• Chiropractic care
• Psychological care
  

Group health insurance

Group health insurance is a plan offered by an employer or another organization. Group health insurance plans cover the individuals in that organization and their dependents under one policy.

Health maintenance organization (HMO) plan

A health maintenance organization (HMO) plan is a medical care system that offers healthcare for policyholders in a specific region. HMOs usually require policy owners to use certain in-network providers.

Health reimbursement account (HRA)

A health saving account (HSA) is an account used to save for future medical expenses. Money saved in an HSA is federal income tax exempt when deposited. HSA funds can build up year to year and don’t have to be spent within a certain period. HSAs are often paired with high-deductible health insurance plans (HDHPs).

High-deductible health insurance plan (HDHP)

A high-deductible health insurance plan (HDHP) is an insurance plan with a larger-than-average deductible. HDHPs come with more out-of-pocket costs, which means your insurance won’t cover any medical expenses until you have met your deductible.

HDHPs often have lower monthly payments compared to plans with lower deductibles. They are often paired with an HSA that allows you to save tax-exempt money for medical costs.

In-network provider

An in-network provider is a healthcare professional, hospital, medical supplier, or pharmacy that is part of an insurance plan’s network.

Healthcare services from in-network providers are usually less expensive than out-of-network care. Insurance companies often negotiate discounted prices from providers in exchange for referrals.

Individual health insurance

Individual health insurance is coverage purchased by individuals to cover themselves and their dependents. It is not associated with an employer-sponsored group coverage plan. In other words, it’s insurance that someone purchases themselves, not insurance they get through their job.

In-patient services

In-patient services are medical services administered following admittance to a hospital and after an overnight charge is posted.

Insurance policy

An insurance policy is a contract between an insurer (the insurance company) and the insured (the individual, business, or entity being covered). An insurance policy defines the insurance terms and conditions, along with costs associated with coverage.

Insurer

An insurer is a company or organization that provides insurance coverage.

Long-term insurance

Long-term insurance is a type of insurance contract that covers specific services over a set period of time. Long-term insurance coverage usually lasts for 12 months.

Medicaid

Medicaid is a federally funded, state-managed health insurance program. Since its launch in 1965, Medicaid has offered healthcare coverage for low-income individuals who can’t afford or don’t qualify for other federal or commercial policies.

Medicare

Medicare is a federal insurance program offering benefits to American citizens over the age of 65. Following its creation in 1965, Medicare has since expanded to include individuals with disabilities under the age of 65 and enrollees with certain conditions. 

Medicare supplement plans

Medicare supplement plans are health insurance programs offered by commercial insurance providers to provide coverage for Medicare benefit gaps. For instance, you may select a Medicare supplement plan to pay for hospital visits after you run out of coverage on your existing Medicare policy.

Network

A network includes the healthcare providers, hospitals, and pharmacies contracted by an insurance company to offer discounted services.

Non-covered charges

Non-covered charges are healthcare costs that aren’t covered by your existing health insurance program. These may include services like plastic surgery, chiropractic care, or psychological services.

Open enrollment period

Open enrollment period is an annual window when individuals can enroll in a health insurance plan. Open enrollment lasts for a minimum of 15 days. The enrollment period begins no earlier than October 1 and no later than November 15.

If an individual misses open enrollment, they may qualify for a special enrollment period.

Out-of-network provider

Also known as a non-network provider, an out-of-network provider is one outside your insurance program’s network. Medical services from out-of-network providers are usually more costly than those covered by your insurance policy.

Out-of-pocket costs

Out-of-pocket costs are healthcare expenses you are required to pay for yourself following treatment or services.

Out-of-pocket maximum

The out-of-pocket maximum is the highest dollar amount you will pay for healthcare services during a benefit period. Your out-of-pocket maximum includes costs like co-payments, coinsurance, and deductibles. It does not include your monthly premiums. 

Once you reach your out-of-pocket maximum, your insurance company will assume financial responsibility for the remainder of your coverage period—but only for services covered by your plan.

Outpatient services

Outpatient services are those that do not require overnight hospitalization. Often, these services or treatments are conducted in a doctor’s office, clinic, or hospital.

Policyholder

An insurance policyholder—or policy owner—is the individual who purchased, pays for, and is covered by the insurance policy.

Point-of-service (POS) plan

A point-of-service plan is a health insurance policy that allows policyholders to use non-network providers. However, you will likely pay higher deductibles or coinsurance costs for out-of-network care.

Pre-existing condition

A pre-existing condition is a health condition that was diagnosed or treated before enrolling in an insurance policy.

Previously, insurance companies may have charged policyholders higher monthly premiums if they had documented pre-existing conditions. Under the Affordable Care Act, insurance providers can’t refuse coverage or charge higher rates due to pre-existing conditions.

Preferred provider organization (PPO)

A preferred provider organization (PPO) is a type of insurance plan in which policyholders can receive care from in-network and non-network providers. PPO policyholders may receive some coverage for medical treatments and services provided by non-network physicians. However, most PPO plans offer better benefits and lower costs on treatments from in-network providers.

Premium

A premium is the amount of money paid to an insurance provider each month in exchange for coverage. Individuals or employers may be responsible for paying monthly premiums.

Provider

A provider is a physician, licensed healthcare professional, clinic, doctor’s office, hospital, or medical facility. Providers may be in-network or non-network.

Riders

A rider is an optional or additional coverage option you can add to your existing insurance plan at an extra cost. Examples of riders include maternity, critical illness, accidental disability, and hospital cash riders.

Short-term insurance

Short-term insurance is a type of insurance plan that provides coverage for a short period of time. Typically, these plans cover costs for up to 6 months. Short-term insurance plans may only apply to certain medical treatments or services.

Special enrollment period (SEP)

A special enrollment period is a time when you can sign up for insurance coverage outside of the annual open enrollment period. Certain life events qualify you for an SEP, such as getting married, losing health coverage, having a child, or beginning a new job.

Depending on the type of SEP you qualify for, you may have up to 60 days before or after the event to enroll in a new health insurance plan.

Statement of Health

A statement of health is a short questionnaire used to determine overall health, medical history, and lifestyle, which may have an impact on your life insurance coverage.

Underwriting

Underwriting is a process through which health insurance providers decide to offer coverage to a potential enrollee. Providers may set a policy premium during the underwriting process as well.

Waiting period

A waiting period is the window of time before a new employee becomes eligible for insurance coverage under an organization’s healthcare plan. It may also refer to the window of time between a policy’s effective date and the date that a provider will pay for some pre-existing conditions.