Common Insurance Terms

Benefit: Proceeds payable when the event insured by your policy occurs.  This may be a medical service, dental procedure, life insurance amount, disability payment, etc.

Benefit Period: The length of time benefits may be payable under a policy.  Generally used in disability policies or Long Term Care Insurance.

COBRA: The Consolidated Omnibus Budget Reconciliation Act of 1986.  The law which gives qualified beneficiaries the option to continue group insurance at the same benefit level enjoyed when covered as an active employee or dependent for a price slightly higher than that paid by the group.  Continuation may last from 18 to 36 months.

Copayment: Generally a fixed dollar amount charged to the insured person for an office visit or prescription.  The policy will pay the balance for those services.  Copayments may also be charged in addition to the coinsurance and deductible  for services like Emergency Room visits.

Coinsurance:  The term applied to the cost-sharing of most policies.  When a contract pays 70% and the insured pays 30%, this 30% amount is referred to as the coinsurance, and applies to the Out of Pocket Maximum.  In-network coinsurance is typically lower than out -of -network.

Coordination of Benefits: The process which assures that insured persons covered under more than one policy will  not receive more than 100% of the covered charges when benefits are payable under different contracts.  Working spouses who cover each other under Medical or Dental plans will find that their employer’s plan will pay first (Primary) and the spouse’s plan will pay based on remaining charges (Secondary).  Those who double-cover children will find that the spouse who has a birthday falling earlier in the year will have their plan deemed “Primary” and the spouse wth the later birthday will have the “secondary” plan.  Claims incurred on the children will be paid in that order.

Deductible: The amount of expenses the insured pays before benefits begin.  Some types of services may be payable without a deductible, such as preventive care in a health insurance policy.  Typically PPO plans will begin to pay for office visits and prescription drugs before requiring that the insured meet a deductible.

Domestic Partner: These people are the same-sex or opposite-sex, live with an employee and share financial and other responsibilities.  Requirements vary, but are outlined in the Affidavit of Domestic Partnership required by the insurance carrier involved.  Any premiums paid by an employer for these partners are TAXABLE INCOME to the employee.  The employee portion of the premium must not be run through a Section 125 plan.

Eligibility Waiting Period: The length of time a new employee must work for an employer before becoming eligible for coverage.  Typical language is “coverage will start the first of the month after 30 days”.

Elimination Period: The length of time the insured person must be disabled before benefits begin to accrue, generally for Long Term or Short Term Disability, or Long Term Care Insurance.

Full Time: Employees who work for a small group (2-50 employees) will be required to work 30 hours/week to be considered full time.  Part time employees may be covered under the same group contract, at the employer’s discretion, if they work more than 20 hours but fewer than 30 hours weekly.  Based on California’s AB1672 and the Federal HIPAA law, the employer may not require more than 30 hours weekly.

Guaranteed Issue: Coverage offered regardless of the health status of the applying person.  No medical questions are asked, no medical records obtained.

Maximum Benefit: On health policies, this is generally a “lifetime maximum”.  Dental plans generally show an annual (calendar year) figure, representing the point at which the insurance carrier stops paying claims in a given year.  There may be a specific figure for orthodontics on either a lifetime or calendar year basis.

Negotiated Fee: Generally a discounted amount which is determined by the insurance company and provider, which will be lower than the “retail” cost of services or supplies.

Network: The list of medical, dental, or vision providers who have been approved by a health plan and who have agreeed to accept negotiated fees for their services.  Benefits will usually be greater when these doctors, labs, hospitals, facilities, dentists, etc. are used.

Out of Pocket Maximum: The point at which the coinsurance stops and the policy pays 100% of covered charges for the balance of the calendar year.  Care must be taken to determine if this amount includes the deductible when comparing policies.

Pre-Authorization: An insurance company may require that you submit a treatment plan or surgery schedule prior to receiving services.  Benefits may not be payable without this prior authorization.

Pre-Existing Condition: In California, a pre-existing condition is defined as any medical condition for which you sought treatment, received treatment, took medication, etc. during the 6 months prior to the effective date of coverage.  Pre-existing conditions may be excluded for 6 months following the date of coverage, unless you have continuous coverage (prior insurance in effect for at least 6 months).  Credit for “time served” is given for any length of prior insurance, as long as there is no gap in coverage exceeding 63 days for individuals or 180 days for groups.  A “Certificate of Creditable Coverage” is generally required by the new carrier.

Primary and Secondary: Refers to the order in which benefits are paid when multiple policies cover the same service.  See coordination of benefits for information on group plans.  For employees or dependents who are covered under group insurance and are eligible for Medicare, the number of employees in the group (those who work for the employer) will determine if Medicare is primary or secondary. Premiums charged to employees over age 65 will vary based on the plan’s position, and will be adjusted annually.

Reasonable and Customary: Sometimes referred to as Usual, Customary, and Reasonable, the fee charged for a given service by the majority of providers in a given region.  Commonly used in Dental plans, policies may determine benefits for non-network providers by using a percentile of this fee.  The higher the percentile,t he better the coverage, i.e. 90th percentile is a richer benefit than 80th percentile.   If the covered charges are based on the fee charged by 90% of the providers in a given region, then the carrier will indicate the 90th percentile of Reasonable and Customary charges in the policy documentation.  These fees may be adjusted annually, semi-annually or quarterly.

Underwriting: The process of risk assessment.  This usually involves health questions for individual coverage;  health questions and financial stability evaluation for groups.

An additional glossary of Long Term Care insurance terms may be found in that area.

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