Glossary of Health Insurance Terms
If it sometimes seems like insurance companies have a language of their own, you are not alone. Policyholders often feel frustration when calling their insurer about a denied claim or trying to decipher a denial letter. At Gianelli & Morris, we encounter insurance policies every day as we represent policyholders whose claims have been unreasonably and unfairly denied. Below we’ve included a glossary of some of the most basic terms you are likely to encounter when requesting authorization or battling a denial. When you need help getting the healthcare you need, contact our office to speak with a skilled and experienced California insurance bad faith attorney.
Beneficiary
A Beneficiary is a person designated to receive benefits from an insurance policy, retirement plan, or will. In the context of health insurance, a beneficiary may be a spouse, child, or other dependent covered under the policy.
Claim
A Claim is a formal request made by a policyholder to an insurance company for payment of benefits under a policy. Claims can be filed for various reasons, including medical treatment, disability, or death. Claims can be denied if the insurer disputes coverage or eligibility. Wrongful or bad faith claim denials can be fought with the help of a lawyer practicing insurance law.
Co-payment (Co-pay)
A Co-payment, or Co-pay, is a fixed amount that a policyholder must pay out-of-pocket for a specific service, such as $30 for a doctor’s visit or $19 for a prescription medication, due at the time of service. Co-pays are typically required by managed care plans like HMOs and PPOs.
Coinsurance
Coinsurance is the percentage of healthcare costs a policyholder must pay after meeting their deductible. For instance, if coinsurance is 20%, the policyholder pays 20% of the bill, and the insurer covers 80%.
Coordination of Benefits (COB)
These are rules used when a policyholder has multiple insurance plans to determine which plan pays first and how costs are shared between plans.
Deductible
A Deductible is the amount a policyholder must pay out-of-pocket before the insurance company begins to cover the costs of eligible services. For example, if a policy has a $1,000 deductible, the insured must pay this amount before the insurer covers additional costs. Deductibles can vary widely depending on the plan and type of coverage.
Exclusion
An Exclusion is a provision within an insurance policy that eliminates coverage for certain risks, conditions, or services. Common exclusions in health insurance policies include cosmetic procedures, experimental treatments, and pre-existing conditions. Reviewing exclusions is critical to understanding coverage limits. Legal consultation is sometimes necessary, as insurance companies have been known to wrongfully exclude a covered service to avoid paying for it.
Explanation of Benefits (EOB)
An Explanation of Benefits (EOB) is a statement sent by an insurance company to a policyholder detailing the services provided, the amount billed, the amount covered by insurance, and the policyholder’s financial responsibility. EOBs help policyholders understand how their benefits are applied. EOBs are not bills but help clarify claims processing.
Health Maintenance Organization (HMO)
A Health Maintenance Organization (HMO) is a type of managed care health insurance plan that requires members to receive their care from a network of designated healthcare providers. HMOs place an emphasis on cost-efficiency by limiting care to a network of providers, except in emergencies. HMOs emphasize preventive care and often require members to choose a primary care physician (PCP) who coordinates all aspects of their care, including referrals to specialists. This “gatekeeper” role of the PCP can raise questions of conflict of interest when a patient’s access to care or treatment is denied.
Independent Medical Exam (IME)
An Independent Medical Exam (IME) is an evaluation performed by a physician who is not involved in the patient’s care. IMEs are commonly requested by insurance companies to obtain an unbiased opinion on a claimant’s medical condition, the necessity of treatment, or the extent of a disability. IME critics will tell you that insurance companies often order IMEs as a means to dispute a treating physician and deny a requested service.
Independent Physician Association (IPA)
An Independent Physician Association (IPA) is an organization of independent physicians or practices that contract with insurance companies to provide services to members at negotiated rates. IPAs allow physicians to maintain their independence while benefiting from the collective bargaining power of the group. Aspects of IPAs, such as capitation rates and risk-sharing pools, may act to limit access to care or quality of care while maximizing profits for the IPA.
Insurance Bad Faith
Insurance Bad Faith occurs when an insurance company unreasonably denies a claim, underpays or delays payment, misrepresents policy terms, or fails to investigate a claim properly. Policyholders and beneficiaries who experience bad faith practices may have legal recourse to recover owed benefits and potentially additional damages.
Managed Care
Managed Care is a system of health care delivery designed to manage cost, utilization, and quality. It involves a network of providers who agree to comply with the care and cost guidelines laid out by an insurance company. Managed care plans often require members to select a primary care physician and obtain referrals for specialist care. Managed care plans, such as HMOs and PPOs, typically use networks of healthcare providers and emphasize preventive care. They can also limit access to medically necessary procedures, leading to unfair claim denials.
Medical Group
A Medical Group is a collection of physicians who share resources, such as office space and staff, and collaborate to provide care to patients. Medical groups can vary in size and may include various specialties. They often contract with managed care organizations to offer a range of services.
Network
A Network is a group of doctors, hospitals, and other healthcare providers contracted with an insurance company to offer services at negotiated rates. Networks can be in-network (covered at lower costs) or out-of-network (often more expensive). HMO policyholders are generally required to stay in-network except for a medical emergency, while PPO policyholders are free to go out of network as they see fit.
Out-of-Pocket Maximum
The Out-of-Pocket Maximum is the maximum amount a policyholder is required to pay for covered services in a plan year. Once this limit is reached, the insurance company covers 100% of eligible expenses for the remainder of the year. This includes deductibles, co-pays, and co-insurance.
Preferred Provider Organization (PPO)
A Preferred Provider Organization (PPO) is a type of health insurance plan that provides more flexibility in choosing healthcare providers compared to an HMO and does not require referrals for specialist care. PPOs have a network of preferred providers, but members can see out-of-network providers at a higher cost.
Pre-authorization
Pre-authorization, also known as prior authorization, is the process by which an insurance company reviews a proposed treatment or service to determine if it will be covered under the policy. Certain procedures and medications may require pre-authorization to ensure they are medically necessary, and failure to obtain preauthorization can result in claim denial. Disputes over medical necessity sometimes have to be litigated in court or otherwise resolved with the help of an attorney who is well-versed in California insurance law.
Premium
A Premium is the amount a policyholder pays regularly (monthly, quarterly, or annually) to maintain health insurance coverage. Premiums are typically paid by both the policyholder and their employer if they have employer-sponsored insurance. Failure to pay premiums can result in policy termination.
Provider Network
A Provider Network is a group of healthcare providers, including doctors, hospitals, and clinics, contracted by an insurance company to provide services to members at negotiated rates. Using in-network providers typically results in lower out-of-pocket costs for policyholders.
Step Therapy
Strep Therapy is a protocol requiring policyholders to try less expensive or lower-tier medications before approving coverage for more expensive treatments.
Usual, Customary, and Reasonable (UCR)
UCR is a standard used by insurers to determine the maximum amount payable for a service based on what is typically charged in a geographic area. Charges above the UCR amount may not be fully covered.
Utilization Review
Utilization Review is the process by which insurance companies evaluate the necessity, appropriateness, and efficiency of healthcare services provided to policyholders. This review can occur before, during, or after the care is provided and is used to ensure that services are medically necessary and cost-effective. Denials based on utilization review often lead to disputes over claim validity.
Contact Gianelli & Morris for Help With Denied Insurance Claims in California
This glossary is designed to help you better understand the terminology used in health insurance policies and claims. If you have any questions or need further assistance with a denied claim, please contact Gianelli & Morris at 213-489-1600 for professional legal guidance and dedicated representation.
