Discover basic health insurance terminology

Knowing the ins and outs of your health insurance plan is a key step in taking control of your health. But how can you understand your plan if you don’t speak the language?

We’ve compiled a list of common words and phrases used in health care and in relation to health insurance to help you understand the fundamentals.

UPMC provides most Highmark members with full, in-network access to all UPMC doctors, hospitals, and services in the greater Pittsburgh and Erie areas. For questions, please call our help line at 1-855-646-8762.

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Health Insurance Glossary

Use this insurance glossary to best understand your coverage.

Allowed amount/maximum: The allowed amount or maximum dollar amount an insurance company will pay for a covered service.

If the charge is over the maximum, the insured person may be required to pay the difference out-of-pocket.

Balance billing: This occurs when a health care provider, for example a doctor or hospital, bills the patient for the difference, or balance, between the allowed amount and the actual charge for service.

If you seek care from a provider who is in your insurance company’s network, and therefore in-network for you, the provider has agreed accept your insurance as payment in full and is thus prevented from balance billing.

Claim: A detailed statement of services from a health care provider, or sometimes directly from the patient, presented to the health insurance company for payment.

COBRA: An acronym for the Consolidated Omnibus Budget Reconciliation Act. This is a federal law that offers employees the option of keeping their employer-sponsored health insurance for a limited time after being terminated or having their hours reduced. The cost for this health plan is often more than the cost of insurance as an active employee but typically less than the price of individual health insurance.

Commercial health insurance: Commercial insurance is any policy that is not some form of Medicare or Medicaid or other coverage provided by the government.

If you are under 65 and have health insurance through your employer (or your partner’s employer), it is likely commercial health insurance.

Companies such as Aetna, Cigna, Highmark, United Healthcare, and UPMC Health Plan offer commercial insurance options.

Coinsurance: Coinsurance is the percentage you pay toward your care after your annual deductible is satisfied. For instance, if you’re on an 80/20 plan, you’ll be required to pay 20 percent of your covered or in-network services until your deductible is met.

Copayment or Copay: The fixed amount paid toward a medical service. For example, some plans have standard copays for office visits, specialist visits, or physical therapy.

Covered services: Any medical service, medication, or equipment that a person is entitled to under the terms of their specific insurance plan.

Deductible: The amount paid by the patient directly before their health insurance provider covers the cost of services. Copays and some other costs often are not counted toward a deductible and do not change or go away when the deductible is met.

If your deductible is $5,000, you’re required to fulfill this amount in a calendar year before your provider adjusts (increases) the amount they will cover.

Family and Medical Leave Act (FMLA): A U.S. labor law that requires companies employing 50 or more people to provide 12 work weeks of unpaid leave each calendar year for employees who meet certain criteria without the threat of termination.

Some examples of FMLA-eligible leave would be a serious medical condition, the need to care for an ill family member, or the birth or adoption of a child.

Flexible spending account (FSA): An FSA is nontaxed income put into a specified account used to pay for out-of-pocket health costs. A set amount may be carried over to the next calendar year if it isn’t used.

Group health insurance: A plan provided to a group of people employed by a company or through an association or other organization. The coverage level is usually standardized for all employees, which lowers the risk for the employer and insurer. A group insurance plan is often more affordable than individual insurance coverage.

Health Insurance Marketplace or Exchange: The marketplace allows individuals, families, and small businesses to shop for and compare health insurance plans. The exchange is facilitated by the federal government and, in some cases, the state.

The marketplace typically has an open enrollment period in the late fall.

Health insurance premium: The amount an insured individual or employer pays (or shares the cost of) to the health insurance company for coverage. This cost is usually paid monthly. Deductibles, coinsurance, and other costs are in addition to the premium.

Health maintenance organization (HMO): An HMO is an insurance plan in which a network of medical providers has agreed to work for a fixed annual fee. An HMO will require the insured individuals to use an approved primary care doctor, and that doctor must approve any referrals to other specialists. The monthly premiums for an HMO are typically lower when compared to a PPO.

Health savings account (HSA): An HSA is an employer-funded, nontaxed account that is typically attached to the employee’s health plan. The account pays for approved medical, dental, or other health-related expenses, and unused funds may roll over to the following year.

Home health care: Home health care provides services in the home to a person with an illness or injury. It is often less expensive than the cost of long-term hospitalization or nursing care.

Hospice: Health care that is provided for the terminally ill. Hospice care is often provided in the patient’s home, or in a similar setting, to provide comfort near the end of life.

In-network provider: A provider or health care facility that has agreed to accept a discounted rate for their services from a contracted insurance company. When an insured individual uses an in-network provider, the cost is usually less than it would be for out-of-network services, both to them and to their insurance company.

Inpatient care: Any medical care that requires the admission of a person into a hospital.

Long-term care: Medical or social services provided for patients with disabilities or chronic illnesses or those of advanced age. The services typically include help with daily living tasks, health care management, and access to onsite medical services, to improve safety and quality of life.

Lifetime limit/maximum: A lifetime limit or maximum is the dollar amount an insurance company agrees to cover for the insured person’s medical services over the course of his or her lifetime. Under current law, companies are prohibited from putting a cap on the dollar amount spent over the course of an insured person’s lifetime.

Medically necessary: This term is used by insurance providers to deem what sort of medical service or equipment is necessary to treat a person’s disease, injury, or illness and whether they will cover the cost.

Medicare: Medicare is a federally run health insurance program for adults 65 and older, younger adults with certain disabilities, or patients with certain advanced medical conditions. The program is divided into four parts, designated as Medicare parts A, B, C, and D:

      • Part A is hospital insurance.
      • Part B is for medical costs, like doctor visits and preventive care.
      • Part C, also called Medicare Advantage, covers everything Parts A and B cover plus some additional costs. Part C plans are not run by the government — they are available only from private insurers.
      • Part D covers prescription drugs.

Medicaid: An insurance program for low-income individuals or families. The program is run by both the federal and state governments, causing variations in plans and coverage from state to state.

Non-covered charges: Charges for services that aren’t covered as part of a person’s health insurance. Non-covered charges are often for elective procedures.

Open enrollment: The period of time when an individual or employee can register for a new health insurance plan or make changes to current coverage levels.

Out-of-network: When a medical provider or facility is not contracted with your insurance company to provide services at negotiated rates, that provider is considered out of network. Depending on your plan, you may be responsible for all charges from an out-of-network provider, and they may bill you up front.

Out-of-pocket limit/maximum: This limit is the most an insured person will pay during a plan year. Once this total is reached through the payment of deductibles, services, and coinsurance, the cost of services is paid at 100 percent by the insurance company.

Outpatient services: When a medical service does not require an overnight stay at a hospital or medical facility, the service is considered outpatient.

Patient Protection and Affordable Care Act (ACA): The ACA is a law passed in 2010 by the U.S. Congress that is generally referred to as Obamacare. It was designed to help lower health care costs and to make insurance more widely available to the uninsured.

Point of service plans (POS): A health insurance plan that combines features of an HMO and PPO plan. The plan may require you to coordinate your care through your primary care doctor. If a service provider is out-of-network, there will be higher out-of-pocket costs.

Preferred provider organization (PPO): A PPO is an insurance plan that provides individuals flexibility in their choice of providers. The flexibility to use in-network or out-of-network providers usually results in a higher monthly premium when compared to an HMO.

Prior authorization: A procedure in which the insurance company requires the patient to get pre-approval for a medical service or prescription before agreeing to cover the cost of the service or prescription.

Preexisting condition: A condition or disease a person has been treated for prior to contracting with their insurance company for coverage. The practice of denying insurance to these individuals has been prohibited since the introduction of the Affordable Care Act.

Referral: A formal recommendation from a primary care physician (PCP) that the patient should visit a specialist. When the patient has a managed care plan such as an HMO, the primary care provider needs to provide a referral so the insured can see a specialist and have the cost of the visit covered by insurance.

Usual, customary, and reasonable (UCR): A fee charged for a medical service that falls within the same price range other providers in that geographic area typically charge. The UCR often determines the allowed amount an insurer will pay for a service.

The terminology in this insurance glossary is a great way to start educating yourself about health insurance and how it works.

If you have questions about your health insurance coverage, it is best to contact your insurance company directly.

If you have questions about full, in-network access to UPMC doctors and hospitals, please call our help line at 1-855-646-8762.

Editor's Note: This article was originally published on , and was last reviewed on .

About UPMC

Headquartered in Pittsburgh, UPMC is a world-renowned health care provider and insurer. We operate 40 hospitals and 800 doctors’ offices and outpatient centers, with locations throughout Pennsylvania, Maryland, New York, West Virginia, and internationally. We employ 4,900 physicians, and we are leaders in clinical care, groundbreaking research, and treatment breakthroughs. U.S. News & World Report consistently ranks UPMC Presbyterian Shadyside as one of the nation’s best hospitals in many specialties and ranks UPMC Children’s Hospital of Pittsburgh on its Honor Roll of America’s Best Children’s Hospitals. We are dedicated to providing Life Changing Medicine to our communities.