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Basic Insurance Terminology

Brand new? A bit rusty? If you’re hazy on insurance terminology, you’re in luck! Here’s a cheat sheet on the terms and descriptors you are likely to encounter when billing insurance.

  • Benefits – Medical expenses that a health insurance policy covers
  • Exclusions – Medical and other expenses that a health insurance policy does not cover
  • Premium – Money patients pay to their insurance company in exchange for insurance benefits
  • Claim – The formal request to an insurance company for reimbursement of a patient’s medical benefits
  • Co-Insurance or Coinsurance – The percentage of covered expenses a patient shares with their insurance company.
  • Co-pay or Co-payment – The dollar amount a patient must pay toward the cost of a benefit. Usually paid each visit when services are rendered, though sometimes only when an office visit is billed.
  • Deductible – The dollar amount of eligible expenses patients must pay during each policy year before benefits are payable by the insurance company.
  • Provider/Practitioner/Physician – Any person or entity that provides health care services. A provider could be a doctor, a counselor, a hospital, or a physical therapist, just to name a few. Providers are usually licensed by the state in which they practice medicine.
  • Network – A group of doctors, hospitals, and other providers with whom a health insurance company contracts to provide discounted services to insured individuals.
  • In-network/Participating/Contracted – A provider or health care facility that is contracted to be part of a health insurance plan’s network. In general, insured individuals pay less money out-of-pocket when they see in-network providers.
  • Out-of-network/Nonparticipating/Not Contracted – Describes a provider or health care facility which is not part of a health plan’s network. Insured individuals usually pay more money out-of-pocket when they see out-of-network providers.
  • Allowed amount – The maximum dollar amount an insurance company will pay for a given procedure or service. If a provider has a contract with an insurance company, the provider and the insurance company negotiate an allowed amount for each service or procedure. If a provider has a contract with a health insurance company, then the health insurance company considers the provider in-network and will not charge more than the allowed amount for a given procedure.
  • Usual, Customary & Reasonable (UCR) – The average charge for a given procedure or service. Typically based on the provider’s local area. If a provider is out-of-network, then there is no contractual agreement on how much he or she can charge for a given procedure. To help manage cost, insurance companies will often process out-of-network claims based on UCR. If the provider’s actual charge exceeds UCR, then the patient could be responsible for the difference between the UCR and actual charge amounts.
  • Out of Pocket (OOP) – The maximum amount the insurance carrier requires the patient to pay each plan or calendar year. Once this amount is met for the year, carriers often waive copay and coinsurance requirements until the plan renews.
  • Plan or Policy Year – Describes a policy with start and end dates other than January 1st to December 31st. (I.E. A school insurance policy that begins on September 1st and ends August 31st.)
  • Calendar Year – Describes a policy that is active from January 1st to December 31st.