Understanding these health insurance keywords can make managing the financial aspects of your child’s care easier.
The fee associated with additional service performed before or after a procedure, such as lab work, X-ray and anesthesia.
Assignment of benefits
Process used to have insurance payments sent directly from the insurance company to the healthcare provider.
The amount your provider billed your insurance company for the service.
The number that identifies the claim that either you or your health provider submitted to the insurance company. Along with your insurance ID number, you will need this claim number if you have any questions for your health plan.
The amount the insured person pays, usually a percentage, for a portion of the costs associated with the healthcare service after the deductible has been paid. For example, a health plan might pay 80 percent of covered charges, and the insured person is responsible for the remaining 20 percent. The 20 percent amount is then referred to as the co-insurance amount. In this case, if your bill was $100, $80 would be paid by insurance and $20 is your responsibility. The $20 is the co-insurance.
A set amount that is paid at the time of service (for example, an office visit or a physical therapy visit).
Coordination of benefits (COB)
When someone is insured by two or more group health insurance plans, one plan becomes the primary plan and the other plan(s) the secondary plan(s). The COB helps to organize things between the insurance companies to avoid multiple payments for the same claim. Standard coordination of benefits goes in the following order for an active employee:
Employee: Policy in which you are the subscriber is the primary. If you are the policyholder on more than one policy, whichever policy has been in effect the longest is primary.
Dependent children: For natural parents still married, or without court order, coordination of benefits follows the birthday rule. The parent whose birthday falls first within the year (goes by month, not year) is primary.
For parents with court order: The parent named is primary.
For parents divorced/separated with spouses and no court order: Custodial natural parent is primary, then spouse of custodial parent, then non-custodial parent, then spouse of non-custodial parent.
Dependent children who are also covered by the state: State health policies always are last in line to pay benefits.
Any financial contribution made by the insured person towards the cost of the healthcare service, as defined by their health insurance policy.
Current Procedural Terminology (CPT) codes are numbers assigned to every task and service a medical practitioner may provide to a patient including medical, surgical and diagnostic services. Some insurance plans do not cover certain CPT codes or may have limited benefits for particular services. It is best to verify certain CPT codes directly with your insurance plan before receiving services to make sure they are covered.
Covered benefits/covered services
A health service included in the premium of a policy paid by or on behalf of the insured patient. Each health plan may define its own list of medically necessary covered services. It is important to check with your health insurance provider to find out if the service is covered.
The annual amount the insured person must pay for healthcare expenses before the insurance company begins to pay for covered medical services. The amount is determined by the specific policy of the insured person. Many plans have individual and family deductible amounts.
An individual who relies on an employee for support or obtains health coverage through a spouse, parent or grandparent who is the covered person. For example, if your child is on your insurance plan through your employer, your child is a dependent on that plan.
These are also known as ICD9 or ICD10 codes (International Classification of Diseases). They are used to group and identify diseases, disorders, symptoms and medical signs.
Specific conditions or circumstances listed in the contract or employee benefit plan for which the policy or plan will not provide benefit payments.
Exclusive provider organization (EPO)
A managed care organization that is similar to a preferred provider organization (PPO). Families who get their healthcare through an EPO usually do not have to select a primary care physician. If you want to make an appointment with a physician who is out-of-network, it may require pre-authorization, and the cost-sharing portion (co-insurance and/or co-pays) will typically be higher in this case as well.
Explanation of benefits (EOB)
A statement from the health plan that lists healthcare services provided, amount billed, payment made and amount owed by the insured person.
Flexible spending account (FSA)
A flexible spending account (FSA) is a special type of savings account that can be used to pay for medical expenses. Your employer deducts a certain amount of money each paycheck and puts that money into the FSA. This transfer of funds occurs before taxes are withheld from your paycheck, so you pay less in tax.
Money in an FSA can only be used to pay for medical expenses, including dental and vision expenses. You may use it for co-pays, deductibles and over-the-counter medications. For more information on how to use the funds in your flexible spending account, contact your human resources department or employee benefits plan administrator.
Health maintenance organization (HMO)
HMOs reduce the cost of providing health benefits for organizations (like your employer). The HMO offers health insurance coverage to patients through hospitals, physicians and other healthcare providers with whom they have a contract. There are different types of HMOs. Many require you to choose a primary care provider who can then refer you to specialists. If you want to see a provider outside of the HMO network, you will need pre-authorization from the insurance company. The cost-sharing amount may be different than if you used an in-network provider.
Health savings account (HSA)
A health savings account (HSA) is a type of account that you can put money into to save for health-related expenses on a tax-free basis.
Health reimbursement account (HRA)
A health reimbursement account (HRA) is an IRS-approved program that allows an employer to set aside funds to reimburse medical expenses paid by participating employees. Using an HRA has tax advantages that offset healthcare costs for the employees and their employers.
In-network or participating
Physicians, hospitals or other healthcare providers who are contracted with an individual’s insurance plan or network.
Letter of medical necessity
A letter to the insurance company explaining why certain services/treatments are being requested. This letter is often written by the referring physician or the specialist to persuade the insurance company to pay for certain services. This letter should include the history of the medical condition, reason for visit/testing and other clinical information. Other supporting clinical information may be required by the insurance carrier.
The amount specified is the total amount your insurance company will pay on your behalf over the course of your lifetime. This amount begins accruing the date your policy begins and continues until your policy ends for any reason. Unlike the annual out-of-pocket maximum, with the maximum lifetime payout, the amounts that your insurer spends paying your claims carry over from year to year.
Managed care organization
An insurance plan that contracts with a network of healthcare providers. The patient’s financial responsibility is significantly less when provided in-network. EPOs, HMOs, POS, and PPOs are types of managed care organizations.
National provider identifier (NPI)
A national provider identifier (NPI) is a unique 10-digit identification number required by all U.S. healthcare providers to do business with private insurance companies and governmental organizations.
Non-covered procedure or service
A medical procedure or service that an insurance plan considers medically unnecessary (or experimental/investigational) and therefore does not cover.
With PPO plans, a provider that is outside of the preferred provider organization is a non-preferred provider. Non preferred providers do not have an agreement with the PPO, therefore an insurance company will not reimburse a non-preferred provider at the rates that they would pay a preferred provider. The patient will have a greater out-of-pocket expense when seen when seeing a non-preferred provider.
Out-of-network or non-participating
Physicians, hospitals, or other healthcare providers who do not have a contract with an individual’s insurance company. Some plans allow patients to utilize out of network providers, and when this applies, the coinsurance responsibility is typically higher for the patient/family when utilizing out-of-network benefits. Deductible, coinsurance and out-of-pocket expenses may be higher when utilizing out-of-network benefits.
The amount the insured person is responsible to pay for medical services that are not reimbursed by the person’s insurance plan. Many plans have varying out-of-pocket amounts.
Plan year/Calendar year
This refers to the length of time that a patient’s insurance plan is in effect. A calendar year plan begins January 1 and ends December 31. A plan year begins according to the specific employer group. For example, the plan year may begin July 1 and end June 30.
The patient’s annual deductible and out-of-pocket expenses apply to each plan year or calendar year. A patient’s annual deductible and out-of-pocket amounts are calculated up to the point the plan or calendar year ends. If the patient renews insurance with the same plan, the patient starts over with the new year’s deductibles and out-of-pocket expenses. For example, a patient who has a plan that runs on a calendar year could have benefits as follows:
12/31/11 — Deductible of $200 has been met as well as out of pocket of $1200.
1/1/12 — New calendar year has begun. Deductible and out of pocket expense requirement begins again.
The physician practices that provide care within The Children’s Hospital of Philadelphia (ex. Anesthesia, Surgery, Radiology, Pediatrics etc.).
A health problem that existed before you applied for health insurance or tried to enroll in a new health plan. Health reform has eliminated this issue for children, but this provision in the law will not help anyone over age 19 until 2014.
A preferred provider is a provider that has an agreement with the preferred provider organization (PPO). The preferred providers will be reimbursed at the negotiated rate with the PPO.
Preferred provider organization (PPO)
Like HMOs, PPO plans establish a network of providers with whom they have a contract. Patients receive maximum benefits if they choose in-network providers. PPO members may self-refer for care to in-network and out-of-network providers. The out-of-pocket expenses will be higher for the use of out-of-network providers.
Point of service (POS)
POS is a type of managed care organization that establishes a network of providers with whom they have a contract. Patients receive maximum benefits if they choose in-network providers. Some POS plans require selection of a primary care provider and may require the PCP to make the referrals to specialists. The out-of-pocket expenses will be higher for the use of out-of-network providers.
The process where, before a patient can be admitted to the hospital or receive other types of specialty services, the managed care company must approve of the proposed service in order for it to be covered by the insurance company. For example, the process of seeking approval for an outpatient surgical procedure from the insurance company is a typical example of a service that requires pre-approval by many plans. Not all services will require pre-approval, but if you are in doubt, it's best to contact your insurance company in advance of obtaining any type of non-emergent healthcare service.
These are specific numbers given to a healthcare provider to identify them with an insurance carrier. These provider numbers are often used with referrals and pre-authorizations. The provider numbers may be the NPI or tax identification numbers, or other unique numbers assigned to a provider by the insurance company. CHOP can supply you with the necessary provider number associated with services being requested.
A referral is a type of pre-approval that health plan members, primarily those with HMOs, must obtain from their primary care physician before seeing a specialist.
Members may pay different levels of copayments, coinsurance, and/or deductibles depending on their plan design and the tier of the provider/hospital delivering a covered service.
- Tier 1: Lowest out of pocket cost
- Tier 2: Moderate out of pocket cost
- Tier 3: Highest out of pocket cost
Usual, customary, and reasonable (UCR), or reasonable and customary
Every insurance carrier has a payment rate for each test, procedure and medical service. When a patient is accessing out-of-network benefits at CHOP, the insured is responsible for paying the difference between CHOP’s charges and the insurance carrier’s usual and customary rates, in addition to any co-insurance and deductible costs.