1. 1. US Healthcare Insurance Overview:
1
US
Healthcare
Basic

2. Content
1. Overview of Healthcare Insurance
2. Types of Health Insurance Plans
3. How Healthcare Insurance works
4. Major entities of Healthcare Insurance
5. Life Cycle of a Health Insurance Claim
2
6. Cost Sharing Mechanism
7. HIPAA
8. Health Insurance Coding System
9. Sample HCFA and UB Claim Form
10. Basic Terminology

3. 1. US Healthcare Insurance Overview:
What is Insurance?
Insurance, in law and economics, is a form of risk management primarily used to hedge against the risk of a contingent loss.
Insurance is defined as the equitable transfer of the risk of a loss, from one entity to another, in exchange for a premium, and can be thought of as a
guaranteed small loss to prevent a large, possibly devastating loss.
Insurer: An Insurer is a Company selling the insurance.
Insured or Policy Holder: A person or entity buying the insurance.
What is Healthcare Insurance?
Health insurance is a contract or a written agreement (the insurance policy) wherein, for premium payments, the healthcare payer (the insurance
company) promises to compensate the member (the insured) for the medical expenses as defined in the agreement. Coverage is the services or the
benefits that the member gets, under certain defined circumstances, which can vary greatly from policy to policy.
The contract, or policy, spells out what the insurance company will pay for and how much of the bill the insured will have to pay.
Example: The Policy may cover a physician office visit, but the policy holder or member may have to pay $30.00 as a co-payment.
Alternatively, the policy may not cover anything until the member has paid an agreed upon amount out of pocket, which is known as a deductible. These
deductibles and co-payments, along with any other non-reimbursable expenses are out-of-pocket-expenses. Out-of-pocket expense cap is the
amount the member pays for certain medical services or treatments before the insurance company pays for 100 percent of the reasonable and customary
fee. Other policies may have co-insurance, which is a percentage of the bill that the member is required to pay, which may be in addition to the
deductible and co-payment. Often, the total amount of co-insurance in a given policy is capped by the policy's maximum. The policy will also state the
amount the member pays each month for the coverage, known as the premium, and the total amount the insurance company will pay out for the life of
the policy - commonly referred to as a lifetime maximum.
Health care in the United States is provided by many separate legal entities including private (e.g. BCBS, UHG, Aetna, Humana, Cigna, etc) and public
spending (e.g. Medicaid, Medicare etc). More is spent per person on health care in the United States than in any other nation in the world. These health
insurance organizations can be categorized as follows:
Public health care coverage:
- Medicare
- State Children's Health Insurance Program (SCHIP)
- Medicaid
- Military health benefits (TRICARE)
Private health care coverage:
- Employer sponsored
- Self purchased
3

4. Medicare is the federal health insurance program that covers most people age 65 and older. Some younger people who are disabled or who have End-
Stage Renal Disease (permanent kidney failure) are also eligible for coverage.
Eligibility Criteria:
- People age 65 or older,
- People under age 65 with certain disabilities, and
- People of all ages with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a kidney transplant).
Medicare Part A (Hospital Insurance)
One part of the Medicare program is called Part A. Most people do not have to pay a premium for Part A because the individual or their spouse paid
Medicare taxes while working. Others can buy Part A if they meet certain criteria.
Medicare Part A is a type of hospital insurance provided by Medicare. The coverage provided by Part A includes inpatient care in hospitals, nursing
homes, skilled nursing facilities, and critical access hospitals. Part A does not include long-term or custodial care. If an individual meets specific
requirements, then they may also be eligible for hospice or home health care.
What does Part A Cover:
- Hospital Stays
- Blood Transfusions
- Nursing Home or Skilled Nursing Facility
- Home health services
Medicare Part B (Medical Insurance)
Medicare Part B is a medical insurance provided by the federal government to eligible beneficiaries. The coverage provided by Part B includes medically
necessary doctor's services, outpatient care, and most other services that Part A does not cover such as some physical or occupational therapies and
some home health care services. Part B covers preventive services as well.
Most people have to pay a premium for Part B. The state may pay for premiums or deductibles for those qualified to receive help. Otherwise, the
premium is usually deducted from a Social Security, Railroad Retirement or Civil Service Retirement check. The Part B premium can also be paid every
quarter or through the electronic payment option, or Medicare Easy Pay.
What does Part B Cover:
- Tests, Labs and Screenings.
- Preventive services include exams, lab tests.
- Glaucoma tests are covered once per year if performed by a legally authorized eye examiner.
- Bone mass measurement is covered every two years (or as medically necessary).
- Lab Services such as blood tests or urinalysis are covered.
- Diabetic screenings are covered if you have high blood pressure, dyslipidemia, obesity, or high blood sugar.
- Ambulatory surgery center fees are covered for approved services.
- Emergency room services for bad injuries, severe illness, or any time the insured believes the insured‘s life is in danger.
4

5. What Medicare Part A and Part B do not Cover:
- Dental care and dentures
- Routine vision and hearing care
- Most eyeglasses and hearing aids
- Custodial or long term care
- Routine physical exams (except for an entry-year exam)
- Some shots, tests and lab tests
- Some diabetic supplies
- Routine foot care
- Acupuncture and certain chiropractic services
- Cosmetic surgery
Medicare Part C (Medicare Advantage)
Medicare Part C combines Part A and Part B options and covers all medically needed services. The difference is that private insurance companies that are
approved by Medicare provide this type of coverage. In most cases, Part C is a lower-cost alternative to the Original Medicare Plan, and providers usually
offer extra benefits and include prescription drug coverage (Part D).
There are several plans available for Medicare Advantage. The Part C plans include the following:
Medicare Preferred Provider Organization (PPO)
The insured can visit any doctor or specialist that they choose. If they are not in their PPO network, the cost increases. They usually can see a specialist
without a referral.
Medicare Health Maintenance Organization (HMO)
The insured can visit doctors in the HMO network only. In most cases, they are required to have a referral to visit a specialist.
Medicare Private Fee-for-Service (PFFS)
The insured can visit any doctor or specialist, but the doctor must be willing to accept the PFFS's fees, terms, and conditions. They do not need to have a
referral to see a specialist.
Medicare Special Needs
These plans are designed for people with certain chronic diseases or other special health needs. These plans must include Part A, Part B, and Part D
coverage.
Medicare Medical Savings Account (MSA)
There are two parts to this plan:
- A high-deductible plan with which coverage will not begin until the annual deductible is met.
- A savings account plan where Medicare deposits money for the insured to use towards health care costs.
5

6. Medicare Part D (Prescription Drug Coverage)
Part D is prescription drug coverage insurance that is provided by private companies approved by Medicare.
How Can You Get Part D Coverage
There are two ways to join the Medicare prescription drug coverage plan:
The first is by adding it to the Original Medicare Plan or some Medicare cost plans, private fee-for-service plans, and Medical savings account plans.
The second way is to join an HMO or PPO plan that includes Part D coverage.
The insured usually have to pay a monthly premium that will vary according to the plan chosen.
Adding Part D to the Original Medicare Plan or Medicare Advantage Plan
If the insured are in the Original Medicare Plan, they may add Part D coverage.
Generally, they pay a separate premium or yearly deductible.
If the insured are in the Medicare Advantage Plan, then chances are they already have Part D coverage. However, a few plans do not include a drug plan;
therefore, they may add Part D to those plans.
How Part D Works
After the insured join, they receive a membership card and materials via mail. They pay a co-pay, co-insurance, or deductible when they use their card.
Some Part D plans have a "coverage gap." A coverage gap means when members have spent a certain amount of money, they are responsible for paying
the entire cost of prescriptions while they are in the gap until they reach the out-of-pocket limit. After they meet the out-of-pocket obligation, they only
have to pay a small co-pay or co-insurance for the remainder of the calendar year.
The State Children‘s Health Insurance Program (SCHIP) is a joint state/federal program to provide health insurance to children in families who earn too
much money to qualify for Medicaid, yet cannot afford to buy private insurance. The statutory authority for SCHIP is under title XXI of the Social Security
Act. SCHIP programs are run by the individual states according to requirements set by the federal Centers for Medicare and Medicaid Services, and may
be structured as independent programs separate from Medicaid (separate child health programs), as expansions of their Medicaid programs (SCHIP
Medicaid expansion programs), or combine these approaches (SCHIP combination programs). States receive enhanced federal funds for their SCHIP
programs at a rate above the regular Medicaid match. 6

7. Medicaid is the United States health program for eligible individuals and families with low incomes and resources. It is a means-tested program that is
jointly funded by the states and federal government, and is managed by the states. Among the groups of people served by Medicaid are eligible low-
income parents, children, seniors, and people with disabilities. Low income is only one test for Medicaid eligibility for those within designated groups
and does not necessarily qualify an individual for Medicaid. It is estimated that Medicaid does not cover approximately 60 percent of low-income
Americans. Medicaid is the largest source of funding for medical and health-related services for people with limited income in the US. Because of the
aging population, the fastest growing aspect of Medicaid is nursing home coverage.
Medicaid Services:
- Inpatient hospital services
- Outpatient hospital services
- Prenatal care
- Vaccines for children
- Physician services
- Nursing facility services for persons aged 21 or older
- Family planning services and supplies
- Rural health clinic services
- Home health care for persons eligible for skilled-nursing services
- Laboratory and x-ray services
- Pediatric and family nurse practitioner services
- Nurse-midwife services
TRICARE is a regionally managed health care program for active duty and retired members of the uniformed services, their families, and survivors.
TRICARE brings together the health care resources of the uniformed services and civilian health care professionals to provide better access and high
quality health care service
The Department of Defense Military Health System (MHS) provides health benefits to active duty service members, retired service members and their
dependents. The MHS consists of a direct care network of Military Treatment Facilities and a purchased care network known as TRICARE. Additionally,
veterans may also be eligible for benefits through the Veterans Health Administration.
7

8. Group health insurance describes the situation whereby the insurance company contracts with a group, usually an employer, and then issues certificates
for each member of that group.
Group Health Insurance is a Health insurance purchased through a group that exists or some purpose other than buying insurance, such as a workplace,
labor union, or professional association.
It has been reported that over 60% of the U.S. population that has health insurance receives their health care coverage through an employer-sponsored
group health insurance plan.
Most health insurance companies in the U.S. will have three classification levels based on the number of enrolled employees on the health plan:
- Small group
- Mid-size group
- Large group
Not all employees maybe consider eligible. Temporary or part-time employees are seldom eligible to participate in an employer’s health insurance
benefits plan.
Individual health insurance is purchased directly by an Individual from the insurance company. It is a health coverage purchased on an individual basis
rather than through a group.
What Individual Health Insurance Plans are Available?
Under the individual and family health insurance product category, there are several different types of private health insurance plans available, such as
indemnity (fee-for- service) health insurance, health maintenance organization (HMO) plans, preferred provider organization (PPO) plans, point-of-
service (POS) plans, and health savings account (HSA) plans. Each plan type differs on two major features: cost and choice.
Individual Insurance:
- A personal policy designed to protect the individual and dependents
- Individual is also known as the policyholder
- Policyholder must show evidence of good health…this is called Insurability
- The individual pays the premium
Group Insurance:
- Designed to provide protection (coverage) to a specific group of people under a single insurance contract
- The employer is the policyholder
- The premium contribution is shared between the employer and the employees (usually the employer is the major contributor)
- Evidence of insurability is usually not required
8

9. A type of medical plan that reimburses the patient and/or provider as expenses are incurred.
An indemnity that allows the participant the choice of any provider without effect on reimbursement. These plans
reimburse the patient and/or provider as expenses are incurred.
Managed care plans generally provide comprehensive health services to their members and offer financial incentives for
patients to use the providers who belong to the plan. Examples of managed care plans include:
• Health Maintenance Organizations (HMOs),
• Preferred Provider Organizations (PPOs),
• Exclusive Provider Organizations (EPOs),and
• Point of Service Plans (POSs).
Health maintenance organizations deliver comprehensive medical care to plan members by entering into negotiated contracts with providers to form a
network. Alternatively, an HMO may own its network facilities or employ the physicians in its network. The provider network, which consists of
participating physicians, hospitals, and ancillary service providers, delivers medical care to HMO members in exchange for negotiated compensation.
Physicians: The relationship between an HMO and its participating physicians is a contractual one, through either direct employment or an independent
contractor arrangement. As noted earlier, to establish a network that provides HMO members with direct access to medical care, an HMO must contract
with sufficient numbers and types of physicians.
Selecting a Primary Care Provider: In an HMO network, a member is required to select a primary care physician (PCP) to manage the health care. The
PCP will guide the member through the medical system and co-ordinate the medical care among various specialists. A member cannot directly consult a
specialist. A PCP refers a member to a specialist.
Hospitals: Health maintenance organizations also negotiate contracts with hospitals and other inpatient facilities to provide medical services to HMO
members. Again, the issues of access, credentialing, and contractual arrangement are considered. Accreditation by the Joint Commission on
Accreditation of Healthcare Organizations (JCAHO) and verification of the existence of a state license are typically minimum requirements for a hospital
to participate as a network provider. Other factors that an HMO considers in contracting with one or more hospitals include the level and cost of hospital
services, the quality of the physicians on the hospital‘s medical staff, the type of specialty facilities and services offered by the hospital, and member
access within a geographic area.
Ancillary Service Providers: An HMO also contracts with ancillary service providers. Ancillary services are auxiliary or supplemental services used to
support diagnosis and treatment of a patient‘s condition and include laboratory, radiology, other diagnostic services, home health services, physical
therapy, and occupational therapy. An HMO contracts with the appropriate number and type of ancillary service providers so that its provider network
includes the healthcare services that are commonly needed by plan members.
2. Types of Insurance Plans:
Cont’d
9

10. Payer (Cigna)
Physician
1
Physician
2
Hosp
1
Hosp
2
PCP Specialist
Out of
Network
Physician
3
Hosp
4
Hosp
3
HMO In -
Network
Patient
Refereed by PCP
Contractual
Agreement
10

11. Preferred provider organizations (PPO) are a healthcare benefit arrangement designed to supply services at a discounted cost by providing
incentives for members to use designated healthcare providers (who contract with the PPO at a discount), but which also provide coverage
for services rendered by healthcare providers who are not part of the PPO network.
Payer (Cigna)
Physician
1
Physician
2
Hosp
1
Hosp
2
PCP Specialist
PPO Out
of
Network
Physician
3
Hosp
4
Hosp
3
PPO In -
Network
Patient
Contractual
Agreement
No
Contractual
Agreement
Covered
11

12. A POS is a hybrid product that combines some aspects of traditional group health insurance with aspects of HMOs and PPOs. The POS
allows consumers to "customize" their healthcare, choosing at the point of service either medical provider from within the plan‘s network or
out of network providers.
Payer (Cigna)
Physician
1
Physician
2
Hosp
1
Hosp
2
PCP Specialist
POS Out
of
Network
Physician
3
Hosp
4
Hosp
3
POS In -
Network
Patient
Contractual
Agreement
No
Contractual
Agreement
Covered
Refereed by PCP
12

13. :
Plan-A more restrictive type of preferred provider organization plan under which employees must use providers from the specified network
of physicians and hospitals to receive coverage; there is no coverage for care received from a non-network provider except in an emergency
situation.
Payer (Cigna)
Physician
1
Physician
2
Hosp
1
Hosp
2
PCP Specialist
EPO Out
of
Network
Physician
3
Hosp
4
Hosp
3
EPO In -
Network
Patient
Contractual
Agreement
No
Contractual
Agreement
Covered
Refereed by PCP
13

14. An insurance plan that covers the Medicare patient’s deductible and co-payment
obligations. These plans are designed to pay the 20% difference between the Medicare allowed amount and the amount
Medicare pays. These policies may be purchased individually, or premiums may be paid through an employer-sponsored
program, for retirees of a company. There are ten standard, approved, Medicare supplement programs called Plans A through
J. Plan A is the least expensive and has the least coverage. Plan J is the most expensive and the most comprehensive. Plans H,
I and J offer limited prescription drug coverage. If plans H, I, J are chosen when the person is first eligible, they are guaranteed
issue.
Funding Arrangement is the method used to fund accounts that cover claim payment and fees associated with services
incidental to claim administration
Below mentioned are some of the funding arrangements offered to our policyholders:
- Fully Insured (FI)
- Administrative Services Only (ASO)
- Modified Premium (MP), Modified Minimum Premium (MMP)
Fully Insured (FI)
Under the fully insured method, premiums are collected to:
- Adequately cover claim payment
- Allow for reserve
- Cover retention services
How Does Fully Insured (FI) Work
The insurance company determines the premium that is needed to adequately cover claims, reserve needs, and retention.
This premium is billed and collected from the customer according to the provision of the company policy. In turn, the
company maintains a responsibility in the contract to pay for claims that were incurred during the effective dates of coverage.
- This method of funding is commonly known as ―insurance.
- Fully insured policies are subject to state mandates.
Administrative Services Only (ASO)
Under an administrative services only agreement, the insurance company reviews claims and makes payment from the
employer‘s funds while providing services normally considered to claim administration. Generally, full administrative and
underwriting are also provided to the customer. 14

15. How Does ASO Work?
The ASO agreement takes the form of a service contract between the insurer as administrator and the buyer, as a self-funded
employer. It specifies services to be provided by the insurer, the rights and obligations of both parties, and the administrative
fee.
Note: Since this is a service contract, it is not considered “insurance”. Consequently, no insurance contract is involved and
there are no premiums or premium taxes.
Modified Minimum Premium (MMP)
The Modified Minimum Premium arrangement combines insurance ‘with self-funding‘. MMP plans create a partially self-
funded arrangement aimed primarily at premium tax savings for the employer.
How Does Modified Minimum Premium (MMP) Work
Under the MMP arrangement, the policyholder assumes liability for claims up to a specific amount, such as 90% of the
estimated monthly claims. As needed, the policyholder deposits funds into this account.
These plans are partially self-funded by the employer and partially funded by premiums. The employer deposits funds into an
account to cover claim payment up to a specified percentage. Premiums are collected from the employer to cover the
remaining percentage.
Healthcare
Insurance
Public
Insurance
Medicare SCHIP Medicaid Tricare
Private
Insurance
Group Individual
UHG Aetna Cigna BCBS Etc.
15

16. How Healthcare Insurance Works:
In order to understand how health insurance works, let us have a look at the four major parties entities involved in health insurance:
- Healthcare Insured (Individuals/Businesses)
- Government
- Private Insurers
- Health Care Service Providers
Individuals /
Businesses
Health Service
Providers
Governme
nt
Private Insurers
Direct Out Of Pocket
Payments
Public
Employees
Premiums
Payments
to
Providers
Premiums
Medicare,
Medicaid,
SCHIP
Subsidies
Taxes
3. How Healthcare Insurance Works:
16

17. 4. AN OVERVIEW OF THE RELATIONSHIP BETWEEN MAJOR
ENTITIES:
17
Member
Supplier Purchaser
Provider Payer
PurchasesSupplie
s
Submit
Claim
Reimburse
Overview
There are five major entities in insurance industry that participate in the quality delivery of health care. They are
1. Member / Beneficiary / Enrollee
2. Provider
3. Suppliers
4. Payer / Insurer
5. Purchaser

18. 1. Member / Beneficiary / Enrollee: A Member is any person eligible as either a subscriber or a dependent for a health
care service or managed care service in accordance with a contract.
A member or beneficiary is an individual who is eligible for receiving benefits under an insurance policy or plan.
A dependent could be spouse or dependent child (covered till the age of 18 years or beyond if the child is disabled or
covered till the age of 22 years if the child is a full time student under public school or college).
Member is enrolled under a benefit plan with Insurer by paying premiums. This can be a group health insurance or
individual insurance.
2. Provider: A health care provider or health professional is an organization or person who delivers proper health care in a
systematic way professionally to any individual in need of health care services.
3. Suppliers: Suppliers are subcategory of health care providers. A supplier is an organization of specified health care
products / services and plays a major role in the delivery of the various health products that are used by the patient
prescribed by the provider. These include but are not limited to:
· Drug companies
· Pharmacies
· Medical supply companies
4. Payer / Insurer: The Payer or Insurer is the organization that pays for the claims. Payer plays a major role in the
negotiation of contract with the provider and creating payment schemes that tie providers more strongly to the interest of
patients.
5. Purchaser: Purchasers are the entity that pays the premium to Insurer and purchase the health coverage for the
medical services. Purchaser could be
· Individuals
· Employers
· Government
Member and Purchaser could be the same entity in case of Individual Purchaser. Member and Purchaser could be different
entity if the Purchaser is Employer or Government. In this case, employer is purchasing the coverage for all the employees.
Therefore, there is a purchaser for multiple members (employees).
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19. 3. Patient
Demographic
Entry
4. ICD, CPT,
HCPCS Coding
5. Charge Entry
6. Claims
Submissions –
Electronic Billing
& Paper Billing
7. Insurance
Company (Claim
Adjudication)8. Payment and
Denial Posting
from EOBs and
Correspondence
s
9. A/R Follow-
ups – Denial
Management &
Appeals
10. Payments
and MIS Reports
send to the
Providers
1. Clinical /
Doctor Visit
2. Insurance
Verification
5. Life Cycle of a Healthcare Insurance Claim:
Life Cycle of a
Healthcare
Insurance
Claim
19

20. Make an Appointment
Find a provider within the specified network and schedule an appointment. The receptionist will ask for basic information to schedule the
visit. He or she will also ask for unique ID numbers given by the insurance company.
Verification of Coverage from Insurance Companies
After arriving for an appointment, a receptionist may ask for a copy of insurance card. Once the card is copied on the front and back, the
receptionist will call the insurance company to ensure that the beneficiary is still eligible and verify for which services they are eligible.
Receive Care from Provider
Once the services are verified, the beneficiary will go in to receive care from the provider. The provider will assess the patient and suggest
follow up appointments with specialists if necessary. In some cases, an insurance company may require that the primary care physician
provide an official referral.
Submission of Claim by Provider to Insurance
The office manager or billing representative will submit a claim to the insurance company. The claim contains basic demographic and
ICD-9 information, which is coding that, describes the beneficiary's condition as well as procedures that were performed. This claim may
be on a standard claim form or on one specified by the insurance company. It is sent electronically or mailed to the insurance company.
Follow up on Claim
Claims usually pay within 30 to 60 days and this varies from one insurance company to another. The office manager will follow up with
the insurance company if payment does not occur in a timely manner. The insurance company may send explanation of nonpayment prior
to follow up.
EOB is sent to Beneficiary and Provider
An Explanation of Benefits is sent to the beneficiary and the provider outlining what was paid to who and any remaining amount that is
due to the provider by the beneficiary.
20

21. Overview
Insurance is a mechanism for protection against risk. In the context of insurance, risk refers to the possibility of a substantial financial
loss from some event. Insurance requires some type of cost sharing so that the Insured assumes at least part of the risk. The purpose of
Cost sharing is to reduce the misuse of insurance benefits. There are four main types of cost sharing mechanism in the health Insurance
industry apart from the premium cost sharing. They are:
· Copayment
· Deductibles
· Coinsurance
Insured individuals generally pay a portion of the actual cost of medical services out of their own pockets. These expenses are called Out
of pocket expenses and are in the form of Copayments, Deductibles and Coinsurance. These out of pocket expenses are incurred if and
when medical care is used. Since members have to pay these expenses from their pockets, they become their liabilities and are termed as
Member Liabilities.
Copayment:
A specific charge that your health insurance plan may require that you pay for a specific medical service or supply, also referred to as a
"co-pay." For example, your health insurance plan may require a $15 co-payment for an office visit or brand-name prescription drug,
after which the insurance company often pays the remainder of the charges.
Deductibles:
A deductible is a fixed amount of money which the member have to pay before most, if not all, of the policy's benefits can be started.
However, in many health insurance policies (plan) member can use some services (emergency room etc) without meeting the deductible
first. These services will vary with each type of plan.
A deductible amount is calculated yearly, so member has to meet a new deductible for each year of the policy. Before member meets this
amount, they are required to pay for health care.
Coinsurance:
Coinsurance is a form of medical cost sharing in a health insurance plan that requires an insured person to pay a stated percentage of
medical expenses after the deductible amount, if any, was paid. Once any deductible amount and coinsurance are paid, the insurer is
responsible for the rest of the reimbursement for covered benefits up to allowed charges.
Coinsurance rates may differ if services are received from an approved provider (i.e. participating provider - a provider with whom the
insurer has a contract or an agreement specifying payment levels and other contract requirements) or if received by providers not on the
approved list (non-participating provider).
21
6. Cost Sharing
Mechanism:

22. Out-of-Pocket Maximum:
Insured individuals pay a portion of the actual cost of medical services out of their own pockets. These expenses are called out-of-
pocket expenses and are in the form of copayments, deductibles and coinsurance. These out of pocket expenses are incurred if and when
medical care is used.
Allowable Amount:
Also referred to as the Allowed Amount, Approved Charge or Maximum Allowable. This is the dollar amount typically considered
payment-in-full by an insurance company and an associated network of healthcare providers.
(Co-pay + Coins + Deductible + Payment) = Allowable
22
DOS Services Description Billed amount Allowed amount Copayment Deductible
Coinsurance (by
member)
Payment
1/1/2012 99213 Office visit $250.00 $150.00 $25.00 $25.00 20% ?
1/1/2012 97110 Physical therapy $1,500.00 $700.00 $0.00 $500.00 20% ?
Total $1,750.00 $850.00 $25.00 $525.00 ?
Question: How much will be the payment amount? L1 - $80.00 and L2 - $160.00
DOS Services Description Billed amount Allowed amount Copayment Deductible Coinsurance
(by member)
Payment
6/18/2012 99213 Office visit $300.00 ? $25.00 $25.00 20% $120.00
6/18/2012 97110 Physical therapy $2,000.00 ? $100.00 $500.00 20% $320.00
Total $1,750.00 ? $25.00 $525.00
Question: How much will be the allowable amount? L1 - $200.00 and L2 - $1000.00

23. 23
7. HIPAA: Health Insurance Portability and
Accountability Act
To improve the efficiency and effectiveness of the health care system, the Health Insurance Portability and
Accountability Act of 1996 (HIPAA), Public Law 104-191, included Administrative Simplification provisions that
required the Department of Health and Human Services (HHS) to adopt national standards for electronic health care
transactions and code sets, unique health identifiers, and security. At the same time, Congress recognized that
advances in electronic technology could erode the privacy of health information. Consequently, Congress incorporated
into HIPAA provisions that mandated the adoption of Federal privacy protections for individually identifiable health
information.
Following the passage of HIPAA, two additional laws have been enacted that add requirements to HIPAA and
strengthen various aspects of administrative simplification. These laws are:
Health Information Technology for Economic and Clinical Health Act (HITECH) enacted as part of the American
Recovery and Reinvestment Act of 2009 (ARRA)
Subtitle D of the HITECH Act addresses the privacy and security concerns associated with the electronic transmission
of health information, in part, through several provisions that strengthen the civil and criminal enforcement of the
HIPAA rules.
Patient Protection and Affordable Care Act of 2010 (ACA)
ACA builds upon HIPAA with new and expanded provisions, including requirement to adopt operating rules for each of
the HIPAA covered transactions; a unique, standard Health Plan Identifier; and a standard for electronic funds transfer.
ACA requires that health plans certify their compliance with the standards and operating rules, and increases penalties
for noncompliance.
AMA Advocates for Administrative Simplification
Because physician practices can save significant time and money through automation of the claims process, the AMA
diligently advocates for continued administrative simplification. Review AMA-developed whitepapers and AMA
testimonials about administrative simplification, to address the ongoing problems in the claims revenue cycle—
problems which contribute to increased complexity and expense.
The following are highlights of some of the HIPAA-related topics. Click on the links for more information.
Privacy Standards
The HIPAA Privacy Rule provides federal protections for personal health information held by physicians and gives
patients an array of rights with respect to that information. At the same time, the Privacy Rule is balanced so that it
permits the disclosure of personal health information needed for patient care and other important purposes.
Cont’d

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Security Standards
The HIPAA Security Rule establishes national standards to protect individuals’ electronic personal health information
that is created, received, used, or maintained by a covered entity. The Security Rule requires appropriate
administrative, physical and technical safeguards to ensure the confidentiality, integrity, and security of electronic
protected health information.
Physicians Click & Complain About Health Plan Hassles and HIPAA Transactions
Tell the AMA about problems you've encountered in having your claims and other submissions accepted by payers.
HIPAA Plain & Simple: A Healthcare Professionals Guide to Achieve HIPAA and HITECH Compliance
Simplifies the complex HIPAA regulations for those in the medical office who have direct patient contact or are
responsible for safeguarding patient information.

25. 25
8. Health Insurance Coding System:
1. CPT Code - CPT (Current Procedural Terminology) codes are numbers assigned to every task and service a medical
practitioner may provide to a patient including medical, surgical and diagnostic services. They are then used by
insurers to determine the amount of reimbursement that a practitioner will receive by an insurer. Since everyone uses
the same codes to mean the same thing, they ensure uniformity.
CPT codes are developed, maintained and copyrighted by the AMA (American Medical Association.) As the practice of
health care changes, new codes are developed for new services, current codes may be revised, and old, unused codes
are discarded. Thousands of codes are in use, and they are updated annually. Development and maintenance of these
codes is overseen by editorial boards at the AMA, and the publications of all the software, books and manuals needed
by those who use them brings millions in income to the AMA each year.
2. HCPCS Code - HCPCS Codes, Healthcare Common Procedure Coding System numbers, are the codes used by
Medicare and monitored by CMS, the Centers for Medicare and Medicaid Services. They are based on the CPT
Codes (Current Procedural Technology codes) developed by the American Medical Association.
3. ICD – 9 Code - ICD codes were first developed in 1893 in France by a physician, Jacques Bertillion. They were called
the Bertillon Classification of Causes of Death. In 1898, they were adopted in the United States, and were
considered, in effect, ICD-1 because that was the first version of code numbers.
Since then, as medical science has progressed and new diagnoses have been developed, named and described, the
code lists have been updated. The number designation changes when the updates are so extensive that a wholesale
change needs to be made. There may be annual updates, too, but those are considered to be relatively minor, and
the basic code set doesn't change. For example, the upgrade in 1949, ICD-6, was the first time mental disorders
were added to the code set. The upgrade in 1977 to ICD-9 was the first time procedure codes were added, and the
CM designation was included.
Medicine CPT code range 90281 to 96999; 97001 to 97799; 98925 to 99199
Surgery CPT code range 10021 to 69999
Radiology CPT code range 70010 to 79999
Anesthesia CPT code range 00100 to 01999; 99100 to 99142
Pathology CPT code range 80002 to 89399
Evaluation and Management CPT code range 99201 to 99499
Hospital DRG code range DRG 001 to DRG 999

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9. Sample HCFA and UB Claim Form:

27. 27
Required fields on the form are marked "REQUIRED".
Patient Information (blocks 2-8). REQUIRED
Box 2 - Last Name, First Name, Middle Initial (if any)
Box 3 - Date of Birth and Sex
Box 4 - Medi-Cal Beneficiary Name (if different than the name in block 2)
Box 5 - Patient's Address
Box 6 - Patient's Relationship to Insured (used in conjunction with information on block 9)
Box 7 - Insured Address (used in conjunction with information on block 9)
Box 8 - Patient's Marital and Work Status
Other insurance information (blocks 9-9d) - This section is completed if the Patient has other insurance. REQUIRED
Box 9 - Other Insured's Name. Enter the last name, first name, and middle initial of the enrollee in the other insurance
policy
9a - Other Insured's Policy or Group Number
9b - Other Insured's Date of Birth, Sex
9c - Other Insured's Employer's Name
9d - Insurance Plan Name or Program Name
Please see under Section X, Claims Processing and Payment, Coordination of Benefits, for more information. SFMHP is the
payor of last resort; therefore, claims for patients who are covered under Medi-Cal and another insurance plan must
include a copy of the insurance Explanation of Benefits or Claim Denial Letter in order for SFMHP to determine payment
liability. Medicare/Medi-Cal crossover claims are sent to the State's fiscal intermediary (EDS) or the Medicare fiscal
intermediary. They are not processed by the SFMHP Claims Unit.
Patient's Condition (blocks 10a-c) - Is the Patient's condition related to Employment? Auto Accident?Other
Accident? REQUIRED
Check "YES" or "NO" to indicate whether employment, auto liability, or other accident involvement applies to one or more of
the services described in Item 24. Any item checked "YES" indicates there may be other insurance primary to MediCal.
Identify primary insurance information on Item 11.
Enter the State postal code (i.e.: CA for California)
Patient Signatures (blocks 12-13) REQUIRED
Box 12 - Release of Information: Patient's or Authorized Person's Signature
Box 13 - Assignment of Benefit: Insured or Authorized Person's Signature
Comments (block 19)
Free-form "comments" field to insert additional claim information not designated to appear in another block.
Diagnosis Coding (block 21) REQUIRED
Enter the patient's DSM IV diagnosis.
No narrative information is needed in block 21.
Document the condition(s) to the highest degree of specificity.
Prior Authorization Number (block 23) REQUIRED
Record the Authorization number issued by the ACCESS Team for the services being claimed.

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Dates of Service (block 24A) REQUIRED
Enter the month, day, and year for each procedure or service. When "from" and "to" dates are shown for a series of identical
services, enter the number of days or units in block 24d. If the "from" and "to" dates of services are the same, code only the
"from date" of service using the appropriate six-digit format (e,g,: 010197)
Do not date range services in different months on one detail line. Instead, you must split up the dates, prorating the
charges and quantity billed appropriately.
Place of Service (block 24B) REQUIRED
Enter the appropriate place of service code (list follows these instructions). Make sure that the procedure code you are
using matches the place of service. For example, do not bill 99220 (Hospital Observation Care:Initial Problem = High) with
a place of service code 11 (Office). List the name and address of the facility where service was rendered on block 32.
Use the 2 digit code only - do not use abbreviations such as "O" for Office, etc.
Procedure Code (block 24d) REQUIRED
Enter the authorized HCPCS (HCFA Common Procedure Coding System) codes listed in the authorization letter.
Diagnosis Pointer (block 24E) REQUIRED
Enter the diagnosis code reference number as shown in block 21, to relate the date of service and the procedures
performed to the appropriate diagnosis.
Do not use DSM IV codes in this block. Use only the reference number(s) from block 21.
$ Charges (block 24F) REQUIRED
Enter the charge for each item.
Days or Units of Service (block 24G) REQUIRED
Enter the number of days or units. When multiple services are provided, enter the actual number provided.
EPSDT Service (block 24H)
Check if the service being claimed is an EPSDT procedure.
COB - Coordination of Benefits (block 24J)
Check if the service is covered by another insurance carrier. Please attach an Explanation of Benefits form showing this
service was claimed to the other carrier. Note other health coverage information in blocks 9 a-d, 6, and 7.
Federal Tax ID Number (block 25)
Enter Physician's Social Security Number (check SSN box) or Tax ID Number. If a Group Practice, enter the Employer
Identification Number (EIN)
Total Charge (block 28)
Enter the total amount of the services you are claiming.
Amount Paid (block 29) REQUIRED
Enter any co-payment amounts paid to you by the Patient or their responsible party during the period covered by your
claim.

29. 29
Balance Due (block 30)
Enter the amount due to you for this claim. Please note, the actual claim payment is subject to SFMHP Published Rate
Schedule, coordination of benefits policies, and the service amount(s) listed on the authorization; and, is limited to the
unpaid balance of the Provider's charge.
Signature of Physician or Supplier (block 31) REQUIRED
Sign and record the date you are submitting the claim. The signature represents the provider's certification that all
information on the document is true and accurate.
Name and Address of Facility where services were rendered, if other than Practitioner's Office. (block 32) REQUIRED
Enter the name and address of the facility if the services were furnished in a hospital, clinic, patient's home, or facility other
than the physicians' office. If the practitioner's address listed on block 33 and the place of service is the same, please write
"SAME".
This block must be completed whether the provider performs the work at the office or at another location.
Provider Billing Information (block 33) REQUIRED
Enter the name, address, zip code and telephone number of the practitioner or provider group billing for the service. Enter
under "PIN#" your SFMHP Provider ID Number.

30. 30
Sample UB Claim Form:

31. 31
1. Enter the provider's, or facility's, name and address in Box 1. Format the information with the provider's full name on
line one, the street address on line two, and the city, state and zip code on line three.
2. Move to Box 3 and enter the patient's control number or account number. Enter the numbers from left to right.
3. Place the provider's federal tax identification number in Box 5. Box 6 is reserved for the dates of coverage. Boxes 7
thorough 11 are not required unless specified by the insurance company.
4. Enter the patient's name in Box 12 along with his address in Box 13. The patient's birthday is required in Box 14. Box 15
requires an "M" for male or "F" for female.
5. Provide the admission information in Boxes 17 through 22. The medical records number for the patient is required in
Box 23. Condition codes go in Boxes 24 through 31.
6. Complete Boxes 32 through 37 by providing any applicable occurrence codes that affect the way the claim should be
processed by the payer. Boxes 39 through 41 are reserved for value codes. These specialized codes represent data
elements required by the payer organization to process the claim, such the hour of accident according to NADHO.
7. Enter the procedure codes and charges in Boxes 42 through 49. Use the Current Procedural Terminology (CPT) manual
for the acceptable codes.
8. Provide the payer's name in Box 50 and the provider's number in Box 51. Mark a "Y' in Box 53 to accept assignment. This
allows the insurance to pay the provider directly.
9. Enter previous payments and the amount due in Boxes 54 and 55, respectively. Boxes 58 though 66 require information
from the patient regarding insurance. Supply the requested information in each box.
10. Place the primary diagnosis code in Box 67. Enter additional codes in the boxes provided. Use Box 79 through 81 and
report the procedures performed. Supply the attending physician's information in Box 82. Add another physician if
necessary in Box 83.

32. 32
10. Basic Terminology:
24 Hour Approval:
"24 Hour Approval" is a special feature offered on some health insurance plans. When you apply for coverage under
plans offering "24 Hour Approval", you can be advised via email of the insurance company's coverage decision
within 24 hours.
How It Works:
1) Apply online for a health insurance plan with this symbol.
2) Complete and submit the application online through our website.
3) The insurance company will then review your application and you can receive an update within 24 hours on
whether you are approved; though in some cases you may receive a status update or request for further information
instead. Depending on whether the insurance company needs more information, when you submit your application
or other conditions, some exceptions may apply.
Access:
The availability of medical care. The quality of one's access to medical care is determined by location, transportation
options, and the type of medical care facilities available in the area, etc..
Accident:
For health insurance purposes, an accident is an unforeseen, unexpected and unintended event resulting in bodily
injury.
Accumulation Period:
The period of time during which an insured person incurs eligible medical expenses toward the satisfaction of a
deductible.
Actively-at-work:
Most group health insurance policies state that if an employee is not "actively-at-work" on the day the policy goes
into effect, the coverage will not begin until the employee returns to work.
Actual Charge:
The actual dollar amount charged by a physician or other provider for medical services rendered, as distinguished
from the allowable charge.
Actuary:
A person professionally trained in the mathematical and statistical aspects of the insurance industry.
Actuaries frequently calculate premium rates, reserves and dividends and assist in estimating the costs and savings
of benefit changes.
Acupuncture:

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Acute Care:
Medical care administered, frequently in a hospital or by nursing professionals, for the treatment of a serious injury
or illness or during recovery from surgery. Medical conditions requiring acute care are typically periodic or
temporary in nature, rather than chronic.
Additional Drug Benefit List:
see Drug Maintenance List.
Administrative Services Only (ASO) Agreement:
A business contract under which an insurance company agrees to perform specific administrative duties for the
maintenance of a self-funded health insurance plan.
Admissions/1,000:
A statistic used by health insurance companies describing the number of hospital admissions for each 1000
persons covered under a health insurance plan within a given time period.
Admits:
Hospital admissions. A term used to describe the number of persons admitted to a hospital within a given period.
Adverse Selection:
The tendency of those who experience greater health risks to apply for and continue their coverage under any given
health insurance plan. When adverse selection increases, health insurance companies experience greater expenses
and may raise rates.
Age Change:
For insurance purposes, this is the date on which a person's age changes. Note that this may not correspond with
the individual's actual birthday, but may fall midway between birthdays. An age change may result in an increase in
rates.
Age Limits:
Ages below and above which an insurance company will not accept applications or renew policies.
Age/Sex Factor:
A factor employed by insurance companies in the underwriting process, used to determine a group's risk of
incurring medical costs, based on the ages and genders of the persons in that group.
Agent:
A state-licensed individual or entity representing one or more insurance companies. An agent solicits and facilitates
the sale of insurance contracts or policies and provides services to the policyholder on behalf of the insurer. See
also, Broker.

34. 34
Allied Health Personnel:
Also referred to as paramedical personnel, these are health workers (often licensed) who perform duties that would
otherwise be performed by physicians, optometrists, dentists, podiatrists, nurses and chiropractors.
Allowable Charge:
Also referred to as the Allowed Amount, Approved Charge or Maximum Allowable. See also, Usual, Customary and
Reasonable Charge. This is the dollar amount typically considered payment-in-full by an insurance company and an
associated network of healthcare providers. The Allowable Charge is typically a discounted rate rather than the
actual charge. It may be helpful to consider an example: You have just visited your doctor for an earache. The total
charge for the visit comes to $100. If the doctor is a member of your health insurance company's network of
providers, he or she may be required to accept $80 as payment in full for the visit - this is the Allowable Charge.
Your health insurance company will pay all or a portion of the remaining $80, minus any co-payment or deductible
that you may owe. The remaining $20 is considered provider write-off. You cannot be billed for this provider write-
off. If, however, the doctor you visit is not a network provider then you may be held responsible for everything that
your health insurance company will not pay, up to the full charge of $100.
This term may also be used within a Medicare context to refer to the amount that Medicare considers payment in
full for a particular, approved medical service or supply.
Allowable Costs:
Charges for healthcare services and supplies for which benefits are available under your health insurance plan.
Allowed Amount:
See Allowable Charge.
Alternate Delivery System:
Healthcare services or facilities which "deliver" care that is more cost-effective than that provided in a hospital.
Alternate Delivery Systems may include skilled nursing facilities, hospice programs and home health care services.
Alternative Medicine:
Any medical practice of form of treatment not generally recognized as effective by the medical community at large.
Alternative medicine may encompass a broad range of services and practices including acupuncture, homeopathy,
aromatherapy, naturopathy, etc.. Many insurance companies do not provide coverage for these services.
Ambulatory Care:
Medical care rendered on an outpatient basis and which may include diagnosis, certain forms of treatment, surgery
and rehabilitation. See also, Ambulatory Setting.

35. 35
Ambulatory Setting:
Medical facilities such as surgery centers, clinics and offices in which healthcare is provided on an outpatient basis.
Ancillary Fee:
An extra fee sometimes associated with obtaining prescription drugs which are not listed on a health insurance
plan's formulary of covered medications.
Ancillary Products:
Additional health insurance products (such as vision or dental insurance) that may be added to a medical insurance
plan for an additional fee.
Ancillary Services:
Supplemental healthcare services such as laboratory work, x-rays or physical therapy that are provided in
conjunction with medical or hospital care.
Annual limit:
Many health insurance plans place dollar limits upon the claims the insurer will pay over the course of a plan year.
Beginning September 23, 2010, PPACA phases annual dollar limits will be phased out over the next 3 years until
2014 when they will not be permitted for most plans. There is an exception to this phase out for Grandfathered
Plans. Except for Grandfathered Plans, beginning September 23, 2012 annual limits can be no lower than $2 million.
Except for Grandfathered Plans, beginning January 1, 2014, all annual dollar limits on coverage of essential health
benefits will be prohibited.
Application Fee:
The health insurance company may require a one-time application fee. Some insurance companies may refund this
fee if the application is not approved. See More Insurance Plan Details section for additional information.
Approved Charge:
See Allowable Charge.
Approved Health Care Facility or Program:
A medical facility or healthcare program (often organized through a hospital or clinic) that has been approved by a
health insurance plan to provide specific services for specific conditions.
Assignment of Benefits:
The payment of health insurance benefits to a healthcare provider rather than directly to the member of a health
insurance plan.

36. 36
Attending Physician Statement (APS):
A physician's assessment of a patient's state of health as outlined in office notes and test results compiled by the
physician. An APS may be requested by an insurance company in lieu of a medical examination in order to
determine the state of a health insurance applicant's health for underwriting purposes.
please note, however, that definitions of certain terms may vary across insurance companies.
Balance Billing:
The amount you could be responsible for (in addition to any co-payments, deductibles or coinsurance) if you use an
out-of-network provider and the fee for a particular service exceeds the allowable charge for that service.
Basic Hospital Expense Insurance:
See Hospitalization Insurance.
Bed Days/1,000:
A statistic used by health insurance companies describing the number of inpatient hospital days for each 1000
persons covered under a health insurance plan within a given time period.
Benefit:
A general term referring to any service (such as an office visit, laboratory test, surgical procedure, etc.) or supply
(such as prescription drugs, durable medical equipment, etc.) covered by a health insurance plan in the normal
course of a patient's healthcare.
Benefit Level:
The maximum amount a health insurance company agrees to pay for a specific covered benefit.
Benefit Package:
A description of the healthcare services and supplies that a health insurance company covers for members of a
specific health insurance plan.
Benefit Riders:
This term may be used to describe ancillary products purchased in conjunction with a medical insurance plan.
Benefit Year:
The annual cycle in which a health insurance plan operates. At the beginning of your benefit year, the health
insurance company may alter plan benefits and update rates. Some benefit years follow the calendar year, renewing
in January, whereas others may renew in late summer or fall.

37. 37
Binding Receipt:
When you submit an application for health insurance and include an initial payment, the health insurance company
may provide you with a binding receipt. A binding receipt indicates that, if coverage is approved, the health
insurance company is required to initiate coverage from the date on which payment was received.
Birthday Rule:
One method used by health insurance companies to determine which parent's health insurance coverage will be
primary for a dependent child, when both parents have separate coverage. Typically, the health insurance plan of
the parent whose birthday falls earliest in the year will be considered primary. For more information, see also, COB.
Board-certified:
A board-certified physician is one that has successfully completed an educational program and evaluation process
approved by the American Board of Medical Specialties, including an examination designed to assess the
knowledge, skills and experience required to provide quality patient care in a specific specialty.
Broker:
Though sometimes used in a sense synonymous with the term agent, a broker typically works to match applicants
with a health insurance company or plan best matched to their needs. The broker is paid a commission by the
insurance company, but represents the applicant rather than the insurance company itself.
Business License:
A license from a governmental agency authorizing an individual or an employer to conduct business.
Business Structure:
A state-designated legal structure that governs business taxes, liability, and operational requirements. Examples
include: sole proprietorship, partnership, corporation, or LLC.
COB (Coordination of Benefits):
This is the process by which a health insurance company determines if it should be the primary or secondary payer
of medical claims for a patient who has coverage from more than one health insurance policy. See also, Non-
duplication of Benefits.
Capitation:
A method of compensation sometimes employed by health insurance companies, in which payment is made to a
healthcare provider on a per-patient rather than a per-service basis. For example, under capitation an HMO doctor
may be paid a fixed amount each month to serve as the primary care physician for a specific number of HMO
members assigned to his or her care, regardivess of how little or how much care each member needs.

38. 38
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985):
Federal legislation allowing an employee or an employee's dependents to maintain group health insurance coverage
through an employer's health insurance plan, at the individual's expense, for up to 18 months in certain
circumstances. COBRA coverage may be extended beyond 18 months in certain circumstances. COBRA rules
typically apply when an employee loses coverage through loss of employment (except in cases of gross misconduct)
or due to a reduction in work hours. COBRA benefits also extend to spouses or other dependents in case of divorce
or the death of the employee. Children who are born to, adopted, or placed for adoption with the covered employee
while he or she is on COBRA coverage are also entitled to coverage. All companies that have averaged at least 20
full-time employees over the past calendar year must comply with COBRA regulations.
Carrier:
Any insurer, managed care organization, or group hospital plan, as defined by applicable state law.
Carry-over Provision:
A provision of some health insurance plans allowing medical expenses paid for by the member in the last three
months of the year to be carried over and applied toward the next year's deductible.
Case Management:
When a member requires a great deal of medical care, the health insurance company may assign the member to
case management. A case manager will work with the patient's healthcare providers to assist in the management of
the patient's long-term needs, with appropriate recommendations for care, monitoring and follow-up. A case
manager will also help ensure that the member's health insurance benefits are being properly and fully utilized and
that non-covered services are avoided when possible.
Centers for Medicare and Medicaid Services:
Formerly known as the Health Care Financing Administration, the Centers for Medicare and Medicaid Services (CMS)
is part of the federal government's Department of Health and Human Services, and is responsible for the
administration of the Medicare and Medicaid programs. The CMS establishes standards for healthcare providers that
must be complied with in order for providers to meet certain certification requirements.
Certificate of Coverage:
A document given to an insured that describes the benefits, limitations and exclusions of coverage provided by an
insurance company.
Chemical Dependency Inpatient:
Typically, chemical dependency inpatient services include services relating to the treatment of a chemical
dependency that requires a stay at a hospital or other medical facility.

39. 39
Chiropractic:
Typically, chiropractic services include services provided by a licensed chiropractor.
Chronic:
In healthcare and insurance terminology, a chronic condition is one that is permanent, recurring or long lasting, as
opposed to an acute condition.
Claim:
A bill for medical services rendered, typically submitted to the insurance company by a healthcare provider.
Coinsurance:
The amount that you are obliged to pay for covered medical services after you've satisfied any co-payment or
deductible required by your health insurance plan. Coinsurance is typically expressed as a percentage of the charge
or allowable charge for a service rendered by a healthcare provider. For example, if your insurance company covers
80% of the allowable charge for a specific service, you may be required to cover the remaining 20% as coinsurance.
Company:
The insurance company that is offering this health insurance plan.
Cost-sharing:
Health care provider charges for which a patient is responsible under the terms of a health plan. Common forms of
cost-sharing include deductibles, coinsurance, and co-payments. Balance-billed charges from out-of-pocket
physicians are not considered cost-sharing. Beginning in 2014, PPACA limits total cost-sharing to $5,950 for an
individual and $11,900 for a family. These amounts will be adjusted annually to reflect the growth of premiums.
Co-payment:
A specific charge that your health insurance plan may require that you pay for a specific medical service or supply,
also referred to as a "co-pay." For example, your health insurance plan may require a $15 co-payment for an office
visit or brand-name prescription drug, after which the insurance company often pays the remainder of the charges.
Date of Service:
The date on which a healthcare service was provided.

40. 40
Deductible:
A specific dollar amount that your health insurance company may require that you pay out-of-pocket each year
before your health insurance plan begins to make payments for claims. Not all health insurance plans require a
deductible. As a general rule (though there are many exceptions), HMO plans typically do not require a deductible,
while most Indemnity and PPO plans do.
Deductible Carry-over Credit:
See, Carry-over Provision
Department of Health and Human Services:
A department of the federal government responsible for certain social service functions, such as the administration
and supervision of the Medicare program.
Dependent Coverage:
Health insurance coverage extended to the spouse and unmarried children of the primary insured member. Certain
age restrictions on the coverage of children may apply.
Designated Mental Health Provider:
An organization hired by a health insurance plan to provide mental health and/or substance abuse treatment
services.
Drug Formulary:
A list of prescription medications selected for coverage under a health insurance plan. Drugs may be included on a
drug formulary based upon their efficacy, safety and cost-effectiveness. Some health insurance plans may require
that patients obtain preauthorization before non-formulary drugs are covered. Other health insurance plans may
require that a patient pay a greater share or all of the cost involved in obtaining a non-formulary prescription.
Drug Maintenance List:
A list of commonly prescribed drugs intended for patients' ongoing or long-term use.
Drug Utilization Review (DUR):
The process by which health insurance companies evaluate or review the use of prescription drugs for
appropriateness in the treatment of a patient.
Durable Medical Equipment (DME):
Medical equipment used in the course of treatment or home care, including such items as crutches, knee braces,
wheelchairs, hospital beds, prostheses, etc.. Coverage levels for DME often differ from coverage levels for office
visits and other medical services.

41. 41
ERISA (Employment Retiree Income Security Act of 1974):
Federal legislation designed to protect the rights of retirees and beneficiaries of benefit plans offered by employers.
Effective Date:
The date on which health insurance coverage comes into effect.
Eligibility Date:
The date on which a person becomes eligible for insurance benefits.
Eligibility Requirements:
Conditions that must be met in order for an individual or group to be considered eligible for insurance coverage.
Eligible Dependent:
A dependent (usually spouse or child) of an insured person who is eligible for insurance coverage.
Eligible Employee:
An employee who is eligible for insurance coverage based upon the stipulations of the group health insurance plan.
Eligible Expenses:
Expenses defined by the health insurance plan as eligible for coverage.
Eligible Person:
This term is used to designate a person who is eligible for insurance coverage even though he or she may not be an
employee, but rather a member of an organization or union.
Emergency Room:
Typically, emergency room services include all services provided when a patient visits an emergency room for an
emergency condition. An emergency condition is any medical condition of recent onset and severity, including but
not limited to severe pain, that would lead to a prudent layperson, possessing an average knowledge of medicine
and health, to believe that his or her condition, sickness, or injury is of such a nature that failure to obtain
immediate medical care could result in placing the patient's health in serious jeopardy, serious impairment to bodily
functions, or serious dysfunction of bodily organ or part.
Employee Certificate of Insurance:
See Certificate of Coverage.

42. 42
Employee Contribution:
The portion of the health insurance premium paid for by the employee, usually deducted from wages by the
employer.
Employer Contribution:
The portion of an employee's health insurance premium paid for by the employer.
Employer Wage and Tax Statement:
An employer tax reporting statement submitted to the applicable governmental agency to establish and report the
employer's tax responsibilities.
Enrollee:
An eligible person or eligible employee who is enrolled in a health insurance plan. Dependents are not referred to as
enrollees.
Enrollment:
The process through which an approved applicant is signed up with the health insurance company and coverage is
made effective. This term may also be used to describe the total number of enrollees in a health insurance plan.
Enrollment Period:
The period of time during which an eligible employee or eligible person may sign up for a group health insurance
plan.
EPO (Exclusive Provider Organization):
An EPO is a Exclusive Provider Organization. As a member of an EPO, you can use the doctors and hospitals within
the EPO network, but cannot go outside of the network for care. There are no out-of-network benefits.
Essential Benefits:
PPACA requires all health insurance plans sold after 2014 to include a basic package of benefits including
hospitalization, outpatient services, maternity care, prescription drugs, emergency care, and preventive services
among other benefits. It also places restrictions on the amount of cost-sharing that patients must pay for these
services.
Estimated Cost:
The amount quoted is an estimated cost of the health plan, which is subject to change based on your medical
history, the underwriting practices of the health plan, the optional benefits you selected, if any, and other relevant
factors. It may be the sum of estimated premiums and other recurring charges, if the insurance company has such
charges.

43. 43
Evidence of Insurability:
When applying for an individual health insurance plan, an applicant may be asked to confirm his or her health
condition in writing, through a questionnaire or through a medical examination. When applying for group health
insurance, evidence of insurability is only required in specific cases (for instance, when a person fails to enroll in the
group plan during the enrollment period).
Examination:
In health insurance usage, this generally refers to a medical examination performed as part of an application for a
life or health insurance plan. See, Evidence of Insurability.
Exclusions:
Specific conditions, services or treatments for which a health insurance plan will not provide coverage.
Experimental or Investigational Procedures:
Any healthcare services, supplies, procedures, therapies or devices the effectiveness of which a health insurance
company considers unproven. These services are generally excluded from coverage.
Explanation of Benefits (EOB):
A statement sent from the health insurance company to a member listing services that were billed by a healthcare
provider, how those charges were processed, and the total amount of patient responsibility for the claim.
Extended Coverage:
A provision of some health insurance plans allowing for coverage of certain healthcare services after the member is
no longer covered on the plan. For example, a member's maternity benefits may be extended beyond the expected
end of coverage if the woman was already receiving covered maternity services.
Extension of Benefits:
A provision of some health insurance plans allowing for coverage to be extended beyond a scheduled termination
date. The extended coverage is made available only when the member is disabled or hospitalized as of the intended
termination date, and continues only until the patient leaves the hospital or returns to work.
Fee-For-Service Plan:
See Indemnity Plan.

44. 44
Gatekeeper:
A term used to describe the role of the primary care physician in an HMO plan. In an HMO plan, primary care
physicians serves as the patient's main point of contact for healthcare services and refer patients to specialists for
specific needs.
Generic Drug:
A drug which is exactly the same as a brand name prescription drug, but which can be produced by other
manufacturers after the brand name drug's patent has expired. Generic drugs are usually less expensive than brand
name drugs.
Grace Period:
A time period after the payment due date, during which insurance coverage remains in force and the policyholder
may make a payment without penalty.
Grandfathered plan:
Health insurance coverage that existed as of March 23, 2010 that is subject only to certain provisions of thePPACA.
Any policy sold in the individual health insurance market after March 23, 2010 will not be grandfathered even if the
product sold was offered before that date. New employees may be added to group plans that are grandfathered,
and new family members may be added to all grandfathered plans. If you're not sure whether you have a
Grandfathered plan, please contact the plan directly.
Grievance Procedure:
The procedure by which a member or healthcare provider is allowed to file a complaint with a health insurance
company and seek a remedy.
Group:
A number of individuals covered under a single health insurance contract, usually a group of employees.
Group Health Insurance:
A health insurance plan that provides benefits for employees of a business or members of an organization, as
opposed to individual and family health insurance.
Guaranteed Issue:
A term used to describe insurance coverage that must be issued regardivess of health status. In most states, group
health insurance plans are often described as guaranteed issue plans, because a health insurance company
generally cannot refuse coverage to a qualifying business or organization based on the health status of their
employees or members. In some states, all health insurance plans are guaranteed issue.

45. 45
HIPAA (Health Insurance Portability and Accountability Act of 1996):
Legislation mandating specific privacy rules and practices for medical care providers and health insurance
companies, designed to streamline the healthcare and insurance industries and to protect the privacy and identity
of healthcare consumers. HIPAA also provides additional protections for consumers, designed to help them obtain
or retain health insurance coverage in certain circumstances. For more information on HIPAA rules and regulations.
HMO:
HMO means "Health Maintenance Organization." HMO plans offer a wide range of health care services through a
network of providers that contract exclusively with the HMO, or who agree to provide services to members at a pre-
negotiated rate. As a member of an HMO, you will need to choose a primary care physician ("PCP") who will provide
most of your health care and refer you to HMO specialists as needed. Some HMO plans require that you fulfill a
deductible before services are covered. Others only require you to make a copayment when services are rendered.
Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in the
case of an emergency.
An HMO may be right for you if:
You're willing to play by the rules and coordinate your care through a primary care physician
You're looking for comprehensive benefits at a reasonable monthly premium
You value preventive care services: coverage for checkups, immunizations and similar services are often
emphasized by HMOs
HSA (Health Savings Account):
A tax advantaged savings account to be used in conjunction with certain high-deductible (low premium) health
insurance plans to pay for qualifying medical expenses. Contributions may be made to the account on a tax-free
basis. Funds remain in the account from year to year and may be invested at the discretion of the individual owning
the account. Interest or investment returns accrue tax-free. Penalties may apply when funds are withdrawn to pay
for anything other than qualifying medical expenses.
Health Care Financing Administration (HCFA):
See the Centers for Medicare and Medicaid Services (CMS).
Health Service Agreement:
An agreement between an employer and a health insurance company outlining benefits, enrollment procedures,
eligibility standards, etc.
Home Health Agency:
A certified healthcare agency that provides home health care services. See, Home Health Care.
Home Health Care:

46. 46
High Deductible Health Plan (HDHP):
A type of health insurance plan that, compared to traditional health insurance plans, requires greater out-of-pocket
spending, although premiums may be lower. In 2010, an HSA-qualifying HDHP must have a deductible of at least
$1,200 for single coverage and $2,400 for family coverage. The plan must also limit the total amount of out-of-
pocket cost-sharing for covered benefits each year to $5,950 for single coverage and $11,900 for families.
Hospice Care:
Care rendered either on an inpatient basis or in the home setting for a terminally ill patient. Often referred to as
"palliative" or "supportive" care, hospice care emphasizes the management of pain and discomfort and the
emotional support of the patient and family. See also, Respite Care.
Hospital Benefits:
Benefits payable for hospital room and board and other miscellaneous charges resulting from hospitalization.
Hospitalization:
Typically, hospitalization services include services related to staying at a hospital for either scheduled procedures,
accidents or medical emergencies. Hospitalization services typically do not include hospital stays for giving birth to
a child.
Hospitalization Insurance:
Insurance intended to provide coverage in case of hospitalization, including benefits for room and board and
miscellaneous expenses, within certain limitations.
IPA (Individual Practice Association):
An organization of physicians who may maintain separate offices but who negotiate contracts with insurance
companies and medical facilities as a group. Some health insurance applications will ask you to provide your
primary care physician's IPA number. It can usually be found in the health insurance plan's online directory.
In-area Services:
Healthcare services rendered within a health insurance plan's coverage area.
Incontestable Clause:
A provision in an insurance policy that states that the validity of the insurance contract cannot be contested after
two (or sometimes three) years.

47. 47
Indemnity Plan:
Also called "fee-for-service" plans, Indemnity plans typically allow you to direct your own health care and visit
whatever doctors or hospitals you like. The insurance company then pays a set portion of your total charges. You
may be required to pay for some services up front and then apply to the insurance company for reimbursement.
Indemnity plans typically require that you fulfill an annual deductible. Because of the freedom they allow members,
Indemnity plans are sometimes more expensive than other types of plans.
An Indemnity plan may be right for you if:
You want the greatest level of freedom possible in choosing which doctors or hospitals to visit
You don't mind coordinating the billing and reimbursement of your claims yourself
Individual and Family Health Insurance:
A type of health insurance purchased by an individual or family, independent of any employer group or
organization. In most states, a health insurance company may decline coverage for an individual or family health
insurance plan based on the medical conditions or health histories of the applicants or dependents.
Infertility:
Typically, infertility services include any medical services, both inpatient and outpatient, to assist with the
conception of child.
Inpatient:
A term used to describe a person admitted to a hospital for at least 24 hours. It may also be used to describe the
care rendered in a hospital when the duration of the stay is at least 24 hours.
Integrated Delivery System:
A group of doctors, hospitals and other providers who work together to deliver a broad range of healthcare services.
Intermediate Care:
A level of nursing care, considered less intensive than skilled nursing care, but which may be rendered in a skilled
nursing or intermediate care facility.
Lab/X-Ray:
Typically, lab/x-ray is any diagnostic lab test or diagnostic/therapeutic x-ray performed in support of basic health
services. Lab services typically include services like blood panels and urinalysis. X-ray services typically include
basic outpatient skeletal or other plain film x-ray, outpatient ultrasound, GI series, MRI, and CT scan. Prostate
cancer screening, mammograms, and pap smears may be covered by Lab/X-Ray benefit, or they may be covered by
Periodic OB-GYN benefit or Preventative Care benefits. Typically, dental x-rays are not included in Lab/X-ray
benefits.

48. 48
Lapse:
The termination of insurance coverage due to lack of payment after a specific period of time.
Length of Stay (LOS):
The total number of days that a patient stays in a facility such as a hospital.
Lifetime Limit:
Many health insurance plans place dollar limits upon the claims that the plan will pay over the course of an
individual's life. PPACA prohibits lifetime limits on the dollar value of benefits deemed essential by the Department
of Health and Human Services, for plan or policy years beginning on Sept. 23, 2010.
Lifetime Maximum:
Lifetime maximum or lifetime limits refers to the maximum dollar amount that a health insurance company agrees
to pay on behalf of a member for covered services during the course of his or her lifetime. For plan or policy years
beginning on or after Sept. 23, 2010, plans may not establish any lifetime limit on the dollar amount of benefits for
any individual. All plans are required by PPACA to remove the lifetime maximum restrictions.
Limitations:
A term referring to any maximums that a health insurance plan imposes on specific benefits.
Long-term Care:
Care provided on a continuing basis for the chronically ill or disabled. Long-term care may be provided on an
inpatient basis (at a long-term care facility) or in the home setting.
MSA (Medical Savings Account):
A tax-advantaged personal savings account used in conjunction with a high-deductible health insurance plan. MSAs
are currently being phrased out and replaced with HSAs. See HSA.
Major Medical Insurance:
A type of medical insurance plan that provides benefits for a broad range of healthcare services, both inpatient and
outpatient. Major medical insurance plans often carry a high deductible.
Managed Care:
A general term used to describe a variety of healthcare and health insurance systems that attempt to guide a
member's use of benefits, typically by requiring that a member coordinate his or her healthcare through a primary
care physician, or by encouraging the use of a specific network of healthcare providers. The management of
healthcare is intended to keep costs -and monthly premiums- as low as possible. There are several different types
of managed care health insurance plans, including HMO, PPO, and POS plans

49. 49
Maternity (Inpatient):
Typically, inpatient maternity services include hospitalization and physician fees associated with the birth of a child.
Maternity (Outpatient):
Typically, outpatient maternity services include OB-GYN office visits during pregnancy and immediately after giving
birth.
Maternity Coverage:
Maternity coverage means the insurance covers part or all of the medical cost during a woman's pregnancy.
Coverage is broken down into inpatient and outpatient services. Typically, inpatient coverage includes
hospitalization and physician fees associated with child birth. Outpatient coverage pays for prenatal and postnatal
OB-GYN office visits.
Maximum Allowable:
See Allowable Charge.
Max Duration:
Maximum duration is the longest coverage period offered by the plan.
You should choose a plan which has a coverage period which will safely cover your insurance needs while you are
waiting for a standard long-term policy to begin. You should apply for short-term coverage only if you know with
certainty that you will have standard, long-term coverage (or coverage through an employer) at a future date.
Maximum Out-Of-Pocket Costs:
An annual limitation on all cost-sharing for which patients are responsible under a health insurance plan. This limit
does not apply to premiums, balance-billed charges from out of network health care providers or services that are
not covered by the plan.
Medicaid:
A state-funded healthcare program for low income and disabled persons.
Medical Necessity:
A basic criterion used by health insurance companies to determine if healthcare services should be covered. A
medical service is generally considered to meet the criteria of medical necessity when it is considered appropriate,
consistent with general standards of medical care, consistent with a patient's diagnosis, and is the least expensive
option available to provide a desired health outcome. Of course, preventive care services that may be covered under
a health insurance plan are not always subject to the criteria of medical necessity.

50. 50
Medicare:
A national, federally-administered health insurance program authorized in 1965 to cover the cost of hospitalization,
medical care, and some related health services for most people over age 65 and certain other eligible individuals.
Medicare Beneficiary:
Anyone entitled to Medicare benefits based on the rules for eligibility outlined by the Social Security Administration.
Medicare Supplement Insurance:
Health insurance provided to an individual or group that is intended to help fill in the gaps in the coverage provided
by Medicare.
Member:
Anyone covered under a health insurance plan, an enrollee or eligible dependent.
Mental Health Inpatient:
Typically, mental health inpatient refers to services rendered when a patient stays at a hospital or other medical
facility for treatment of a mental health condition.
Mental Health Office Visits:
Typically, mental health office visits include visits to a licensed medical provider for treatment of a mental health
condition.
National Association of Insurance Commissioners (NAIC):
The NAIC is a national association of state officials charged with regulating insurance. The NAIC was formed to help
provide some measure of national uniformity in insurance regulation.
National Drug Code (NDC):
A system employed by healthcare providers and insurance companies for classifying and identifying drugs. Each
prescription drug in common use is assigned an NDC number.
Network:
A "Network" plan is a variation on a PPO plan. With a Network plan you'll need to get your medical care from doctors
or hospitals in the insurance company's network if you want your claims paid at the highest level. You will probably
not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it's
up to you to make sure that the health care providers you visit participate in the network. Services rendered by out
of network providers may not be covered or may be paid at a lower level.

51. 51
Network Provider:
A healthcare provider who has a contractual relationship with a health insurance company. Among other things, this
contractual relationship may establish standards of care, clinical protocols, and allowable charges for specific
services. In return for entering into this kind of relationship with an insurance company, a healthcare provider
typically gains in numbers of patients and a primary care physician may receive a capitation fee for each patient
assigned to his or her care.
Non-duplication of Benefits:
See, COB.
Nursing Home:
A licensed facility which provides general nursing care to those who are chronically ill or who require constant
supervision and assistance with the needs of daily living.
Office Visit:
An office visit is the amount you pay when you see the doctor or dentist for routine care.
Examples for $100 office visit:
If the plan's office visit is $25, then you pay $25.
If the plan's office visit is 30% before deductible, then you pay $30.
If the plan's office visit is 35% after deductible, then, if you have not yet reached your deductible, you pay $100; if
you have reached your deductible you pay $35.
Select higher amounts to lower your monthly premiums.
Office Visit (IFP):
Typically, an office visit is an outpatient visit to a physician's office for illness or injury.
Open Enrollment Period:
A time period during which eligible persons or eligible employees may opt to sign up for coverage under a group
health insurance plan. During an open enrollment period, applicants typically will not be required to provide
evidence of insurability.
Out-of-network Care:
Healthcare rendered to a patient outside of the health insurance company's network of preferred providers. In many
cases, the health insurance company will not pay for these services.
Out-of-pocket Costs:
See Maximum Out-of-pocket Costs.

52. 52
Out-of-Pocket Maximum:
See Maximum Out-of-pocket Costs.
Outpatient:
A term referring to a patient who receives care at a medical facility but who is not admitted to the facility overnight,
or for 24 hours or less. The term may also refer to the healthcare services that such a patient receives.
Outpatient Surgery:
Typically, outpatient surgery is defined as any surgical procedure that does not require an overnight stay in a
hospital.
Over-the-counter (OTC) Drugs:
Drugs that may be obtained without a prescription.
POS:
POS stands for "Point of Service." POS plans combine elements of both HMO and PPO plans. As a member of a POS
plan, you may be required to choose a primary care physician who will then make referrals to specialists in the
health insurance company's network of preferred providers. Care rendered by non-network providers will typically
cost you more out of pocket, and may not be covered at all.
PPO:
PPO means "Preferred Provider Organization." Like the name implies, with a PPO plan you'll need to get your medical
care from doctors or hospitals on the insurance company's list of preferred providers if you want your claims paid at
the highest level. You will probably not be required to coordinate your care through a single primary care physician,
as you would with an HMO, but it's up to you to make sure that the health care providers you visit participate in the
PPO. Services rendered by out of network providers may not be covered or may be paid at a lower level. A broad
variety of PPO plans are available, many with low monthly premiums.
Part-Time Employee:
For the purposes of qualifying for group health insurance, a part-time employee is one working between 20-29
hours per week.
Partial Disability:
A condition in which, as the result of an illness or injury, a group health insurance member cannot perform all the
duties of his or her occupation, but can perform some. Exact definitions differ between health insurance plans.
Partial Hospitalization Services:
Also referred to as "partial hospital days," this is a healthcare term used to refer to outpatient services performed in
a hospital setting as an alternative or follow-up to inpatient mental health or substance abuse treatment.

53. 53
Participating Provider:
Generally, this term is used in a sense synonymous with Network Provider. However, not all healthcare providers
contract with health insurance companies at the same level. Some providers contracting with insurers at lower levels
may sometimes be referred to as "participating providers" as opposed to "preferred providers."
Peer Review:
This term refers to the process by which a physician or team of healthcare specialists review the services, course of
medical treatment, or the conclusions of a scientific medical study conducted by another physician or group of
medical experts. Peer review must be provided by a physician or team of medical experts with training and
expertise equal to the physician or team conducting the treatment or research in question.
Periodic Health Exam:
Typically, a periodic health exam is an exam that is occurs on a regular basis for preventative purposes, like a
routine physical or annual check-up.
Periodic OB-GYN Exam:
Typically, a periodic OB-GYN exam is a routine OB-GYN exam that occurs on a regular basis, typically for
preventative purposes, like a PAP smear.
Physical Therapy:
Typically, physical therapy services include rehabilitative services provided by a licensed physical therapist to help
restore bodily functions such as walking, speech, the use of limbs, etc.
Place of Service:
The type of facility in which healthcare services were provided, whether it be the home, hospital, clinic, office, etc..
Plan Name:
The name of the health plan offered by the insurance company.
Plan Type: PPO
PPO means "Preferred Provider Organization." Like the name implies, with a PPO plan you'll need to get your medical
care from doctors or hospitals on the insurance company's list of preferred providers if you want your claims paid at
the highest level. You will probably not be required to coordinate your care through a single primary care physician,
as you would with an HMO, but it's up to you to make sure that the health care providers you visit participate in the
PPO. Services rendered by out of network providers may not be covered or may be paid at a lower level. A broad
variety of PPO plans are available, many with low monthly premiums.

54. 54
HMO
HMO means "Health Maintenance Organization." HMO plans offer a wide range of health care services through a
network of providers that contract exclusively with the HMO, or who agree to provide services to members at a pre-
negotiated rate. As a member of an HMO, you will need to choose a primary care physician ("PCP") who will provide
most of your health care and refer you to HMO specialists as needed. Some HMO plans require that you fulfill a
deductible before services are covered. Others only require you to make a copayment when services are rendered.
Health care services obtained outside of the HMO are typically not covered, though there may be exceptions in the
case of an emergency.
An HMO may be right for you if:
You're willing to play by the rules and coordinate your care through a primary care physician
You're looking for comprehensive benefits at a reasonable monthly premium
You value preventive care services: coverage for checkups, immunizations and similar services are often
emphasized by HMOs
Network
A "Network" plan is a variation on a PPO plan. With a Network plan you'll need to get your medical care from doctors
or hospitals in the insurance company's network if you want your claims paid at the highest level. You will probably
not be required to coordinate your care through a single primary care physician, as you would with an HMO, but it's
up to you to make sure that the health care providers you visit participate in the network. Services rendered by out
of network providers may not be covered or may be paid at a lower level.
POS
POS stands for "Point of Service." POS plans combine elements of both HMO and PPO plans. As a member of a POS
plan, you may be required to choose a primary care physician who will then make referrals to specialists in the
health insurance company's network of preferred providers. Care rendered by non-network providers will typically
cost you more out of pocket, and may not be covered at all.
EPO (Exclusive Provider Organization).
An EPO is a Exclusive Provider Organization. As a member of an EPO, you can use the doctors and hospitals within
the EPO network, but cannot go outside of the network for care. There are no out-of-network benefits.
Policy Form Number:
A unique number that identifies each health insurance policy filed with a state's department of insurance.
Policy Term:
The period of time for which a health insurance policy provides coverage.

55. 55
PPACA:
On March 23, 2010, President Obama signed the Patient Protection and Affordable Care Act (PPACA) into law.
Legislation (Public Law 111-148), commonly referred to as the health reform law. Among other things, the new law
requires that all Americans maintain minimum essential coverage starting in 2014. At that time, health insurance
companies will not be able to deny insurance coverage to individuals based on a pre-existing condition.
Practical Nurse:
A licensed nurse who provides "custodial" care services, such as assistance in walking, bathing, feeding, etc..
Practical nurses do not administer medications or perform other strictly medical services.
Pre-Admission Authorization:
See Preauthorization/Precertification .
Preauthorization/Precertification:
These are terms that are often used interchangeably, but which may also refer to specific processes in a health
insurance or healthcare context.
1) Most commonly, "preauthorization" and "precertification" refer to the process by which a patient is pre-approved
for coverage of a specific medical procedure or prescription drug. Health insurance companies may require that
patients meet certain criteria before they will extend coverage for some surgeries or for certain drugs. In order to
pre-approve such a drug or service, the insurance company will generally require that the patient's doctor submit
notes and/or lab results documenting the patient's condition and treatment history.
2) The term "precertification" may also be used to the process by which a hospital notifies a health insurance
company of a patient's inpatient admission. This may also be referred to as "pre-admission authorization."
Pre-existing Condition:
A health problem that existed or was treated before the effective date of your health insurance coverage. Most
health insurance contracts have a pre-existing condition clause that describes conditions under which the health
insurance company will cover medical expenses related to a pre-existing condition. For more information, see
also Pre-existing Condition Exclusion.
Pre-existing Condition Exclusion:
see Pre-existing Condition. In some cases, a health insurance company may exclude a patient's pre-existing
conditions from coverage under a new health insurance plan. This is more typical with individual and family health
insurance plans and less common with group health insurance plans. HIPAA legislation imposes certain limitations
on when a health insurance company can exclude coverage for a pre-existing condition. PPACA prohibits pre-
existing condition exclusions for all plans beginning January 2014 and prohibits pre-existing condition exclusions
for all children under the age of 19 in new policies sold on or after September 23, 2010.

56. 56
Premium:
The total amount paid to the insurance company for health insurance coverage. This is typically a monthly charge.
Within the context of group health insurance coverage, the premium is paid in whole or in part by the employer on
behalf of the employee or the employee's dependents.
Prescription Medication:
A drug that may be obtained only with a doctor's prescription and which has been approved by the Food and Drug
Administration.
Prescription Drug Coverage:
Prescription drug coverage varies by carrier and plan type. Typically, prescription drugs are covered in one of the
two ways below:
- Insurance covers a percentage after plan deductible is met.
- Insurance covers cost of the drug but a copay is required with prescription.
Preventive benefits:
Covered services that are intended to prevent disease or to identify disease while it is more easily treatable.
PPACA requires insurers to provide coverage for certain preventive benefits without deductibles, co-payments, or
coinsurance. This rule does not apply to Grandfathered Plans. HHS is continuing to update what it defines as
Preventative Benefits.
Preventive Care:
Medical care rendered not for a specific complaint but focused on prevention and early-detection of disease. This
type of care is best exemplified by routine examinations and immunizations. Some health insurance plans limit
coverage for preventive care services, while others encourage such services. Note that well-baby care,
immunizations, periodic prostate exams, pap smears and mammograms, though considered preventive care, may
be covered even if your health insurance plan limits coverage for other preventive care services.
Primary Care:
Basic healthcare services, generally rendered by those who practice family medicine, pediatrics or internal medicine.
Primary Care Physician (PCP):
A patient may be required to choose a primary care physician (PCP). A primary care physician usually serves as a
patient's main healthcare provider. The PCP serves as a first point of contact for healthcare and may refer a patient
to specialists for additional services.
Primary Coverage:
If a person is covered under more than one health insurance plan, primary coverage is the coverage provided by the
health insurance plan that pays on claims first. See also, COB.