The health care system in the United States can be complex and confusing. A myriad of factors both obvious and subtle contribute to health care products and services that vary in quality, service, and cost from person to person and among geographic areas. By understanding some of the factors that affect the care you receive and knowing how to navigate the increasingly complex health care system, you can make better decisions and ultimately receive better care.
| Ambulatory care |
Health care services that do not require a hospital stay, such as those delivered in a doctor’s office, clinic, or day surgery center. Assignment of benefits: When you assign benefits, you sign a document allowing your hospital or doctor to collect your health insurance benefits directly from your health carrier. Otherwise, you pay for the treatment and the insurance company reimburses you. |
| Benefits |
The amount of money payable by an insurance company to a claimant, assignee, or beneficiary under the insurance policy. Capitation: Capitation represents a set dollar limit that a health maintenance organization (HMO) pays to your primary care physician for providing medical treatment to you and your dependents. This fee is usually paid to the physician on a monthly basis. The physician gets no more or less than this set fee, no matter how much or how little you use her services. |
| Case management |
A technique that insurance companies and HMOs use to ensure that individuals receive appropriate, timely, and reasonable health care services. Claim: A request by an individual (or his or her provider) to an individual’s insurance company for the insurance company to pay for services obtained from a health care professional. Coinsurance: The money that an individual is required to pay for services, after a deductible has been paid. In some health plans, coinsurance is called a “copayment.” Coinsurance is often a specified percentage of the charges. For example, the employee pays twenty percent of the charges and the health plan pays eighty percent. |
| Copayment |
An arrangement where an individual pays a specified amount for various health care services and the health plan or insurance company pays the remainder. The individual must usually pay his share when the service is rendered. This concept is similar to coinsurance, except copayments are usually set dollar amounts (such as $10 per office visit), rather than a percentage of the charges. |
| Deductible |
A set dollar amount that a person must pay before insurance coverage for medical expenses can begin. Deductibles are typically charged on an annual basis. |
| Denial of claim |
Refusal by an insurance company to pay a request submitted by an individual (or his or her provider) to pay for health care services obtained from a health care professional. |
| Employee assistance program (EAP) |
Mental health counseling services that are sometimes offered by insurance companies or employers. Typically, individuals or employers do not have to pay directly for services provided through an employee assistance program. |
| Exclusions and limitations |
Specific conditions or circumstances for which an insurance policy or plan will not provide coverage (exclusions), or for which coverage is specifically limited (limitations). |
| Health Maintenance Organization (HMO) |
Prepaid, or capitated, health care plans in which individuals pay a monthly fee to be a member of the HMO, as well as small fees or copayments for specified health care services. Services are provided by physicians and allied health care personnel who are employed by or under contract with the HMO. HMOs vary in design, and depending on the model, services may be provided in a central facility, or in an individual physician’s office. HMOs are available to both individuals and employer groups. |
| Indemnity plans |
Indemnity health plans are also called “fee-for-service” plans. These types of plans primarily existed before the rise of HMOs and PPOs. The individual pays a pre-determined percentage of the cost of health care services, and the insurance company (or self-insured employer) pays the other remaining charges. Fees for services are defined by individual providers, and therefore vary from physician to physician. Indemnity health plans allow individuals to choose their own health care professionals - there are no provider networks from which to choose. |
| Independent Practice Association (IPA) |
A group of independent practicing physicians who band together for the purpose of contracting with HMOs, PPOs, and insurance companies for their services. |
| In-network |
Typically refers to physicians, hospitals, or other health care providers who contract with the insurance plan (usually an HMO or PPO) to provide services to its members. Coverage for services received from in-network providers will typically be greater than for services received from out-of network providers, depending on the plan. |
| Long-term care insurance |
Insurance policies that cover the costs of providing nursing care, home health care services, and custodial care for the aged and infirm. |
| Managed care |
A system of health care delivery that is characterized by arrangements with selected providers, ongoing quality control and utilization review programs, and financial incentives for members to use providers and procedures covered by the plan. |
| Maximum benefit |
The maximum dollar amount that an insurance company will pay for claims, either for a specific service or procedure, or during a specified period of time. Most PPO plans have a lifetime maximum benefit, which is the maximum amount of money an insurance company will pay for treatment if an individual during her lifetime. In addition, many plans have maximum benefits for particular services, for example, limiting coverage for treatment of infertility to $10,000. |
| Medically necessary |
A term used to describe the supplies and services needed to diagnose and treat a medical condition in accordance with the standards of good medical practice. Many health plans will pay only for treatment that is deemed medically necessary. For example, most plans will not cover elective cosmetic surgery. |
| Out-of-network |
Typically refers to physicians, hospitals, or other health care providers who do not contract with the insurance plan (usually an HMO or PPO) to provide services to its members. Depending upon the insurance plan, expenses incurred for services provided by out-of-network providers might not be covered, or coverage may be less than what it would be for in-network providers. |
| Out-of-pocket maximum |
The total amount paid each year by the member for the deductible and coinsurance. After reaching the out-of-pocket maximum, the plan pays 100% of the allowable charges for covered services for the rest of that calendar year. |
| Point-of-service plan |
A type of HMO that allows the patient to see either in-network or out-of network providers. However, the patient pays more out of pocket when she uses an out-of-network provider. In these instances, the patient pays a higher coinsurance percentage, and the charges are often subject to a deductible and copayment. |
| Pre-admission certification |
Also called precertification or pre-admission review. Approval by a case manager or insurance company representative (usually a nurse) for a person to be admitted to a hospital or inpatient facility granted before admittance. The individual must obtain preadmission certification, however the physician will sometimes contact the appropriate individual. The goal of preadmission certification is to ensure that individuals are not exposed to inappropriate health care services, or services that are not medically necessary. |
| Pre-existing condition |
Any medical condition that was diagnosed or treated within a specified period immediately before a health insurance policy becomes effective. These conditions may not be covered for a specific period of time under the new policy (usually six to twelve months), however, federal legislation stipulates that an individual only needs to satisfy the pre-existing condition waiting period once, as long as they maintain group health coverage. |
| Preferred Provider Organization (PPO) |
A type of managed care plan in which doctors and hospitals agree to provide discounted rates to plan members. PPOs usually do not exercise tight management over medical care and do not use primary care physicians to coordinate care. Patients are typically reimbursed 80% to 100% for treatment received within the network, versus 50% to 70% for treatment received outside of the network. |
| Primary care physician (PCP) |
A health care professional who is responsible for monitoring an individual’s overall health care needs. Typically, a PCP serves as a gatekeeper for an individual’s medical care, referring her to specialists and admitting her to hospitals when needed. |
| Reasonable and customary charges |
The commonly charged or prevailing fees for health services within a geographic area. If charges are higher than what an insurance carrier considers reasonable and customary, the carrier will not pay the full amount and instead will pay what is deemed reasonable and customary for the particular service. The remaining charges are then the responsibility of the patient. |
| Self-insured |
A health benefits plan in which the employer is at risk for the cost of its employees’ health care. Typically, a third party provides administrative services for the plan to the employer group. |
| Waiting period |
A period of time in which your health plan does not provide coverage for a particular pre-existing condition. |
| Waiver |
A rider or amendment to a policy that restricts benefits by excluding certain medical conditions from coverage. |
| Back to top |
