Glossary

Admitting Privileges: The right of a doctor to admit patients to a particular hospital or medical facility.

Agent: A licensed insurance-company representative who solicits, negotiates, and effects insurance contracts, and who serves the policyholders for the insurer.

Attending Physician’s Statement: A statement from the physician who treated or is treating the insured individual.

Basic Hospital: Insurance that covers only inpatient care (in a hospital or other medical facility).

Benefit Schedule: In a group insurance plan, the list of coverage amounts for each class of insured individuals.

Benefits: Payments made by an insurance company after it approves an insurance claim.

Binder: A document that provides temporary coverage until a policy is written and delivered.

Birthday Rule: When both parents have insurance, benefits for dependent children are paid by the plan of the parent whose birthday occurs first in the year.

Break in Service: Amount of time between leaving a company and returning to work at the same company; used in calculating benefits for employees who take a leave of absence, short-term disability, or some other extended period of unemployment.

Business Insurance: Insurance that’s geared for businesses rather than individuals.

Buyer’s Guide: A consumer’s guide to life insurance. In some states, insurance companies must supply a copy to every applicant.

Cafeteria Plan: See Flexible Benefits Plan.

Cancelable Policy: An insurance policy that can be terminated at any time by the insurer.

Carry-Over Provision: A provision stating that expenses incurred at the end of a benefit period – usually the last three months of the year –  that apply to the deductible, may also be applied to the next period’s deductible. This protects the insured individual from having to pay a double deductible simply because an injury or illness occurred at the end of a period.

Cash Value: The amount of money due the policyholder if their insurance policy lapses or is cancelled.

Claim: A request by a claimant submitted to the insurance company to compensate for a loss incurred.

Claim Frequency Rate: The percentage of insureds who file claims, or the number of claims filed during a calendar period; this rate is used to calculate premiums.

Claimant: The party requesting payment of benefits according to the insurance policy.

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985): Federal law that requires companies with 20 or more employees to offer individuals who would otherwise lose their insurance coverage (e.g., through termination) the option to continue their group healthcare coverage.  Some states require compliance from companies with as few as two employees.

Coinsurance: A provision by which the insured individual shares in the cost of certain expenses.  The same as ’Co-payment’.

COLA (Cost of Living Adjustment): Increases in benefits based on increases in the cost of living.

Consumer Report: A report on an individual’s credit history or other personal information; regulated under the Fair Credit Reporting Act.

Conversion Privilege: The right of an insured individual to convert from group to individual coverage; this generally occurs when someone leaves the group that was supplying group coverage.

Coordination-of-Benefits Clause: A provision stating that benefits will not be paid if another insurance policy has already covered the expenses.

Co-payment: A provision by which the insured individual shares in the cost of certain expenses. The same as ’coinsurance’.

Death Benefit: Money paid to the beneficiary(ies) upon the death of the insured individual.

Decline: A refusal by an insurance company to grant insurance coverage.

Decreasing Term Insurance: Insurance in which the amount of coverage decreases during the term of coverage.

Deductible: The amount of covered expenses the insured individual must pay before any benefits are received from the insurance company.

Deferred Compensation Plan: A plan in which benefits are paid in the future.

Disability: Inability to work due to an injury or sickness.

Disability Benefits: Benefits paid when the insured individual is disabled.

Disability Income Insurance: Insurance that pays a percentage of the insured individual’s regular income should they become disabled and unable to work.

Election Period: The 60-day period during which the affected individual must accept or decline COBRA coverage.

Eligibility Period: The period during which a new employee may enroll in the group health insurance coverage.

Eligibility Requirements: Requirements for joining a group health-insurance plan or another insurance/financial plan.

Employee Assistance Programs: Counseling services designed to help employee’s manage a wide range of personal and work-related situations, and can cover a wide range of mental-health issues.

EPO (Exclusive Provider Organization): A healthcare system in which the insured individual can visit any physician within the contracted network without prior approval or referral from the insurance company or a primary-care physician.  EPO’s do not cover services received outside the network.

Errors and Omissions Insurance: Insurance against injurious actions, such as negligence, by an agent.

Evidence of Insurability: An application process in which an individual provides medical information or evidence that the individual’s risk falls within an insurable range.

Experience Rating:  A group’s history of premiums and claims which is used to calculate premium rates. (A history of high claims, for example, could result in increased premium costs.)

Experience Refund:  A refund of premiums when the claims experience proves to be superior to that used when the premium was calculated.

Family Deductible:  A single deductible that covers an entire family’s insurance policies.

Federally Qualified HMO:  An HMO that meets the requirements of the Health Maintenance Organization Act of 1973. Under the law, these HMOs receive certain advantages, such as eligibility for federal loans.

Flexible Benefits Plan:  An employee benefits plan in which the employees can select from several types and amounts of coverage. Also called a cafeteria plan.

Grace Period:  After a premium due date has passed, the length of time the policy remains active.

Graded Premium Whole Life Insurance:  Whole life insurance in which premiums increase at specified times until they reach a preset maximum level, where they remain.

Group Insurance:  An insurance contract that provides coverage to a group.

Guaranteed-Issue Limit:  The maximum amount for which an insurance company will insure an individual without receiving information concerning their insurability; used in group insurance.

Guaranteed-Issue Insurance:  Group insurance in which all members of the group who meet certain conditions automatically receive coverage without individual underwriting.

Guaranteed-Renewable Policy:  An insurance policy that be renewed continually for a set period of time.

Health Insurance:  An insurance policy that protects the insured individual in case of illness or injury, and that pays for appropriate medical treatments, based upon limits established within the individual policy.

HIPAA (Health Insurance Portability and Accountability Act of 1996):  Federal law that ensures continuous health coverage for an insured individual who loses or moves to a new job. This is done by guaranteeing portability – defined in this case as using current health coverage (the coverage possessed before leaving employment) to reduce or eliminate any preexisting condition exclusions that might apply under future insurance plans.  Current coverage may or may not be maintained after leaving employment; although some states laws allow coverage to continue temporarily.

HMO (Health Maintenance Organization):  An insurance plan in which individuals or their employers pay a fixed monthly fee for service regardless of medical costs incurred.  The insured individual must utilize a primary-care physician within the system for all initial treatments except in life-threatening emergencies. Hospitals or specialists must be referrals of the primary-care physician and be within the HMO’s network.

Indemnity: A health insurance plan that allows the insured individual freedom to select any physician or medical facilities and, unlike other health plans, refer oneself to any specialists.  The individual is responsible for a yearly deductible, after which the insurance company pays coinsurance at a set rate.  Also known as fee-for-service.

Individual Insurance: Insurance issued to one person.

Insurance: Protection against loss in which premiums are paid in exchange for benefits should a loss occur.

Key-Person Insurance: Insurance designed to protect a business against the loss of income resulting from the disability or death of a key employee.

Lapse: Termination of an insurance policy because premiums were not paid on time.

Length of Stay: Amount of time spent in a hospital or other medical facility.

Liability Insurance: Insurance providing coverage for those who have been found legally liable for injuring others or damaging others’ property.

Life Insurance: Insurance that protects against economic loss by paying a specified sum to beneficiaries upon the death of the insured individual.

Lifetime Maximum: The maximum amount paid under an insurance policy.

Limit: The maximum amount a policy will pay.

Long-Term-Care Policy: A benefits plan that pays either a fixed benefit or a percentage of expenses for nursing-homecare, home-healthcare, and adult day care to an insured individual who suffers a loss of functional or cognitive capacity.

Long-Term Disability: Disability lasting for a long period of time, as defined in the insurance policy.

Long-Term Disability Insurance: Insurance plans that provide income for an individual who has become disabled and is no longer able to work. The compensation is either fixed or a percentage of regular income.

Loss Ratio: The ratio of claims to premiums (claims divided by premiums).

Major-Medical Insurance: Medical insurance that covers most expenses associated with illness or injury.

Managed Care: A system devised by insurance companies to reduce costs while providing high-quality healthcare. (HMOs and PPOs are examples of managed care.)

Mandated Benefit: An insurance benefit required by state or federal law.

Manual Rates: Preset rates that are used for broad groups when the group has no claim history.

Medicaid: A federal program that provides medical coverage for people under 65 who meet certain requirements.

Medical-Expense Insurance: Health insurance that covers some or all medical expenses.

Medical Report: A physician’s report on an insured individual’s health.

Medicare: A federal program that provides medical coverage for people 65 and over who meet certain requirements.

Medicare Supplement: Supplemental coverage that provides benefits for expenses not covered by Medicare.

Mode of Premium Payment: The timing in which premiums are due, monthly or annually, for example.

Multi-Employer Plan: Pension and other benefits plans that involve more than one employer.  If an employee moves to another employer in the plan, their coverage continues unabated.

Multi-Employer Trust: Insurance plans that cover the employees of more than one employer.

Mutual Insurance Company: An insurance company owned by policyholders rather than stockholders or other individuals.

NAIC (National Association of Insurance Commissioners): An association of state insurance commissioners established to create consistent insurance regulations.

Noncancellable and Guaranteed-Renewable Policy: An insurance policy in which the insurance company can neither raise premiums nor terminate the policy.

Noncontributory Group Insurance: Group insurance in which the entire premium is paid by the group policyholder and participants pay no portion of the insurance premium.

Noncontributory Plan: A plan in which all contributions are made by the sponsor and nothing is paid by the individual participants.

Out-of-Pocket Maximum: The amount the plan participant must pay before the insurance company begins paying 100 percent of the expenses.

Outpatient: Healthcare services that do not involve an overnight stay in a hospital or other medical facility.

Partial Disability: A disability that affects some but not all duties or that affects the amount of time the individual can work (from full-time to part-time).

Partial Disability Benefit: A benefit, generally a portion of the full disability amount, paid when an insured individual suffers a partial disability. Also called a residual disability benefit.

Payroll-Deduction Plan: A payment plan in which the premium is deducted from the employee’s paycheck.

PCP (Primary-Care Provider): An insured individual’s main doctor.  Often a general or family practitioner. (The PCP refers patients to specialists or hospitals as needed.)

Plan Document: A document that outlines the terms of an employee-benefits plan.

Plan Participation: An individual taking part in a plan who shares in the plan’s responsibilities and benefits.

Point-of-Service (POS) Program: An indemnity program option in which employees coordinate their healthcare needs through a primary-care physician.

Policy: A written insurance contract.

Policy Anniversary: The annual anniversary of the date on which a policy was issued.

Pooling: Combining several small groups into one large group to obtain lower insurance premiums and greater benefits.

Portability: The ability to transfer benefits form one plan to another or from one employer to another.

PPO (Preferred Provider Organization): A managed-care system in which the insured individual can choose from a network of healthcare providers or go outside the network.  Healthcare providers in the network discount their fees for PPO members.

Pre-Admission Review: Prior authorization from the insurer; required before an insured individual can be admitted to a hospital, except in an emergency.

Pre-Admission Certification: Written approval by the insurance company or representative for an insured to be admitted to a hospital or other medical facility.

Pre-Authorized Payment System: A form of payment in which the insured authorizes both the bank and the insurance company to allow automatic withdrawals from an account to pay premiums.

Predetermination-of-Benefits Provision: A provision which states that when the cost for a procedure will exceed a certain amount, the medical provider must submit the treatment plan to the insurer before any services are undertaken, to allow the insurer to determine how much it will pay for the procedure

Preexisting-Condition Provision: A provision which states that medical expenses relating to preexisting conditions will not be covered until the insured has been enrolled in the plan for a certain length of time.

Premium: Payment charged by an insurance company to establish and maintain an insurance policy.

Qualified Domestic-Relations Order: A settlement in which the court assigns a portion of a pension plan or other employee-benefits plan to an alternate payee due to issues arising from alimony, child support, or other domestic matters.

Quote: An estimate of the cost of insurance, based on the initial information given by the applicant.

Reasonable-and-Customary Fees: The standard fees charged by physicians, hospitals, and other healthcare providers. (The fees are often used to determine what an insurance plan will or will not cover.)

Reinstatement: The putting back into force of a lapsed policy.

Reinstatement Provision: A provision that states what the policyholder must do in order to have a lapsed policy put back into force.

Reinsurance: Transactions in which one insurance company buys insurance from another company to help defray its risks.

Reinsurer: The insurance company that accepts the risk in a reinsurance deal. Also called the assuming company.

Relative Value Schedule: A schedule describing the cost of medical procedures as a unit rather than as dollar amounts. (A procedure with a value of 50, for example, is more expensive than a procedure with a value of 40.)

Renewal Premiums: Premiums payable after the initial premium.

Renewal Provision: A provision that states what a policyholder must do to ensure continued insurance coverage after the initial term.

Retroactive Disability Benefit: Disability benefits that are payable as of the date of disability, but which are disbursed after the elimination period has expired.

Rider: An amendment to a policy.  Also called an endorsement.

Risk: The likelihood that the insurance company will suffer a loss.

Risk Class: A group of insured individuals who pose a risk for the insurance company, such as nonsmokers.

Second Opinion: A subsequent medical opinion, from a physician or medical expert other than the one who rendered the initial opinion.

Self-Administered Group Insurance Plan: A group insurance plan in which the policyholder performs administrative functions, such as record keeping, request processing, and filing changes of address.

Self-Insured Group Insurance: Group insurance in which the group sponsor rather than the insurance company is responsible for paying claims.

Short-Term Disability: An injury or illness that disables an individual for a brief time period.

Short-Term Disability Insurance: Insurance that provides benefits, often a portion of salary, during a short-term disability.

Small-Group Insurance Plan: Group insurance, usually covering fewer than 50 people, that is designed to be simpler to underwrite than the typical group plan.

Social-Insurance Supplement Policy: Medical-expense insurance designed to supplement benefits provided by the government.

Social Security: A federal program that provides retirement income, disability coverage, and healthcare to qualified individuals.

Spouse and Children’s Insurance Rider: A rider that provides some coverage for the insured individual’s spouse and children.

Stand-Alone Dental: An insurance plan that provides only dental coverage.

Stand-Alone Life: An insurance plan that provides only life insurance.

Stand-Alone Rx/Stand-Alone Prescription: An insurance plan that provides only prescription-drug coverage.

Stop-Loss Provision: A provision which states that the insurance company will pay all expenses after the insured individual has paid his out-of-pocket maximum.

Summary Annual Report (SAR):  An annual report that sets forth the financial and participant data of employer-sponsored health and welfare plans.

Summary Plan Description (SPD):  A document provided by employers to plan beneficiaries (participants) that outlines what the plan provides and how it operates.

Third-Party Administrator: A party that administers an insurance policy but is not responsible for paying any claims.

Total Disability: A disability in which the individual is unable to perform any of the essential duties of the position previously held, or any position for which training, education, and experience exist.

Underwriter: The person who performs the underwriting function.  Also, an organization that ensures money is available to pay claims.

Underwriting: The process of classifying insurance applicants based on their risk, so proper premiums can be charged.

Underwriting Requirements: Guidelines for determining an individual’s insurability; they may include medial records or personal history.

Usual, Customary, and Reasonable (UCR) Expenses: Regular charges in a given geographical area for a particular medical service.

Utilization Review: A way the insurance company analyzes a case to determine if the treatment was appropriate or necessary.

Waiting Period: The time before insurance coverage begins, benefits are qualified for, or entrance into a plan is permitted.

Waiver-of-Premium-for-Disability Benefit: A provision by the insurer to stop collecting premiums from the insured individual for the entire period he is injured and unable to work.

Weekly Indemnity Plan: A form of short-term disability insurance that pays a percentage of weekly earnings.

Workers’ Compensation: Government-mandated insurance for employees and their dependents that goes into effect if the employee dies or suffers disease or a job-related injury.