Insurance Terms & Definitions

Catastrophic Coverage

In the state of Washington, RCW 48.43.005(5) defines catastrophic health plan to mean a plan requiring:

• A deductible of at least $1500 and out-of-pocket maximum of at least $3000 for a policy for one enrollee.
• A deductible of at least $3000 and out-of-pocket maximum of at least $5500 for a policy for more than one enrollee.
• Additionally, the definition applies to specific types of health plans that exclude or substantially limit outpatient physician services, generally plans that do not include maternity coverage are considered to be catastrophic

COBRA

(Consolidated Omnibus Budget Reconciliation Act of 1985): A federal law that requires most employers with more than 20 employees to allow eligible employees and their beneficiaries to continue to self-pay for their coverage after it normally terminates for up to 18, 24, 29 or 36 months.

Co-insurance

An agreement between the insured and the insurance company where payment is shared for all claims by the policy. A typical arrangement is 80%/20% up to $5,000. The insurance company pays 80% of the first $5,000 and the insured pays 20%. Usually after 80% of $5,000, the insurance company then pays 100% of covered expenses during the remainder of the calendar year up to any limits of the policy.

Co-payment

A small charge paid at the time a medical service is received. It does not accumulate towards a plan’s deductible or out-of-pocket maximum.

Creditable Coverage

Creditable Coverage refers to the amount of time covered under a prior medical insurance plan that can be used to reduce your pre-existing condition periods under a new plan. You must not have had more than a 63 day break in coverage and the prior plan must have provided equal or better coverage than your current plan. Catastrophic coverage is NOT creditable.

Deductible

The amount of covered expenses that the insured must pay before a plan or insurance contract starts to reimburse for eligible expenses

Flexible Spending Accounts

Special accounts typically funded by an employee’s salary reduction to help pay certain expenses not covered by the employer’s plan or insurance contract. The advantage of these accounts is that after-tax dollars are converted to before-tax dollars, thereby reducing the actual cost of expenses.

High Deductible Health Plan (HDHP)

HDHPs are qualified health insurance plans designed to work in conjunction with a HSA. These are available on an individual or group basis.

Health Insurance Portability & Accountability Act of 1996 (HIPAA)

There are two sections to the Act. The first deals with providing protection of health insurance coverage for people who lose or change jobs. HIPAA provides for creditable coverage as long as there is no more than a 63-day break in coverage. It also provides that at least one guaranteed issue option must be available for individuals.

The second section deals with administration and privacy rules that affect your protected personal information.

Health Savings Accounts (HSAs)

HSAs are an innovative way of paying for medical care in this country. HSAs are sold in conjunction with a qualified high-deductible health insurance plan and are available for both individuals and employers. HSAs can help you save money on your medical care as well as provide a good way to save for future medical expenses. This guide provides much information about this new and innovative health insurance product. Click here for the NAHU Consumer Guide To Health Savings Accounts (HSAs)

Lifetime Aggregate or Maximum

The maximum benefit payment provided under a plan or insurance contract.

Out-of-Pocket Maximum

The maximum amount that an insured is required to pay under a plan or insurance contract. Read your contract carefully as this can be expressed in different ways, for example coinsurance maximum simply refers to the cap on your coinsurance expenses but does NOT include deductible and copays.

Pre-certification

Utilization management program that requires the individual or provider to notify the insurer before hospitalization or surgical procedure. Notification allows the insurer to authorize payment and to recommend alternate courses of action

Pre-existing Condition

A condition or diagnosis which existed (or for which treatment was received) before coverage began under a current plan or insurance contract, and for which benefits are not available or are limited for a specified amount of time.

Self-Funding

An arrangement under which all or some of the risk associated with providing coverage is not covered by an insurance contract.

Usual, Customary, and Reasonable (UCR) Fees

Charges of health care providers that are consistent with charges from similar providers for identical or similar services in a given locale.

Note: Definitions are provided for reference purposes only and should not be construed to be legally binding. Please contact us or your insurance company for clarification as to how these terms apply to your specific policy or situation.