What Does it All Mean? Your Medical Insurance Glossary
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The terms used in medical insurance and patient billing can sound like a foreign language, filled with unfamiliar words and phrases. An educated patient is better positioned to make sure that billing is accurate and to act as an informed participant in the care process. For all the patients here who could benefit from a simple breakdown of “what all this confusing healthcare jargon means,” here is a concise glossary of important terms to help you feel more informed and less intimidated when you see this stuff on your insurance forms or bills.
We have listed your medical insurance terms in alphabetical order, and suggest you bookmark or otherwise save this article — that way you can visit it anytime you need clear and transparent information about the language of your medical insurance. We will also link to this glossary in each article in our series, and it will continue to be a work in progress. We will update the glossary as needed as part of our ongoing commitment to maintaining this as a valuable resource for readers.
A
Adjustments: An adjustment is the amount the healthcare provider has agreed not to charge. An adjustment is made between the insurance company’s approved amount and the provider’s actual charge. The provider writes off or adjusts fees in exchange for access to the insurance company’s patient base.
Authorization: Authorization is approval of medical services by an insurance company, usually prior to services being provided.
B
Benefit: Payment given by insurance provider to settle a claim for medical services provided.
Bundled billing: When payments for multiple providers for a single episode of care are combined into a single total cost as opposed to piecemeal charges from each provider, separately.
C
Claim: An itemized statement of services and fees provided by a medical provider to the insured patient for payment.
Coding: Every medical condition, procedure, durable medical equipment, prosthetics, ambulance rides, medicines has a code that must be assigned for insurance and statistical purposes. The codes are assigned by several government organizations and coder is a specific job title.
Co-insurance: The percentage of costs of a covered health care service you pay (20%, for example) after you’ve paid your deductible. (see below)
Contracted Fee (Allowable Rate): The contracted fee is the maximum amount an insurance plan will pay for a covered healthcare service. (see below)
Contractual Obligations: There are many different kinds of contractual obligations.
Healthcare providers enter into contracts with insurance companies. Those contracts specify what services are covered by that insurance plan and what the insurance will allow for the services. If there is a difference between the price charged by the provider and the price the insurance is willing to pay, the balance is called a contractual adjustment you are obliged to write off.
Another contractual obligation is the contractual obligation by which the patient has to pay any deductibles or co-payments. These financial obligations are in the contract between the patient and the insurance company.
There are other contractual obligations. As a provider, you may have to schedule an appointment for patients with a particular insurance company within a week. You may have to provide the patient with forms or other paperwork for certain procedures. You may have to obtain prior authorization for certain procedures. There can be a lot of these obligations. Medicare is a good example. They have thousands of contractual obligations providers are required to follow. They are available online.
As a patient, all of your obligations are found in the contract you have with the insurance company. For more information, see Quora.
Co-payment: A fixed amount ($20, for example) you as patient pay for a covered health care service after you’ve paid your deductible. If the deductible has not been reached, the patient is responsible for full payment.
Covered service: Medical services, medicines or supplies deemed necessary by an insurer which are provided and paid for under benefits.
CPTs: A Current Procedures Terminology (CPT) code is the numeric identifier for medical procedures, tests, surgeries, evaluations, and any other medical procedure performed by a healthcare provider on a patient. The first three characters describe the injury or disease documented by the healthcare provider followed by more specific subcoding.
D
Deductible: A deductible is the amount a patient must pay each year before benefits begin.
Diagnosis codes: In medical coding, there are two types of codes: those that categorize procedures and those that categorize ailments. ICD codes are used to provide information to the insurer for reimbursement purposes on ailments. See below for ICDs.
E
F
Fee for service: Fee for service is the form of reimbursement for healthcare services where a fee is paid to a provider after a service is delivered.
G
H
I
ICDs: An International Statistical Classification of Diseases and Related Health Problems code (ICD) is the alpha and numeric identifier for diagnoses and symptoms. The first three characters categorize the injury, and the fourth through sixth characters describe in greater detail the cause, anatomical location and severity of an injury or illness.
In-network: In-network refers to providers that are part of a health plan’s group of providers with which it has negotiated a discount, which is passed to patients.
Insurance Adjudication Process: The insurance adjudication process determines the insurer’s payment or financial responsibility, after the member’s insurance benefits are applied to a medical claim. There are three possible outcomes of claims adjudication: The claim may be paid, denied, or reduced and paid at a lower rate.
J
K
L
M
Medical Note Attachments: Medical note attachments are the “electronic attachments” such as test results, referrals, or provider notes that are sometimes required when doctors submit a claim or a prior authorization request to an insurer.
Modifiers: Modifiers are used to provide supplemental information concerning a procedure or service provided by a physician.
N
O
Out-of-network: Out-of-network refers to a medical provider that does not have a contract with the patient’s health insurance company.
P
Payer: the insurer or other party that satisfies the claim, or settles a financial obligation.
Plan:
Policy:
Preferred Provider: A preferred provider has a contract with a health insurer or plan to offer services to patients at a discount.
Procedure Codes: Procedure codes are the numerical codes used to identify what service was provided to a patient (surgeries, durable medical equipment, medications, etc.). Also known as CPTs.
Provider Network: A provider network is a list of the healthcare providers with which the plan has contracted to provide medical care to its members.
Q
Quantities: With regard to prescriptions, quantity limits define how much of a drug a person can fill during a specific time period. Insurance plans use quantity limits to ensure patient safety and to control healthcare costs.
R
S
Stop Loss / Max Out of Pocket: A patient reaches the stop loss when the insured individual has paid the deductible in full and reached the out-of-pocket maximum amount of co-insurance. At this point, the insurance begins to pay at 100 percent of allowable expenses.
T
U
V
Verification: Verification is the process of establishing and documenting whether services or documents conform to specified requirements.
