Healthcare Finance Glossary

Below you’ll find definitions on all things healthcare related. And there are a lot of them! To help you find what you need, use the following alphabet to jump to the correct section.

Notice that some are red? That’s a good thing; it means there are no terms in that section that you need to know.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A


Access — Refers to the availability or proximity of healthcare services, providers, or institutions; the ability to be seen or seek appropriate treatment.

Activity — In an EOB (see below), the treatment provided by a medical facility or professional. May also appear as Service, Treatment, or Product.

Acute Care — Medical treatment that involves going to the hospital for a serious injury, and/or illness; generally for short-term, focused treatment with the goal of achieving stability.

Administrative Services Only — A contract that allows insurance companies to perform specific administrative duties (such as billing, reporting, communications, EOBs, etc.) while the account holder assumes the risk and financial liability of the health plan. Generally only a feature of larger Group Health Plans (see below).

Adverse Selection (Health Insurance) — Refers to market conditions in which those more likely to utilize healthcare services (i.e., those who are sicker or older and therefore high risk) purchase health insurance, while healthier, low-risk individuals do not. This imbalance can drive up premium costs and disrupt the cost and risk accounting of insurance carriers.

Affordable Care Act (ACA) — The 2010 healthcare law was designed to protect patients and provide equal coverage for everyone when it comes to health insurance. Also referred to as The Patient Protection and Affordable Care Act and/or Obamacare, because the bill was signed into law by President Obama during his first term.

Allied Health — This refers to licensed healthcare workers other than physicians, nurses, dentists or pharmacists. Nutritionists, technologists, hygienists, and radiologists are some common examples of allied health professionals.

Allowable Cost — In an EOB (see below), the maximum amount an insurance company will allow medical providers to bill for a specific treatment or service. The primary function of a provider network is to negotiate the allowable costs that will be charged to patients covered by a given insurer. Also called Approved Charge.

Amount Billed — In an EOB (see below), the full charges by a care provider and sent to your insurer for review and/or payment; the net costs of a given visit or procedure, to be paid by you and/or your insurer

Amount Not Covered — In an EOB (see below), the sum of the costs of ineligible or otherwise non-covered treatments; costs which will not be paid by insurance. These can range from duplicate charges (a billing error on the provider’s end), to charges exceeding a plan’s maximum payout, to failure to get prior authorization (an error on the patient’s end).

Amount Paid by Insurance — In an EOB (see below), the share of costs from a given medical bill that will be paid entirely by your health plan; generally the remainder once deductibles, copays, coinsurance, and other such charges are subtracted from the total amount billed.

Amount Paid by Another Source — In an EOB (see below), the portion of a medical bill which your insurance is not paying, but may be covered by a secondary insurance, third party coverage (like an employer), paid by a health spending account of some kind, or other source. Not included in the final amount owed by the patient.

Annual Limit — Refers to the total amount an insurance company will cover or pay during a particular year; patients who have met their plan’s limit will be solely responsible for any further medical costs or outstanding balances. Limits may be placed on the plan as a whole, and/or individual categories of services.

Approved Charge — See Allowable Cost.

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B


Balance Billing — The difference between a medical provider’s charges and an insurer’s allowable cost, usually paid by the patient. Generally, visiting an in-network provider eliminates this fee; out-of-network providers may include the fee, as they are not subject to the allowable cost limitations of the insurance plan.

Benefit Package — Usually given out to clients once they’ve successfully signed up for a health insurance plan. The package provides a detailed description of the services covered by the specific plan, as well as the network of participating providers and clinics.

Benefit Year — Describes a health insurance plan’s annual cycle, for the purposes of determining deductibles, utilization, and any payout limits, as well as re-enrollment periods. The health insurance company may alter plan benefits and update their rates, which will take effect the following benefit year. Some benefit years start in January, whereas others may begin during the late summer months.

Birthday Rule — healthcare providers use this method when children are listed as dependents on their parents’ healthcare plans. Whichever parent whose birthday comes earlier in the calendar year is considered the holder of the primary plan for payment purposes.

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C


Carrier — Any insurer and/or organization holding an insurance policy; the entity responsible for making payments on behalf of the plan, and receiving premium payments.

Catastrophic — Often associated either with Catastrophic Coverage or a Catastrophic Event; refers to an unplanned and unpredictable medical emergency or condition, likely to entail emergency or other acute care beyond routine physicals or preventative healthcare treatment. Catastrophic plans/coverage often carry higher deductibles and lower premiums, as patients would only utilize coverage in the event of an extreme emergency, rather than for minor or day-to-day health maintenance.

Claim — A bill submitted to insurance carriers for medical services on behalf of the insured patient.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) — A federal law allowing an individual to retain the group health insurance plan of his or her former employer, without the employer subsidy, for a set period of time. This allows individuals changing jobs to avoid gaps in coverage during the waiting period (see below) before qualifying for benefits from a new job. The coverage is also offered to spouses and/or dependents in the case of a divorce or death of an employee.

Coinsurance — The share of an allowable charge paid by the insured patient; generally expressed as a percentage of the cost of a given treatment or service. Different treatments or routine services will typically have their own coinsurance rates described in the insurance plan. Coinsurance is one of the most common cost sharing methods used to hold patients accountable for the costs of healthcare, and their consumption of health services.

Co-payment/Co-pay — A fixed fee, expressed as a static dollar amount, owed by the insured patient for a specific type of treatment or service. Insurance plans will generally have different copays associated with specific, common services (ie, prescription drug copays, office visits, etc). Co-pays are one of the most common cost sharing methods used to hold patients accountable for the costs of healthcare, and their consumption of health services.

Coordination of Benefits (COB) — The process of determining whether or not a service provided to a patient should be paid by the primary or secondary payer. This usually only happens if an individual has more than one healthcare insurance plan, especially as a supplement to Medicare (see below).

Cost Sharing — These are healthcare charges that a patient is responsible for under the term of their health plan. This can include things like coinsurance, copayment, and deductibles.

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D


Date of Service — Refers to the time of treatment or the appointment for which charges are being documented on an EOB (see below).

Deductible — The total dollar amount an insurance plan may require a patient to pay out-of-pocket before their coverage plan kicks in and makes payments for claims. Although the insurer may not pay for any treatment before the deductible is met, providers are still subject to the allowable cost limitations of a given plan.

Dependent — Any member of the family (usually a spouse or children) covered under the primary insurance holder’s plan.

Direct Contracting — An arrangement made through a company that self-funds and coordinates healthcare costs and coverage with medical providers, rather than using a middleman (an insurance company).

Discounts — Also called Plan Discounts; Section of an EOB documenting charges the patient is not responsible for, or that the insurance plan will pay. This section may be itemized for a given network or insurer to detail each item contributing to the total Amount paid by insurance (see above).

Drug Formulary — A complete list of all prescription medication drugs covered under an insurance plan.

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E


Employer Mandate — A provision of the Affordable Care Act requiring employers of a certain size to offer qualified health insurance plans to all full-time employees.

Employer-Sponsored — Health insurance, generally a group plan, for which an employee pays a share of monthly premiums and receives tax benefits for doing so; also described as employer-subsidized insurance

Enrollment — The process by which individuals or groups sign up for health insurance and receive coverage. Alternatively, this term may also be used to describe the number of people covered by a given health insurance plan.

Enrollment Period — A set range of dates during which individuals and groups may shop for insurance and apply for coverage by insurance providers. (Also see Open Enrollment Period and Special Enrollment Period).

Essential Health Benefits (EHB) — A set of 10 categories of treatment all plans are required to cover in order to be considered qualified under the Affordable Care Act; includes annual wellness visits, maternity care, mental health services, and more.

Explanation of Benefits (EOB) — A document provided by an insurer — not a hospital or doctor’s office — detailing a medical visit or treatment which was billed to insurance as a claim (see above). Generally contains multiple sections describing how the patient’s insurance plan processed charges for the relevant treatment, and gives an itemized account of the total costs, which parties are responsible for paying them, and summarizing the patient’s use of his or her insurance plan in the given benefit year, including deductible and total payouts.

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F


Free-to-Service — This plan usually lets patients visit whatever healthcare facility they want to. The insurance company then pays a portion of their total charges. Some facilities will require patients to pay up-front.

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G


Group Health Insurance — When multiple people, usually as a business organization, apply for healthcare coverage collectively in order to secure advantageous premiums and benefits. They will generally achieve a more balanced risk pool than any individual, and command greater cumulative purchasing power to negotiate with insurers. Also called Group Plans, or associated with Group Pricing of insurance.

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H


Health Insurance Exchange — This is a resource center individuals who don’t have health insurance can go to in order to seek information about their insurance options; regardless of their eligibility. Also called State Exchanges, Obamacare Exchanges, or the Individual Marketplace.

Health Maintenance Organization (HMO) — This type of plan offers a wide range of services through network providers that inclusively work with HMO patients. As a member of this plan, individuals will have to provide insurance companies with their primary healthcare physician information. That way, insurance can refer patients to HMO specialists as needed.

Health Plan — Medical insurance; refers to the fee schedules, networks, qualifications and limitations of an insurance product or self-insured program that helps patients pay for healthcare services.

Health Savings Account (HSA) — This is a personal savings account designed to let participants pay for medical expense with pre-tax dollars. Qualified insurance plans (group or individual) allow individuals to open these accounts at a specific financial institution, and elect to have money automatically withheld from their paychecks before taxes, and deposited into the HSA, with annual contributions limits. The account can then be used as a normal checking or debit account, but only for qualified (ie, health or medical) expenses. Account holders may be required to provide documentation of how HSA funds were used when filing taxes; use of HSA funds for non-qualifying purchases may result in tax penalties or other fees.

High-Risk — Anyone considered more likely to become sick or injured, and to require healthcare services/to utilize health insurance. Can refer to individuals or groups (as in high-risk pools). Generally, high-risk populations increase both the consumption of healthcare services, and the costs of health insurance.

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I


Indemnity Carrier — See Free-to-Service.

Individual Health Insurance — Plans or coverage purchased by individuals to cover themselves and in some cases, their families/dependents as well.

Individual Mandate — A provision of the ACA which requires individuals to either purchase a qualified health insurance plan, or pay a fee as part of the tax returns.

Individual Marketplace — This is simply the market for insurance coverage. In other words, it’s a service that helps people shop around for affordable insurance plans.

In-Network — The providers, hospitals, and/or pharmacies that have negotiated prices and fee schedules with a given insurance provider and are subject to a plan’s terms. A list of in-network providers is generally available from the insurance company for a given plan. Treatment and services rendered by in-network providers are considered in-network care (related: Out-of-Network).

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L


Low-Risk — Anyone considered unlikely to fall ill or become injured; generally, the younger and/or healthier segment of the population who consumes much less healthcare services, and is unlikely to utilize their health insurance. Can refer to individuals or groups (as in low-risk pools).

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M


Managed Care — The primary method of healthcare delivery in the United States, designed to control costs, improve efficiency, and maximize the quality of outcomes. Essentially, patients agree to visit only certain providers or clinics (ie, a provider network), while costs are controlled by a management company, and utilization is tracked in order to identify patterns, risks, and areas for improvement.

Medicaid — A federally funded, state-administered health coverage program designed for low income and disabled people and/or families. The program is funded by Medicaid taxes, which are paid according to a progressive scale by all workers and employers in the United States, separately from income taxes. Money is then granted to each state, which has broad authority to set eligibility standards and means-testing of those who seek coverage through the program. Although intended for lower income individuals and families, each state may have other qualifying conditions allowing people to access Medicaid. (Also see Medicare)

Medical Savings Account — A pre-tax account that allows patients to pay for medical expenses and/or services.

Medicare — A federally funded and managed health insurance program that’s designed to cover the cost of hospitalization, medical care, and other health related issues for people aged 65 years and older (younger people can qualify under certain special circumstances). Funding is provided by Medicare taxes, which are paid according to a progressive scale by all workers and employers in the United States, separately from income taxes.

Member — Refers to anyone covered under a given health insurance plan.

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N


Network Plan — Provides for members who are covered with different services and/or supplies at a discounted price. The members can receive discounts from hospitals, pharmacies, and other health clinics as long as they’re covered under the plan.

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O


Obamacare — See Affordable Care Act (ACA).

Open Enrollment Period — This is a time frame in which shoppers can enroll, switch plans, and buy health insurance. Open enrollment usually runs from a month towards the end of the year.

Out-of-Network — Healthcare clinics or professionals not listed among a given health insurance company’s preferred providers. Services rendered by these institutions or providers are considered out-of-network care, and are subject to different costs and terms than in-network services, typically making them more expensive to the patient, and possibly exempt from deductibles.

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P


Patient’s Responsibility — Term appearing on EOB forms referring to the final costs paid by the patient after insurance and all other discounts or payers have paid their share; may also appear as Your Total Responsibility or Total Patient Responsibility.

Payer — Refers to the health insurance company that covers the cost of a patient’s visit to the doctor. Also known as the Carrier.

Pre-Existing Condition — Refers to a health problem that has already been diagnosed by doctors, before the individual bought insurance or selected a new plan. Unlike an emergency or catastrophic event that could not have been predicted, pre-existing conditions impact an individual’s risk status, and indicate to insurers that he or she is more likely to require some level of care.

Preferred Provider Organization (PPO) — Unlike most health insurance plans, this allows patients to see any provider or clinic within the PPO network without the need for a primary care physician, or a referral to see a specialist. Like other networks, PPO providers charge pre-negotiated fees for all care and can be more affordable to patients with this type of coverage.

Premium — This is the amount of money paid by an employee and/or their employer each month in exchange for insurance coverage. Premiums are generally stable over the course of a given benefit year, and do not change according to utilization. (Also see Deductible)

Prior Authorization — Certain procedures or specialist visits may only be covered by an insurer if the patient or provider contacts the insurer ahead of time to get permission. Without this permission, the treatment or encounter may not qualify for the full benefits schedule of the insurance plan. This is intended to reduce unnecessary visits, over-consumption of healthcare resources, and control costs to the insurance carrier.

Provider Network — A list of clinics, hospitals, medical practices and providers who have negotiated and agreed to a set list of prices and allowable cost limitations (see above) with a given insurance provider. Everyone on the list is considered in-network; anyone not specifically listed is, by default, out-of-network, and therefore not subject to the same charge limits set by the insurance plan. Networks are often regional or state-specific, depending on the insurance plan.

Point of Service Plan (POS) — This is a plan that combines elements from both HMO and PPO plans, to control costs and promote disciplined utilization of health services. As a member of this plan, individuals might be required to choose their primary care physician who will also be responsible for making referrals within a limited network of specialists and clinics.

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R


Referral — This term refers to an insurance company and/or physician transferring a client to another facility to receive medical attention.

Renewal Date — Refers to the time period an insurance contract must be renewed.

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S


Service Plan — See Point of Service Plan.

Special Enrollment Period — Certain qualifying life events (such as the death of a primary account holder, aging out of dependent coverage, or losing employer benefits) allow individuals a limited window in which to shop for and purchase new health insurance balances outside of the standard Open Enrollment Period (see above).

Supplementary Insurance — Secondary health coverage, typically purchased by an individual, in order to expand benefits and reduce patient responsibility for medical bills. Many individuals on Medicare purchase supplementary insurance to fill coverage gaps or make prescription drugs more affordable. Generally needed by people managing chronic conditions, as the cost of treatment would exceed the relative cost of premiums.

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T


Term Health Insurance — Limited health coverage designed to cover a period of not more than 364 days; most plans do not qualify under the ACA as they do not provide Essential Health Benefits (see above), but may be more affordable than qualified plans available on the exchanges.

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U


Underwriting — Accepting financial liability for medical costs in exchange for the payment of premiums. Health insurance companies pool the income generated by the premiums of all their enrolled patients, in order to pay for the claims submitted on behalf of patients who seek treatment.

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V


Veterans Administration (VA) — Often used as shorthand for the local medical clinic where qualified American military veterans seek medical care. Also refers to the Department of Veterans Affairs, the federal organization responsible for operating medical clinics as well as managing the full array of benefits available to qualified veterans.

Veterans Benefits — The federally-sponsored healthcare coverage program exclusively designed for American military veterans. Provides access to VA clinics and pays for the treatment patients receive there.

Vision Care Coverage — In this case, the vision care coverage is an insurance plan that’s designed to help individuals cover and budget for ongoing vision expenses.

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W


Waiting Period — A probationary delay under which an employer makes an employee, usually a new hire, wait before they’re eligible for coverage under company policy.
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