Navigating health insurance can be tricky, but we’ve got you covered! Here’s a quick list of the top 10 health insurance terms you and your employees need to know.

Allowed Amount

The Allowed Amount is the maximum amount on which payment is based for covered health care services. It may also be called “eligible expense” or “payment allowance” or “negotiated rate” or “allowable amount.”

If you go to a provider that charges more than your health plan’s Allowed Amount, you could be obligated to pay the difference if not using a preferred provider under your health plan.

If you have not yet met your plan deductible, you will need to pay that before your plan pays. If you have met your deductible, you’ll pay any coinsurance or copay amount.

Appeal

An Appeal is a request from you for your health insurer or plan administrator to review a decision that denies a benefit or payment. It could also apply if you want to ask for a reconsideration of a lower-than-expected amount toward the billed charge for a medical service or treatment.

Sometimes an Appeal may be referred to as a Grievance.

If your health plan refuses to pay a claim, you have the right to appeal the decision and have it reconsidered by a third party.

Balance Billing

Balance Billing occurs when a health care provider sends a bill for the difference between the provider’s charge for a covered service or treatment and the insurance company’s Allowed Amount.

For example, if the provider’s charge is $100.00 and the allowed amount is $75.00, the provider may balance bill for the remaining $25.00. If the provider is a “preferred provider” under the health plan, it may not balance bill the insured for treatment of covered services.

An out-of-network provider (also known as a non-preferred provider) may send a bill for the balance.

Coinsurance

Coinsurance (sometimes written as Co-insurance) is an insured person’s share of the costs for covered health care services. It is calculated as a percentage (for example, 20%) of the allowable amount for the service. The insured pays the coinsurance amount plus the plan deductible (if not already satisfied).

As an example, if the health plan’s allowed amount for an office visit is $100, and the insured has met the plan deductible, a coinsurance payment of 20% would be $20. If the deductible had not been met, the insured would need to pay the full amount for service provided: $100.

Co-payment

Your co-payment (sometimes written as copayment) is a fixed dollar amount (for example, $30) that you must pay for a covered health care service when you visit a provider.

This amount is usually due at the time the service is provided – not billed after the fact.

The amount may vary based on the type of covered service. Your office visit co-payment may differ from your emergency room co-payment.

Deductible

A deductible is the fixed dollar amount (for example, $500), which the insured must pay for health care service before his/her/their health insurance plan begins to pay.

If the deductible is $500, the plan will not pay anything until the insured meets the $500 deductible for covered health services (subject to the deductible). The deductible may not apply to all services covered under the health plan.

Effective Date

Your group health insurance coverage start date is your “effective date.” It is the date your health insurance company or plan administrator begins to insure you and your employees for covered medical expenses.

The effective date can be any date you and your insurance carrier select. Many employers choose calendar year benefits (January 1-December 31), but another date may be agreed to, especially if your new coverage is replacing another insurer’s plan.

Eligible Employee / Eligible Dependent

“Eligible Employee” and “Eligible Dependent” refer to individuals who are eligible for coverage under a health plan.

For Affordable Care Act (ACA) plans, the only individuals eligible to receive tax-favored coverage are the employee, the employee’s spouse, and the employee’s eligible qualifying dependents.

For employer-sponsored coverage, the employer may establish criteria for employee, spouse, and children eligibility. An employer can require employees to work a specified number of hours (for example, 30 or 40 hours per week) to be eligible for insurance and other benefits.

Evidence of Coverage (EOC)

Evidence of Coverage (EOC) refers to any certificate or individual or group agreement or contract that specifies what is covered by the insured’s health plan. It is issued to the employer and participants after the contract Effective Date. (See definition above.)

An EOC should not be confused with a Summary of Benefits and Coverage (also known as an SBC). An SBC is an easy-to-read summary that gives potential enrollees a comparison based on price, benefits, and other features that may be important.

In addition to the SBC, insurance companies and job-based health plans must also provide a Uniform Glossary of terms used in health coverage and medical care.

An EOC is also different from an Explanation of Benefits (EOB) that summarizes how the insurance company or administration processes a claim. See EOB definition below.

Explanation of Benefits (EOB)

An EOB is an Explanation of Benefits summarizing a medical visit with a doctor or specialist or a visit to a health care facility like an Urgent Care Center or Hospital.

The EOB includes the date of service, a summary of charges, an explanation of what’s covered under the health plan, and the amount the patient may need to pay under the health plan, such as a deductible, copayment, and coinsurance amount.

An EOB is not a bill; it is a statement of medical services received and how the insured and the plan will share the treatment costs. Each health care provider will send a bill for any outstanding amounts due.

More to Come

Watch for additional terms in a future blog post. You can find an online Dictionary for Health Insurance Terms at HeyHealthInsurance.com.