Medical Insurance Terminology

Insurance Economic protection against financial loss caused by possible but unplanned events affecting an individual or business.
Coinsurance A fixed percentage of covered charges paid by the insured person after a deductible has been met.
Premium The amount charged for a medical insurance policy. The insurer agrees to provide certain benefits in return for the
premium. It is also called coverage cost.
Insurance benefits Payments for medical services that can be submitted by an insurance company under a predefined policy issued
to an individual or group of individuals.
Out of pocket maximum The maximum amount that a patient is required to pay out of pocket during a year of coverage, after
which the insurance company pays 100% coverage.
Lifetime maximum benefit The total sum that the health plan will pay out over the patient's life.
Determination A payer's decision about the benefits due for a claim.
Rider A special provision or provisions that may be added to a policy to expand or limit benefits that would otherwise be payable. It
may increase or decrease benefits or coverage, waive a condition, or amend the original contract in other ways.
UCR The usual, customary, and reasonable fee. It is determined by payers comparing the actual fee charged by a physician, the fee
charged by most physicians in a community, and the amount determined to be appropriate for the service.
Usual fee The fee an individual physician most frequently charges for a service to private patients.
Customary fee The range of fees charged by most physicians in the community for a particular service.
Reasonable fee The generally accepted fee a physician charges for an exceptionally difficult or complicated service. A charge is
considered reasonable if it is deemed acceptable after peer review even if it does not meet the criteria for a customary fee or prevailing
charges.
Fee schedule A list of charges for services performed.

Prevailing charges The most frequently charged fees in an area by a specialty group of physicians.
Medical billing cycle (or revenue cycle) A series of steps that lead to maximum, appropriate, timely payments for patients'
medical services.
Payment Cash, a check, a credit card payment, an insurance payment, or a money order received for professional services
rendered.
Payment plan A patient's agreement to pay medical bills over time according to an established schedule.
Truth in Lending Act Federal law requiring disclosure of finance charges and late fees for payment plans.
Collections The process of following up on overdue accounts.
Third-party payer A health plan or other party that agrees to carry the risk of paying for a patient's medical services.
Assignment of benefits An authorization to an insurance company to make payment directly to the physician.
Acceptance of assignment OR accepting assignmentAn agreement by a physician to accept the amount established by Medicare,
Medicaid, or a private insurer as full payment for covered services. The patient is not billed for the difference because it is illegal to
bill the patient for the balance.
Carrier (insurer) An insurance company, payer, or third-party payer.
Allowed charge The maximum charge an insurance carrier or government program will cover for specific services. The allowed
charges are detailed in an insurance carrier's explanation of benefits. In managed care, a participating provider agrees to accept
allowed charges in return for various incentives, such as fast payment. If a participating provider normally charges more for a service
than the allowed charge, the physician must write off the difference, and the patient may not be billed for this amount. However,
nonparticipating providers may bill patients for this difference.
Disallowed charge or write-off The difference between what has been billed by the health-care provider, and what the insurance
company has paid. This is not billed to the patient but written off by the provider.
Limiting charge The highest amount that an insured person can be charged for a covered service by providers who do not accept
assignment. This only applies to certain services, and not to supplies or equipment. 115%.
Coordination of benefits Prevents duplicate payment for the same service. For example, if a child is covered by both parents'
insurance policies, a primary carrier is designated to pay benefits according to the terms of its policy, and the secondary plan may
cover whatever charges are still left. If the primary carrier pays $105 of a $150 charge, the most the secondary carrier will pay is $45.
Adjudication The process followed by health plans to examine claims and determine benefits.
Remittance OR Remittance Advice The statement of the results of the health plan's adjudication of a claim.
Clean claim A claim that is accepted by a health plan for adjudication.
Suspended Claim status during adjudication when the payer is developing the claim.
Medical provider A licensed professional who performs medical procedures.
Participating (PAR) provider A physician or other health-care provider who participates in an insurance carrier's plan. The physician
must keep a list of valid plans, because benefits vary for participating and nonparticipating providers. Claims will be denied or have
reduced reimbursement if the physician is not a participating provider. Disallowed charges and charges not eligible for payment must
be written off.
Nonparticipating (nonPAR) provider A physician or other health-care provider who has not joined a particular insurance plan. Patients
who obtain services from nonPAR providers generally must pay more of the cost than those who obtain services from PAR providers.
115% limiting charge applies.
Referral Transfer of patient care from one physician to another.
Subscriber The person named as the principal in an insurance contract, also called the insured.
Guarantor A person who is financially responsible for a bill from a health-care practice.
Tertiary insurance The third insurance policy responsible for paying a claim.
Beneficiary The person named in an insurance policy to receive the benefits.
Overpayment Payment by the insurer or by the patient of more than the amount due.
Schedule of benefits The list of services that are paid for and the amounts that are paid by the insurance carrier. For example, the
schedule of benefits may say that the insurance carrier will pay only 80% of all medical fees for surgeries, making the subscriber
responsible for payment of coinsurance, the remaining 20% of the medical fees. Such a plan is often referred to as an 80:20 plan.

Medical Insurance Terminology

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Medical Insurance Terminology

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Insurance Economic protection against financial loss caused by possible but unplanned events affecting an individual or business.

Determination A payer's decision about the benefits due for a claim.

Fee schedule A list of charges for services performed.

Collections The process of following up on overdue accounts.

Carrier (insurer) An insurance company, payer, or third-party payer.

Clean claim A claim that is accepted by a health plan for adjudication.

Medical provider A licensed professional who performs medical procedures.

Referral Transfer of patient care from one physician to another.

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