Glossary

Coverage terms explained

Health coverage jargon can be confusing. Our glossary defines some of the most commonly used terms to help ensure that you have all the information necessary to make informed decisions about your coverage plan. 

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C


 
Coinsurance

Coinsurance is a percentage of costs a patient is responsible for paying with his or her own money (out of pocket). Plans specify what this percentage will be for a variety of health-related services, such as a specialist visit, emergency room visit or prescription medications. Because coinsurance is a percentage of total costs, it can be difficult to estimate and plan for in advance.

Related video: Health Insurance Coverage 101 – the basics explained

 
Combined deductible

A deductible – total amount a patient must pay out of pocket annually before the health plan begins to pay – that includes both medical care and prescription medicines. This amount does not include premiums. For example, if a deductible is $1,000, the health plan won’t pay anything for most health care until a patient pays $1,000 out of pocket.

 
Copay

A copay is a fixed amount – or flat fee – a patient is responsible for paying with his or her own money (out of pocket) for certain services or medicines. Plans specify what this amount will be for a variety of health-related services, such as a doctor or specialist visit, emergency room visit or prescription medications. Copays are determined by health insurance plans and are often printed on health insurance cards.

Related video: Health Insurance Coverage 101 – the basics explained

 
Cost sharing

The amount insurance plans require patients to pay out of their own pocket. For example, copays, coinsurance and deductibles.

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D


 
Deductible

The amount patients must pay annually with their own money (out of pocket) before a health plan will pay for any expenses. This amount does not include premiums. For example, if a deductible is $1,000, the health plan won’t pay for most services until a patient pays $1,000 out of pocket. Sometimes plans exempt certain costs, such as some or all prescription drugs, from the deductible. In most cases, preventative services are covered with no cost sharing even if you have not reached your deductible.

Related video: Health Insurance Coverage 101 – the basics explained

 
Drug list

The list of prescription medicines covered by an insurance plan. A non-covered medicine is not included in the list of prescriptions recommended by an insurer. For non-covered drugs, patients must pay for the cost of the medicine or go through a process to get it covered.   Also see formulary or tiers.

Related video: How Does Insurance Cover Your Medicines?
Related article: 5 Questions to Ask About Your Prescription Medicine Coverage

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F


 
Fail First

Insurers may require patients to try certain medicines before allowing a patient to get the medicine his or her doctor originally prescribed. This is sometimes called step therapy. Also see prior authorization and step therapy.

Related video: How Insurers Limit the Use of Medicines
Related article: Who is Making Decisions About Your Health Care?

 
Formulary

The list of prescription medicines covered by an insurance plan. A non-covered medicine is not included in the list of prescriptions covered by an insurer. For non-covered drugs, patients must pay for the cost of the medicine or go through an exceptions process to get it covered.   Also see drug list or tiers.

Related video: How Does Insurance Cover Your Medicines? - The Basics of Health Coverage Formularies
Related article: 5 Questions to Ask About Your Prescription Medicine Coverage

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H


 
Health Insurance Exchange

A place where consumers can shop for health insurance coverage. Available online, the exchange is a place for consumers to sign-up for a plan. The Affordable Care Act created state and federally run exchanges where consumers can shop for coverage and possibly get help paying for premiums. Also see Health Insurance Marketplace.

Related video: What are Health Insurance Exchanges?

 
Health Insurance Marketplace

Created by the Affordable Care Act, the Marketplace is a health insurance exchange run by the federal government or a state where consumers can shop for health insurance coverage. Available online, the marketplace is a place for consumers to sign-up for a plan and possibly get help paying premiums. Also see Health Insurance Exchange.

Related video: Exchange Plan Transparency

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O


 
Open Enrollment Period

Every year health plans have a designated amount of time where consumers can make changes to their coverage for the following year. Employers set open enrollment periods for their employees. For the Health Insurance Exchange or Marketplace, open enrollment is from November 1, 2016 to January 31, 2017 for coverage in 2017. Remember that open enrollment is the time to make changes to and reenroll in coverage.

Related video: 3 Tips for Choosing a Health Insurance Plan
Related article: 5 Things to Consider When Choosing Your Health Coverage

 
Out-of-pocket cost

An expense for medical care a patient is responsible for paying with his or her own money and is not reimbursed by insurance. Out-of-pocket costs can include deductibles, coinsurance and copayments for services. The Affordable Care Act requires that most health plans have an annual maximum on out-of-pocket costs for most health care services.

Related videos:
Health Coverage Disparity in Out-of-Pocket Costs
Out-of-Pocket Costs in the Exchanges: One Patient’s Story

Related content:
ABC’s Patient Profiles – Out-of-Pocket Cost Burden

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P


 
Preauthorization

For some health care services, treatment plans, or prescriptions, a health care plan may require that the services or treatments be deemed medically necessary. In this instance, a health insurer would grant preauthorization before a patient receives services but this isn’t a guarantee the costs will be covered. Also see prior authorization.

Related video: How Insurers Limit the Use of Medicines
Related article: Who is Making Decisions About Your Health Care?

 
Premium

Amount paid for health insurance coverage, usually paid monthly, quarterly or yearly. Premium payments vary based on the type of coverage and cost sharing a plan requires. Premiums do not count towards a deductible.

Related video: Health Insurance Coverage 101 – the basics explained

 
Prior authorization

An extra step that some health plans may require before a service or prescription is covered. This step requires getting permission from your plan before a prescription is covered.  Also see preauthorization, step therapy and fail first.

Related video: How Insurers Limit the Use of Medicines
Related article: Who is Making Decisions About Your Health Care?

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S


 
Step Therapy

Insurers may require patients to try certain medicines before allowing a patient to get the medicine his or her doctor originally prescribed. This is sometimes called fail first. Also see prior authorization and fail first.

Related video: How Insurers Limit the Use of Medicines
Related article: Who is Making Decisions About Your Health Care?

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T


 
Tiers

The list of medicines covered by an insurance plan is often broken down into tiers – usually three or four. Lower tiers (Tier 1 or Tier 2) typically require copayments, or fixed dollar amounts of $10-$50. Higher tiers (Tier 3 or Tier 4) are more likely to require coinsurance, or a percentage of the cost of a medicine. This amount varies based on the cost of the medicine and as a result is harder to predict. Which tier a medicine falls on is included on a plan formulary. Also see formulary or drug list.

Related video: How Does Insurance Cover Your Medicines? - The Basics of Tiers

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