Glossary — Learn Insurance Terms and Phrases
Here are some terms that get thrown around whenever people are talking about insurance. There are some very basic ones — and some pretty advanced ones. Look around — hopefully it will give you a better sense of what the insurance companies are talking about.
Activities of Daily Living (ADLs)
In Long Term Care insurance, ADLs are what you do independently everyday – eating, bathing, dressing, moving about (mobility), transferring (for instance, from a bed to a chair), using the toilet, and maintaining bladder and bowel continence; ADLs are used to measure the ability to function
Medical care that is required for a short period of time to cure a certain illness and/or condition
Adult Day Care
Recreational and/or rehabilitative services provided for persons who benefit from daytime supervision; an alternative between care in the home and in an institution
Assisted Living Facility
A non-medical institution providing room, board, laundry, some forms of personal care, and usually recreational services; also known as domiciliary care facility, sheltered house, board and care home, community-based care facility, residential care facility, etc.
In life insurance, the person — or entity — who gets the money after you die
The longest period of a time a disability or Long Term Care policy will pay you benefits
Brand Name Drugs
A drug manufactured by a pharmaceutical company that’s chosen to patent the drug’s formula and register its brand name. These patents run for 17 years before the drug can be marketed by a generic drug company at a much lower cost to consumers.
In Long Term Care insurance, the key person (usually a relative) overseeing and providing the care for you if you are incapacitated
In a Whole Life life insurance policy, the money you would be paid if you cancel your Whole Life policy; you can also borrow against the Cash Value
Care for an illness continuing over a long period of time or recurring frequently
What you pay for your medical expenses
COBRA is short for the Consolidated Omnibus Budget Reconciliation Act. It is a federal law that allows people to continue benefits for a period of time after group health coverage ends. COBRA applies after a job loss, reduction in hours, death or divorce. The person usually pays the entire premium plus two percent.
In Long Term Care insurance, services that can be given safely and reasonably by a non-medical person, designed mainly to assist with ADLs, including bathing, eating, dressing and other routine activities
The medical expenses you are responsible for before your health insurance plan helps you
In Disability insurance, your physical or mental inability to perform the major duties of your occupation because of sickness or injury
Drug List (aka Formulary)
Used by insurance companies, a pre-approved list of preferred, commonly prescribed prescription drugs. These drugs are chosen by a team of doctors and pharmacists because of the drugs’ clinical superiority, safety, ease of use and cost (but mostly costs!).
Gross salary, wages, commissions, fees, etc., you get from being actively employed
The consecutive number of days for which no benefits are payable at the start of a disability or Long Term Care claim
EOB – Explanation of Benefits
An Explanation of Benefits (sometimes called a Claims Summary), is a document the health insurance company sends you and your medical providers telling you how your medical claims (expenses) have been processed. For you it is simply an FYI. The EOB lists the treatments that took place, the portion of the cost that is covered (called the negotiated rate), and the amount remaining for you to pay directly to the doctor. From the EOB (or Claims Summary), the doctor (or hospital) will send you an adjusted bill. When you receive an EOB from your health insurance company, keep it filed away in a safe place (where the dog can’t eat it!) so that you have it available for reference when you receive the bill from your doctor. Use the information on the EOB to make sure your doctor (or hospital) is billing you for the correct amount.
Certain conditions and causes which are not covered by a policy
Formulary (aka Drug List)
Used by insurance companies, it is a pre-approved list of preferred, commonly prescribed prescription drugs. These drugs are chosen by a team of doctors and pharmacists because of the drugs’ clinical superiority, safety, ease of use and cost (but mostly costs!).
Future Increase Option
In Disability Insurance, an optional benefit which allows you to purchase additional coverage up to a stated age, regardless of health, as long as your income warrants the increase
A prescription drug that has the same active-ingredient formula as a brand-name drug. A generic drug is known only by its formula name and its formula is available to any pharmaceutical company. Generic drugs are rated by the Food and Drug Administration (FDA) to be as safe and as effective as brand-name drugs. Usually, generics cost a lot less for you and the insurance company.
If you bought your health insurance before 3/23/10 and haven’t made any changes to it since, you have a Grandfathered Plan. It does not have to meet the requirements of the federal reform laws known as the Patient Protection and Affordable Care Act (PPACA).
In Disability Insurance, a type of insurance which cannot be cancelled or altered by the insurance company as long as you continue to pay premiums on time
Health Savings Account
A very good, smart money management tool which allows you to save tax free money to pay for medical expenses
HMO – Health Maintenance Organization
A Health Maintenance Organization (it used to be called Managed Care, but The Insurance Mom now refers to it as Mangled Care!). An HMO requires that you see only doctors or hospitals on their list of providers, and sometimes at a specific facility. An HMO also requires that you choose a Primary Care Physician (often sight unseen), who will provide all of your medical care and refer you to an approved specialist if they think it’s necessary. Generally an HMO will not cover medical expenses incurred by seeing someone who is not in the HMO group. Usually an HMO will have limited coverage for emergency medical care when you travel outside your own coverage area. In The Insurance Mom’s opinion, when you choose an HMO you lose control over your own medical destiny.
Home Health Care
Refers to a wide range of services, from skilled care and physical therapy to personal care delivered at home or in a residential setting
A doctor, lab or hospital who is contracted with the insurance company and who must discount their fees for you
A federal government insurance program to assist those age 65 and over and the disabled with medical and hospital expenses. In addition to hospital and doctor expenses, Medicare covers only skilled care in a skilled nursing facility and limited skilled nursing care at home. It does not provide benefits for personal or custodial care. Medicare requires co-payments and deductibles.
Medicare Part A
The part of Medicare that helps pay for hospital care. It also covers nursing home, home health and hospice care.
Medicare Part B
The part of Medicare that helps pay for doctors and outpatient care.
Medicare Part D
The part of Medicare that helps pay for prescription drugs. Insurance companies must be approved sponsors before they can offer Medicare Part D Prescription Drug plans.
Medicare Supplement Plans
Private insurance policies that supplement Medicare benefits by covering co-payments and deductibles for medical and hospital expenses. These policies do not provide coverage for personal or custodial care.
The hospitals, health care professionals and labs that have contracted with a health plan to provide health care services. When a provider is “in-network” they must discount their prices to you.
Any drug not on the formulary (a comprehensive list of pre-approved drugs, generic and brand name, that an insurance company will cover). You get no coverage for it.
If you bought your health insurance after 3/23/10 or made any changes at all to a plan you bought before 3/23/10, you have a Non-Grandfathered Plan. It must meet the requirements of the federal reform laws known as the Patient Protection and Affordable Care Act (PPACA).
Office Visit Fee
What the doctors charge you just for showing up and reading old magazines; sometimes you pay only a co-pay
A doctor, lab or hospital who can charge you as much as they like (watch out!)
The most medical expenses you are responsible for in any calendar year
Patient Protection and Affordable Care Act (PPACA)
The name of the health care reform law President Barack Obama signed on March 23, 2010.
PPACA (Patient Protection and Affordable Care Act)
The name of the health care reform law President Barack Obama signed on March 23, 2010.
PPO – Preferred Provider Organization
With a PPO, you can see any doctor you like, or visit any hospital usually within a preferred network of providers. You always have the option of seeing doctors or visiting hospitals that are “out-of-network,” but you will spend more of your own money on medical expenses. In a PPO, you do not have to choose a Primary Care Physician, and you can usually see any specialist without a referral (although a recommendation is always nice!). The PPO offers choice, flexibility, and more control over your medical life.
An injury, illness, or physical condition which existed prior to the issue of a health, disability, life, or Long Term Care policy
What you pay to own the policy
All medical services you receive, from a doctor, lab, hospital, etc.
In Long Term Care insurance, nursing home or home care that temporarily replaces the existing level of support received from an informal, non paid caregiver for the purpose of providing care and supervision to the patient while relieving the caregiver
Skilled Nursing Facility
State licensed institutional setting which provides nursing and rehabilitative care provided by or under the direction of skilled medical personnel – available 24-hours a day & ordered by a physician under a treatment plan.
Term Life Insurance
Pure life insurance that protects you for a fixed period of time, no bells and whistles here
The process used by an insurance company to assess the risk of providing insurance to you, meaning they look at your current health status and history
Whole Life Insurance
Along with its siblings, Universal and Variable, combines life insurance with an investment feature (also known as the Cash Value)