Glossary of Health Coverage Terms

Adverse Determination – An admission, availability of care, continued stay, or other health care service has been reviewed and has been denied, reduced, or terminated by the health carrier.  Failure for the company to respond in a timely manner to a request for a determination also constitutes an adverse determination.

Allowed Amount – The maximum amount a health plan will pay for covered health care services. This may be called “eligible expense,” “payment allowance," or "negotiated rate" on your Explanation of Benefits

Appeal – A request for your health carrier to review a decision or a grievance.

Balance Billing – When you receive services from an out-of-network health care provider, the provider is not obligated to accept the health carrier’s payment as payment in full and may bill you for the difference.

Consolidated Omnibus Reconciliation Act – Typically known as COBRA, a federal law that gives you the right to continue employer provided group health coverage on a temporary basis after a covered person leaves an employer with 20 or more employees. Employers of 20 or more workers must comply, including employers who provide coverage through Self-Insured health plans.

Coinsurance – The percentage of covered expenses under a health plan that will be paid once the deductible is satisfied.

Coordination of Benefits Act – Specifies how health claims are to be coordinated under Michigan law by Fully Insured health plans issuing major medical and dental coverage.

Copayment – Also known as a copay, a fixed dollar amount paid to a provider at the time health care services are received.

Cost-sharing – A patient’s financial responsibility for a health care service.  Common forms of cost-sharing include Deductibles, Coinsurance and Copayments. The Patient’s Protection and Affordable Care Act (ACA) sets cost-sharing maximums for an individual and for a family. The amounts are adjusted annually.

Deductible – A deductible is a specified dollar amount of medical expenses which the covered person must pay before a health plan will pay. Usually the deductible is an annual amount. For example, if your deductible is $5,000, your plan won’t pay until you’ve met your $5,000 deductible for covered health care services that are subject to that deductible. If you have a family plan, the deductible amount may be per person or a combined family total.

Essential Health Benefits – The ACA ensures that, as of January 1, 2014, health plans offered in the individual and small group markets, both inside and outside of the Health Insurance Marketplace, offer a comprehensive package of items and services, known as essential health benefits. Essential health benefits must include items and services within at least the following 10 categories: ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services; including behavioral health treatment; prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services, including oral and vision care.

Excluded Services – Health care services that your health plan doesn’t pay for or cover.

Explanation of Benefits – Commonly referred to as an EOB, a statement sent by a health plan to a covered individual explaining how a health claim was processed.

External Review – The review of an Adverse Determination by DIFS under the Patient’s Right to Independent Review Act (PRIRA). The insured person must exhaust the health carrier’s Internal Grievance Process before requesting an external review.

Formulary – The list of prescription drugs covered fully or in part by a health plan.

Fully Insured – A plan is fully insured when all benefits are guaranteed under a contract of insurance issued by a health carrier.

Grievance – A complaint that you communicate to your health plan.

Guaranteed Issue – A requirement that health carriers sell a health plan to any person who requests coverage.

Guaranteed Renewability – A Michigan law that requires health carriers to renew coverage under a health plan except under certain circumstances.

Health Insurance Marketplace – Also known as the Federally Facilitated Exchange, a federally operated insurance marketplace where individuals and small businesses shop for and compare health coverage.  The Marketplace can be accessed at www.healthcare.gov.

Individual Mandate – A requirement that everyone maintain health insurance coverage.

In-Network Provider – A provider who has a contract with your health plan to provide services to you at a negotiated rate.

Internal Grievance Process – Upon receipt of an Adverse Determination, a covered person may appeal the health carrier’s decision through the health carrier’s internal grievance process. 

Long-Term Care Insurance – Long-Term Care insurance is an insurance policy designed to provide coverage for at least 12 consecutive months for one or more necessary or medically necessary diagnostic, preventive, therapeutic, rehabilitative, maintenance, personal, or custodial care services provided in a setting other than an acute care unit of a hospital, such as a nursing home.

Long-Term Care Partnership Program – Under the Long-Term Care Partnership program, a qualifying long-term care insurance policy may protect a policyholder’s assets through a feature known as “asset disregard” under Medicaid.  This feature permits individuals to protect assets from Medicaid’s “spend-down” requirements for determining Medicaid eligibility and during the asset recovery process.

Limited Benefits Plan – A type of health plan that provides coverage for only certain specified health care services or treatments or provides coverage for health care services or treatments for a certain amount during a specified period.  Examples are an accident only, hospital indemnity, specified (dread) disease, dental and vision.

Medicaid – Medicaid is a federal program administered by the Michigan Department of Health & Human Services currently providing health coverage to pregnant women, people with disabilities, people in need of nursing home care and others meeting certain income requirements.

Medical Loss Ratio – The percentage of Premiums that are spent by a health carrier on health care services.  The ACA requires that large group health plans spend 85% of premiums on clinical services and other activities for the quality of care for enrollees. Small Group and individual health plans must devote 80% of premiums to these purposes.

Medically Necessary – Health care services or supplies needed to prevent, diagnose or treat an illness, injury, condition, disease or its symptoms and that meet accepted standards of medicine.

Medicare – A federal government program that provides health care coverage for all eligible individuals age 65 or older or under age 65 with a disability, regardless of income or assets. Eligible individuals can receive coverage for hospital services (Medicare Part A), medical services (Medicare Part B), and prescription drugs (Medicare Part D). Together, Medicare Part A and B are known as Original Medicare. 

Medicare Advantage – Medicare Advantage plans are offered by private companies approved by Medicare. Medicare Advantage plans are solely under the authority of the Center for Medicare and Medicaid Services (CMS), a federal agency. These plans are sometimes called “Part C” or “MA Plans.”  Medicare Advantage plans actually replace original Medicare coverage. They provide all of Part A and Part B coverage and must cover all of the services that original Medicare covers except for hospice care.  They also cover many of the same benefits as Medicare Supplement policies.

Medicare Supplement (Medigap) – Designed to help pay for costs that are not paid for by Medicare.  They also help pay for certain out-of-pocket expenses (like deductibles and coinsurance) not covered by original Medicare (Part A and Part B).

Mental Health Parity and Addiction Equity Act of 2008 – Also known as MHPAEA, a federal law requiring health plans to apply similar financial and treatment limits to mental health and substance use disorder benefits and medical/surgical benefits. 

Michigan Medicare/Medicaid Assistance Program (MMAP) – MMAP is funded by a grant from the Michigan Office of Services to the Aging through funding received from the Centers for Medicare and Medicaid Services, the Medicare agency and a grant from the Administration on Aging, and is not affiliated with the insurance industry. MMAP is a free health-benefit counseling service.

Minimum Essential Coverage – Any health plan that meets the ACA’s requirements for having health coverage. To avoid the penalty for not having insurance, you must be enrolled in a health plan that qualifies as minimum essential coverage.

Network – The facilities, providers and suppliers your health plan has contracted with to provide health care services.

Out-of-Network Provider – A provider who does not have a contract with your health plan to provide services to you. You will pay more to see an out-of-network provider. Contact your health carrier for a list of In-Network Providers.

Out-of-Pocket Maximum – The maximum sum paid by the insured on an annual basis after paying the coinsurance amounts for the allowable expenses of covered health services. The out-of-pocket maximum is adjusted annually.

Patient Protection and Affordable Care Act (ACA) – Also known as the Affordable Care Act or ACA, and generally referred to as Obamacare, was signed into law in March 2010.

Patient’s Right to Independent Review Act (PRIRA) – A Michigan law that provides patients with the right to request an appeal of an Adverse Determination and an External Review.

Preauthorization – A decision by your health plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called prior authorization, prior approval, or precertification, your health plan may require preauthorization for certain services before you receive them, except in an emergency. Preauthorization is not a promise your health plan will cover the cost.

Pre-Existing Condition – A pre-existing condition is a condition for which medical advice, diagnosis, care, or treatment was recommended prior to the application for health coverage.  Health plans subject to the ACA are no longer permitted to deny or rate health insurance premiums based on pre-existing conditions.

Premium – The periodic payment to a health carrier to keep your health coverage in force.

Self-Insured – Group health plans may be self-insured or Fully Insured. A plan is self-insured (or self-funded), when the employer assumes the financial risk for providing health care benefits to its employees.

Small Group – The market for health insurance coverage offered to small businesses – those with between 2 and 50 employees in most states.

Summary of Benefits and Coverage – You are required to receive an easy-to-understand summary about your health plan's benefits and coverage. Also referred to as Certificate of Coverage.

Usual, Customary, and Reasonable (UCR) – The amount paid for a medical service in a geographic area based on what providers in the area usually charge for the same or similar medical service. The UCR amount sometimes is used to determine the allowed amount.

Waiting Period – A period of time that an individual must wait before coverage becomes effective and claims may be paid. Premiums are not collected during this period.  A group plan is permitted to impose no longer than a 90-day waiting period on their employees.