Tag Archives: Coverage Descriptions

Understanding Common Health Insurance Terms

Understanding Common Health Insurance Terms

Whether you are searching for health insurance now or already enrolled in a plan, you may find the plan terms, or coverage descriptions, to be difficult to understand. Don’t worry. You are not alone.

Below is a list of common health insurance terms to help you understand what your health insurance plan has to offer:


The deductible refers to the amount of money the insured is required to pay out-of-pocket before accessing benefits from the insurance policy. Deductibles are usually setup on a policy (starting with the effective date of the policy) or calendar year basis, and start over each year. Some services, such as doctor visits and prescriptions, may be available without first satisfying the deductible. Usually there are separate individual and family deductible amounts. Many policies place a cap on the number of individual deductibles that need to be met for a family regardless of the number of family members.


After an insured’s deductible is met, most policies require the insured to pay a percentage of each claim. For example, with an 80% co-insurance plan, the insured would pay 20% of all bills once their deductible was satisfied.

Out-of-Pocket Max

In most cases, the out-of-pocket max refers to the maximum co-insurance that an insured is required to pay before the policy picks up 100% of eligible costs. Some policies include the deductible as part of the out-of-pocket maximum.

Lifetime Maximum

The amount of money the policy will pay during the life of the policy. This figure is often set at $1 million per insured, or some variation thereof, but some policies offer an unlimited lifetime maximum.


These are items or medical services that are not covered by the health plan.

Pre-existing Condition

A medical condition diagnosed prior to the effective date of the health plan. If someone can document at least 12 months of continuous coverage, most health plans are required under HIPAA to cover pre-existing conditions. Some policies, such as short-term or temporary plans, do not cover pre-existing conditions regardless of whether a person has had prior coverage.

Coordination of Benefits

If the insured has two or more insurance policies, such as being covered by a spouse’s insurance plan along with their own, that would cover payment for certain conditions, the the secondary insurer would pay only for expenses not covered by the primary insurer.

Medical Necessity

A medical procedure or service must be performed only for the treatment of an accident, injury or illness and is not considered experimental,
investigational or cosmetic.

Participating Provider

A physician or other medical provider has agreed to accept a negotiated fee for services provided to members of a specific health plan.  These
providers are often called “in-network.”

Usual & Customary Rate (UCR)

This is a reduction in the payment of benefits on a claim which is justified by the insurance company as “the going rate” in a certain
geographical area.

Allowed Amount

The amount of the billed charge the insurance company covers. For an in-network provider, this would be equal to the negotiated rate. For other providers, this might be based off a usual and customary rate for a given area.