Benefits terminology can be confusing, so please see below for an explanation of common insurance concepts and terms.
A provider or insurance company.
The amount you pay each year before the plan begins to pay coinsurance.
Evidence of Insurability (EOI)
The documentation of the good health condition of the insurance beneficiary and his/her dependent’s health in order to be approved for coverage. It is only required in certain circumstances.
Explanation of Benefits (EOB)
After you receive medical services, your insurance will provide you with an EOB. It will outline details regarding how your insurance processed your medical claim, including what portion of the charges your insurance paid and what portion, if any, you are responsible for paying.
Flexible Spending Account (FSA)
A medical plan’s formulary is a preferred brand-name drug list of the most cost-effective outcome-based drugs. You pay less when using a drug on the plan’s formulary list.
Health Maintenance Organization (HMO)
With HMOs, your primary care physician (PCP) is the gatekeeper to other types of care. If you need to see a specialist, your PCP will be your advocate and refer you to one. Note that HMOs typically do not cover out-of-network benefits.
Health Savings Account (HSA)
High Deductible Health Plan (HDHP)
A plan that provides competitive health insurance along with a tax-advantaged health savings account (HSA) that lets you decide how to spend your health care dollars. Essentially, you pay a lower premium in exchange for a higher deductible, much like car insurance.
This refers to a contribution, or “deposit,” an employee may make to his/her HSA, or a deposit made by the company to the HSA of an employee participating in the HDHP.
In-and Out-of-Network Providers
Benefit plans develop networks by contracting with doctors, hospitals, labs, etc., who have agreed to provide health care services to members at negotiated rates. You generally pay less out of pocket when you use in-network providers.
The maximum amount you will pay out of pocket for covered medical expenses per calendar year, including your deductible. After your share of covered expenses reaches this annual limit, the plan pays 100 percent for eligible network services and supplies for the remainder of the calendar year.
Preferred Provider Organization (PPO)
A type of health plan that contracts with doctors, hospitals, labs and other health care providers to create a network of participating providers. You generally pay less when you use providers that belong to the PPO network. You may use providers that fall outside of the plan’s network at an additional cost. This type of plan typically has higher premiums and a lower deductible than a high-deductible
health plan (HDHP).
Prescription Drug Out-of-Pocket Maximum
Reasonable & Customary (R&C) Charges
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 R&C amount sometimes is used to determine the allowed amount.
Summary Plan Description (SPD)
An important document that tells plan participants what the plan provides and how it works.