Insurance Definitions.

Allowed Amount

The amount of the billed charge the insurance company deems is payable by the plan.


Medical care on an out-patient basis, such as hospital outpatient clinics and ER Departments, physician's office and home health care are examples.


The name given to professional services such as laboratory tests and radiology exams.
Assignment of BenefitsDefinition: The patient or guardian signs the Assignment of Benefits form so that the physician or medical provider will receive the insurance payment directly.


If a physician wants to perform a surgery, order a medical supply, or refer the patient to a specialist an authorization and approval by the health plan is required.

Average Wholesale :

This value is generally accepted as a standard measure of evaluating the cost of a particular medication.

Benefit Penalty:

A method used by the insurance company to reduce payment on a claim when the patient or medical provider does not fulfill the rules of the health plan.

The Birthday Rule

A method of determining coordination of benefits under both parent's plans of medical insurance.
BundlingDefinition: A method by which the insurance company decides to combine payment for two or more medical services.


A payment methodology in which the physician is paid a set dollar amount determined by a per member per month (pmpm) calculation to deliver medical services to a specified group of people.


Medical services that are separated from a contract and paid under a different arrangement.
Case ManagementDefinition: A method by which a health plan attempts to control costs by directing all of the procedures for care of an individual through a nurse or other health care professional.


A request for payment by a medical provider for a given medical service or item.
COBRADefinition: Consolidated Omnibus Budget Reconciliation Act


A percentage the patient is responsible for on a given insurance claim

Contracted Provider

A medical provider that has an agreement with a health plan to accept their patients at a previously agreed upon rate for payment.

Conversion Plan

When an individual terminates his/her group policy, an option to continue coverage is by purchasing an individual health plan called a conversion policy.


A per occurrence payment

Cost Containment

When the insurance company devises a way to reduce the benefit payment or costs associated with the health plan.

Covered Expense

A medical procedure or item that is deemed payable by the insurance plan.

CPT Code

Current Procedural DeductibleDefinition: A set dollar amount which must be satisfied within a specific time frame before the health plan begins making payments on claims


Those items or medical services that are not covered by the health plan.
Exclusive Provider Organization (EPO)Definition: A health plan that has the characteristics of an HMO or PPO plan.

Explanation of Benefits

A summary of the payment made by your health plan to the medical provider.

Extension of Benefits

The health plans offers an additional 12 months of coverage due to a disabling condition

Fee for Service

A method of payment for medical services rendered

Fee Schedule

A list of CPT codes and dollar amounts an insurance company will pay for a particular medical service


A listing of pharmaceuticals the health plan pays for.

Fully Insured

An Employer purchases insurance coverage from a licensed insurance company and the insurance company assumes all of the risk.

HCFA 1500

The standard claim format used by health plans on which to consider payment to the medical provider.


Health Maintenance Organization

ICD-9 (International Classification of Diseases 9th Edition)

A standard format of identifying the illness, injury or diseases by using a three digit code.

Indemnity Plan

A non PPO or HMO plan, a plan that does not have preferred provider networks or many cost containment features.

Integrated Delivery System

An organization that combines hospital, physician and other medical services as part of a larger health care system.

IPA (Independent Practice Association)

An organization of physicians who are contracted with an HMO plan.

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