The language of medical bills and insurance is unique, and includes a lot of terms not used in everyday conversation. It also uses terms that mean something different than the way we may ordinarily use them.
We have compiled a guide to the most common medical billing and insurance terms, to help make sense of this language.
Allowed Amount: The amount an insurance carrier allows as payment for a particular healthcare service. If the provider is contracted (in-network) with the insurance carrier, this is total amount that the provider will be paid (including both what the insurance carrier pays and what the patient pays), and the patient may not be held responsible for any charges above this amount for this particular service. If the provider is not contracted (out-of-network) with the insurance carrier, this is the maxium amount the carrier may pay for the service, but the patient can be held financially responsible for anything above this amount by the provider.
Authorization: When an insurance carrier requires the patient to obtain permission before receiving particular healthcare services, this is the term used to identify the approval of such services. Not all services require an authorization. Some services require an authorization only when the patient is seeking care from a non-contracted (out-of-network) provider. When an authorization is required but not obtained, sometimes the patient can be held responsible for all the provider's charges for that healthcare service, but somethimes the patient may not be held responsible for those charges.
Balance Billing: This refers to when a healthcare provider holds the patient financially responsible for the difference between his charges and the amount paid to him by the insurance carrier. In most cases, when a provider is in-network (see below), he may not balance bill the patient (except for copay, coinsurance, deductible and services which are deemed not medically necessary, which are all explained below).
Blue Cross Blue Shield: This is a federation of health insurance carriers across the country. The carriers are separate entities, but may offer crossover services for members from one BCBS area who are seeking care from providers contracted with a sister plan in a different area.
Chargemaster: This is the name for the amount that a particular provider or facility charges for particular healthcare services.
Coinsurance: If a patient and her insurance carrier each pay a percentage of the allowed amount (see above) for healthcare services, the coinsurance is the percentage that the patient is responsible for paying. Not all plans have a coinsurance. Those that do may have a different coinsurance rate for different types of services, both in and out of the carrier's network.
Contractual adjustment: When a provider is contracted (in-network) with the patient's insurance carrier, this is the amount of money between the provider's charge for a service, and the insurance carrier's allowed amount (see above). This difference is written off (or adjusted off) by the insurance carrier, and the patient is not responsible for this amount.
Coordination of Benefits (COB): When a patient has coverage under more than one insurance carrier, each insurance carrier will require the member to advise them about all other health insurance plans to determine which plan is responsible for what services, or which is primary and which is secondary. That information, and the resulting relationship between the insurance carriers for that member, is called COB. Some insurance plans require COB information from members who they believe may either have a second plan, or may not be eligible for coverage, such as children with two working parents who are both eligible for health insurance, for adults who are eligible for Medicare, or older children who are students.
Copay or Copayment: Some plans require members to make a fixed-amount payment to their healthcare provider at the time of service. This amount may vary if the provider is a primary care provider (such as an internist or gynecologist) or a specialist (such as a dermatologist or cardiologist), or if the service rendered are considered well-visits (such as an annual physical).
CPT Codes: Short for Current Procedural Terminology, these codes are used to represent healthcare services. Presently the 4th iteration of these codes (CPT-4) is in use in the United States. CPT codes, their definitions (which establishes under what circumstances they may be used) and their relative values (which helps healthcare providers establish relative pricing for them) are controlled by the American Medical Association.
Deductible: This is the amount that the patient must pay her healthcare provider(s) before the insurance carrier starts paying on the patient's behalf. For in-network services, the patient is not responsible for the entire amount that the provider charges, but only the allowed amount (see above) for those particular services. The size of the deductible varies from plan to plan, and may change from year to year even if the other provisions of the plan do not. A plan may also have separate deductibles for different types of services (for example, there may be a separate out-patient deductible and a separate in-patient deductible, for hostpital services).
Explanation of Benefits (EOB): Although some insurance carriers call this by a variety of names, an EOB is the document which explains the financial calculations made by an insurance carrier about a processed medical claim. Insurance carriers send EOBs to the patient as well as the provider, and although these may look different they contain the same information. Some healthcare providers get their EOBs electronically, in which case they are called Electronic Remittance Advice (ERA) files. ERAs can be printed, but while they appear different from the insurance-generated EOB, they too contain the same information.
Guarantor: The person paying for the patient's financial responsibility who is not the patient is identified as the guarantor. For example, parents are guarantors for their minor children's health insurance. Once a child reaches the age of 18, she is an adult, and is responsible to ensure that her financial obligations are met, regardless of whether she is covered under her parent's insurance and/or if her parents pay her bills. (As an adult, if her bills are not paid, she will be the one sent to collections.)
ICD Codes: Short for International Classification of Disease, these codes are used to represent medical diagnoses. Presently the 9th iteration of these codes (ICD-9) is in use in the United States. The next iteration (ICD-10) is scheduled to begin being used in October 2015 (but the last few rollout dates have been delayed by Congress, so while this date is probable, it is not guaranteed).
In-Network: This refers to a healthcare provider's relationship with a particular insurance plan, and means that the provider has a contract with the plan which, among other things, establishes how much the provider will be paid for the services he renders. Please see Out-of-Network.
Maximum Out of Pocket (MOP): This is the most that a patient is responsible for paying herself in a given period of time. For example, if an insurance plan has a $5,000 MOP, once the patient has paid that amount in deductible, copay and coinsurance, the patient no longer has any financial responsiblity for the remainder of the period (which is usually a calendar year) for in-network services. Some plans also have a (separate) MOP for out-of-network services. The MOP may also be called the Out of Pocket Cap.
Medical Necessity: This term is used by healthcare plans to identify treatments that it covers. Cosmetic services are not considered medically necessary. (Many plans include the removal of benign lesions, such as moles, in this category.) Some conditions that most reasonable people would consider to be medically necessary are not considered as such by a health plan, either for all its beneficiaries or because it is a specific provision excluded by the plan's terms. (An example of this is that some plans consider any treatment for acne to not be medically necessary, regardless of how bad the condition appears.)
Out-of-Network: This refers to a healthcare provider's relationship with a particular insurance plan, and means that the provider does not have a contract with the plan, and therefore the provider is not limited in how much is charged for the services he renders. Consequently, if a patient has out-of-network benefits, and sees an out-of-network doctor, the doctor is permitted to hold the patient responsible for the difference between the chargemaster (see above) and the amount paid to him by the insurance carrier, even if that is a very large amount. Please see In-Network.
Patient Responsibility: For in-network (see above) services, this is the total amount that the patient is financially liable for (including, as defined above, copay, coinsurance and deductible).
Preauthorization & Precertification: Please see authorization, above.
Pre-Existing Condition: This is a medical condition that the patient already had prior to obtaining coverage from the insurance carrier. This may also include a condition that would have been obvious to the patient, even if it was not formally diagnosed by a physician (such as a broken bone, or allergies). If a patient had coverage under a different healthcare insurer prior to the present plan, they may be able to get this provision waived by obtaining a Certificate of Creditable Coverage from the previous insurer and submitting it to the present insurer. Although this situation has mostly been done away with since the implementation of the Affordable Care Act (Obamacare), it does still apply in some circumstances, and also applies to insurance policies that were in effect prior to the law's enactment.
Premium: This is the amount a person (or her employer) pays to an insurance carrier on a scheduled basis (usually monthly) in order to receive coverage from the carrier. Failure to pay the premium may result in termination of the healthcare coverage. Delayed payment of premium may result in a lapse in coverage, and services rendered during that window may not be covered by the insurance carrier.
Referral: This is a provision in some healthcare plans whereby the patient must obtain permission from one provider, usually her registered primary healthcare doctor, to obtain services from another provider. Please see authorization, above.
Remittance Advice: Please see explanation of benefits, above.
Specialist: This is a physician (or a physician extender, such as a nurse practitioner) with expertise in a particular area of medicine, such as cardiology or orthopedics. Many insurance plans have a higher copay (see above) responsibility for a specialist than for a primary care provider.
Supplemental Insurance: This is an insurance plan which covers the patient for her Medicare deductible and/or coinsurance (see both, above).
Termination: This is the term, and the corresponding date, which mean that the patient's health insurance policy has ended. Any services rendered to the patient after this date will not be covered by the carrier. Most insurance carriers consider the last date of coverage to be the termination date although some, confusingly, apply that label to the first date that the patient is no longer covered.
Usual, Customary and Reasonable (UCR): This is the amount of money paid for a particular healthcare service in a given geographic area, on averag. It is often used by insurance carriers to determine the allowed amount (see above). Some insurance carriers peg their out-of-network (see above) payemnts to a particular percentage (or multiple) of UCR for that CPT code (see above).
Write-Off: See contractual adjustment (above).