Important Health Insurance Terms & What They Mean: Part I

Before you sign the papers on a health insurance policy document, it is extremely important to read through all of the terms and conditions to understand the scope of services that you you will be covered under, in case of a medical need. While doing so, you are likely to find a number of terminologies related to health insurance that you may be unfamiliar with.

Here is a handy list of 15 such important terms and their meaning to help you in the process:

1. Premium: This is the sum of money the insured/policyholder has to pay on a monthly (sometimes quarterly) basis to an insurance company. Once you sign the policy documents and provide your bank information, this sum may be arranged to be auto-deducted from your account.
2. Allowed Amount: The allowed amount is the maximum sum of money that an insurance company offers to cover a specific healthcare service or procedure. If the treatment cost exceeds this amount, the policyholder will have to pay the balance amount on their own. This is different from the total sum insured, which is the overall amount an insurance company will spend for a single policy.
3. Term Date: The insurance policy you are signing up for is a contract for a limited period – typically a year. The term date refers to the last date of this contract. Beyond the term date, you will no longer be eligible for the insurance cover.
4. Healthcare Provider: These are the entities that offer healthcare services to patients, including hospitals, physicians, and private clinics, hospices, nursing homes, and other healthcare facilities.
5. Network Providers: Healthcare providerS that have entered into a contract of partnership with the insurance company to provide cashless benefits to insured/policyholders. IThe list of network providers/hospitals is usually provided along with your policy document.
6. Out-of-Network: Out-of-network refers to healthcare providers that are not part of an insurance company’s list of network. Cashless claims cannot be made by policyholders if they visit an out-of-network hospital. Instead, they will have to pay from their pockets and later submit a claim for reimbursement.
7. Indemnity: An indemnity is a type of health insurance plan where a person is eligible to receive care with any healthcare provider in exchange for higher deductibles and co-pays. It is also referred to as a fee-for-service insurance.
8. Managed Care Plan: A managed care plan is a type of health insurance that will only cover treatments made through network providers and will not offer any cover (including reimbursement) for treatment through out-of-network providers.
9. Deductible: A deductible is the amount a policyholder must pay towards his/her healthcare treatment before an insurance company begins to cover the costs as part of the policy. Deductibles range in price according to terms set in a person’s health plan.
10. Co-Insurance: In certain policies, the policyholder is expected to pay a certain percentage of the treatment cost while the insurance company pays the remaining. This is known as co-insurance.
11. Co-Pay: A co-pay is the amount that must be paid to a healthcare provider by the policyholder before they receive any treatment or services. Co-pays are applicable only in certain insurance policies.
12. Maximum Out of Pocket: The amount amount a patient is required to pay whether in terms of deductibles, co-pays or co-insurance.
13. Guarantor: The party paying for an insurance plan who is not the patient. Parents, for example, would be the guarantors for their children’s health insurance.
14. Third Party Administrator (TPA): A TPA is a third-party organisation, hired by the insurance company to act as the intermediary between the policyholder, the healthcare provider and the insurance company.
15. Subscriber: If your insurance is part of a group policy (such as one that an employer takes on behalf of employees), then each individual who is covered under the policy is a subscriber.