Terminology

Here is a list of terms and definitions that may be helpful as you navigate various aspects of insurance. If you have any specific questions, feel free to contact our office at (816) 292-7500.

Actual Cash Value (ACV): An amount equal to the replacement cost of lost or damaged property at the time of loss less depreciation of the property.

Actuary: A specialist trained in mathematics, statistics, and accounting who is responsible for rates and reserve calculations.

Allowed Amount: Maximum amount on which payment is based for covered health care services. This may be called “eligible expense,” “payment allowance” or “negotiated rate.” If your provider charges more than the allowed amount, you may have to pay the difference.

Appeal: A request for your health insurer or plan to review a decision or a grievance again.

Auto Liability: Coverage against an entity’s liability for loss arising out of the entity’s negligence and involving the entity’s ownership, maintenance or use of a scheduled automobile or a hired and not owned vehicle. (Contrast with Commercial General Liability)

Auto Physical Comprehensive Damage: Coverage against loss to a vehicle from any cause except collision with another object or its complete overturn.

Auto Physical Collision: Coverage against loss to a vehicle caused by its collision with another vehicle or its complete overturn.

Auto Physical Specified Perils: Coverage against loss to a vehicle caused by fire or explosion, theft, windstorm, hail, earthquake, flood, mischief, or vandalism.

Balance Billing: When a provider bills you for the difference between the provider’s charge and the allowed amount. A preferred provider may not balance bill you for covered services.

Beneficiary: A person who is eligible to receive coverage. Sometimes "beneficiary" is used for eligible dependents enrolled under a coverage plan; "beneficiary" can also be used to mean any person eligible for coverage, including both employees and eligible dependents.

Boiler and Machinery Coverage: Coverage against the sudden and accidental breakdown of boilers, machinery, and electrical equipment.

Case Management: Coordination and ongoing review of services to help make sure care is appropriate and meets a customer's health care needs. Case management is usually done when the customer has a condition that involves multiple services from several health care professionals. This term is also used to refer to coordination of care during and after a hospital stay, including preparing a discharge plan and following up after higher risk procedures.

Certificate of Insurance: A form which verifies that a policy has been written and states the coverage in general, often used as proof of insurance.

Claims-Made Form: An insurance policy that covers only those claims which occur and are reported during a certain policy period. (Contrast with Occurrence Form).

Claim status: A term used to describe where the claim is during the claim payment process. The claim could be paid, not paid, in-progress or waiting for action (for example, the doctor must provide more information before the claim can be processed).

Consolidated Omnibus Budget Reconciliation Act (COBRA): A federal law that allows people to continue benefits for a period of time after group health coverage ends. COBRA applies after a job loss, reduction in hours, death or divorce.

Co-insurance: Your share of the costs of a covered health care service, calculated as a percent of the allowed amount for the service. You pay co-insurance plus any deductibles you owe.

Coinsurance Clause: A clause contained in some property insurance policies under which the insured shares in a partial loss to the extent that the insured is underinsured at the time of the loss.

Commercial/General Liability: Coverage against an entity’s liability for loss arising out of the entity’s negligence (Contrast with Auto Liability).

Compensatory Damages: Damages awarded that compensate the insured party for the injury sustained, and nothing more.

Coordination of Benefits: When a person is covered under more than one insurance or health plan. It requires that carriers coordinate with one another to correctly consider benefits for all services payable.

Co-payment/Copay: A fixed amount you pay for a covered health care service, usually when you receive the service. The amount can vary by the type of covered healthcare service

Coverage: In insurance, amount and extent of risk covered by an insurer.

Declarations Page: A portion of an insurance contract that provides such information as the name and address of the insured, the policy period, the amount of insurance coverage, applicable premiums and deductibles.

Decline of Coverage: A letter to the insured from the insurer that explains why coverage is limited or denied based upon provisions in the contract.

Deductible: The portion of any claim for which the insured is obligated to reimburse the insurer or to pay in a first party loss.

Deductible (in reference to health coverage): The amount you owe for health care services your health insurance or plan covers before your health insurance or plan begins to pay. The deductible may not apply to all services.

Dependent Coverage: Health/Life insurance coverage for the head of a family which is extended to dependents as defined in the policy.

Disability Income Insurance: Coverage that provides periodic payments to replace income when the insured is unable to work as a result of sickness or injury.

Effective Date: The date on which coverage under a plan begins (also called start date).

Eligibility: Details contained in each health coverage plan that specify who qualifies for coverage under that plan.

Emergency Medical Condition: An illness, injury, symptom or condition so serious that a reasonable person would seek care right away to avoid severe harm.

Evidence of insurability: A statement of information needed for the underwriting of a health policy.

Exclusions: Specific conditions or services that are not covered under the coverage agreement.

Exemplary or Punitive Damages: Damages awarded over and above compensatory damages which serve to make an example of, or punish, the wrongdoer.

Explanation of Benefits (EOB): Statement sent by the health plan explaining what medical treatments and/or services were paid.

Flexible Spending Account (FSA): An account that allows employees to set aside pre-tax dollars to pay for certain health care or dependent care costs during a specific time period (usually one year). Employees deposit funds in the accounts each pay period. Funds that are not spent by the end of the plan year are lost. In 2013, the maximum health care FSA contribution will be $2,500. That amount will increase based on inflation.

Formulary: A list of preferred, commonly prescribed prescription drugs. These drugs are chosen by a team of doctors and pharmacists because of the drugs' clinical superiority, safety, ease of use and cost.

Hired and Not Owned Vehicle: Autos leased, hired, rented or borrowed by an insured.

Hold Harmless Agreement: A contractual arrangement whereby one party assumes the liability inherent in a situation, thereby relieving the other party of responsibility.

Hospital Outpatient Care: Care in a hospital that usually doesn’t require an overnight stay.

IBNR (Incurred but not reported): Refers to estimated losses during a stated period that have not been reported to the insurer as of the date under consideration.

Loss: Generally refers to (1) the amount of reduction in the value of an insured’s property caused by an insured peril, (2) the amount sought through an insured’s claim, or (3) the amount paid on behalf of an insured under an insurance contract.

Loss Ratio: The losses divided by the premiums paid.

Mediation: Usually a voluntary, non-binding meeting between a claimant and an insurer which is facilitated by a mediator in an attempt to resolve a claim.

Medically Necessary: Health care services or supplies needed to prevent, diagnose or treat an illness, injury, condition, disease or its symptoms and that meet accepted standards of medicine.

Negligence: Failure to use that degree of care which an ordinary person of reasonable prudence would use under the same or similar circumstances.

Network: The facilities, providers and suppliers your health insurer or plan has contracted with to provide health care services.

Nuisance Value: The amount an insurer will pay to settle a claim, not because it is a claim of substantial merit, but because the insurer considers it worth that amount to dispose of the claim and settle issues of risk exposure.

Occurrence: An event that results in an insured loss.

Occurrence Form: An insurance policy which specifies that coverage applies to all losses arising out of an occurrence during a policy period regardless of when the claim is reported (Contrast with Claims-made Form).

Open Enrollment: A period when employees can enroll in a health plan or make changes. Most employers offer an open enrollment period each year.

Out-of-Pocket Limit/Maximum: The most you pay during a policy period (usually a year) before your health insurance or plan begins to pay 100% of the allowed amount. This limit never includes your premium, balance-billed charges or health care your health insurance or plan doesn’t cover. Some health insurance or plans don’t count all of your co-payments, deductibles, co-insurance payments, out-of-network payments or other expenses toward this limit.

Plan/Policy: A written contract effecting insurance including endorsements.

Plan Year: Generally, any 12-consecutive-month period determined by the plan under which coverage is provided per the plan documents. MPR's plan year is from July 1 through June 30.

Pool Concept: An organization of entities through which particular types of risks are written with the premiums, losses, and expenses shared in agreed amounts among the entities belonging to the pool. Read more here.

PPD (Permanent Partial Disability): The determination by the Workers’ Compensation Court of the degree of permanent injury to an employee; benefits are payable based upon the Workers’ Compensation Act.

Preauthorization: A decision by your health insurer or plan that a health care service, treatment plan, prescription drug or durable medical equipment is medically necessary. Sometimes called prior authorization, prior approval or precertification. Your health insurance or plan may require reauthorization for certain services before you receive them, except in an emergency. Preauthorization isn’t a promise your health insurance or plan will cover the cost.

Premium: The amount paid by the insured for insurance coverage for a specified risk for a specified period of time.

Premium (in reference to health coverage): The amount that must be paid for your health insurance or plan. You and/or your employer usually pay it monthly, quarterly or yearly.

Primary Care Provider: A physician (M.D. – Medical Doctor or D.O. – Doctor of Osteopathic Medicine), nurse practitioner, clinical nurse specialist or physician assistant, as allowed under state law, who provides, coordinates or helps a patient access a range of health care services.

Property Insurance: Coverage that indemnifies a person with an interest in physical property for its loss or the loss of its income-producing ability.

Provider: A physician (M.D. – Medical Doctor or D.O. – Doctor of Osteopathic Medicine), health care professional or health care facility licensed, certified or accredited as required by state law.

Reinsurance: Insurance that involves acceptance by an insurer, called a reinsurer, of all or part of the risk of loss covered by another insurer. It is a way for an insurer to avoid having to pay for large, catastrophic losses.

Replacement Cost: The cost to replace the damaged property with like kind and quality, with no deduction for depreciation, but still subject to a “limit”.

Reservation of Rights: A letter from the insurer to the insured that provides details regarding certain exclusions to coverage under the insurance contract which the insurer may assert at a later time if facts develop that would exclude coverage, regardless of the insurer assuming the defense of the insured.

Reserves: An amount representing actual or potential liabilities retained by an insurer to cover the expected losses of insureds.

Retention: The net amount of risk which the ceding company or reinsurer keeps for its own account.

Runoff: The exposure to claims and losses after the expiration period of a policy.

Schedule: A list of items covered by an insurance policy with the items’ descriptions, valuations, locations or contents.

Self-Insurance: Financial preparations made to meet pure risk by appropriating sufficient funds in advance of estimated losses, including enough to cover possible losses in excess of those estimated.

Settlement Conference: A court ordered, binding conference involving the claimant, insured and insurer.

SIR (Self-Insured Retention): That portion of a risk or potential loss assumed by the insured; it may be in the form of a deductible, self-insurance, or no insurance.

Special Events Insurance: Coverage designed to insure against loss related to the sponsorship of events, such as firework shows, festivals, community events, celebrations, and the like.

Specialist: A physician specialist focuses on a specific area of medicine or a group of patients to diagnose, manage, prevent or treat certain types of symptoms and conditions. A non-physician specialist is a provider who has more training in a specific area of health care

Stop Loss: Any provision in an insurance policy designed to limit an insured’s losses at a specific amount; it may be for a specific loss or the aggregate of losses.

Subrogation Clause: A clause that gives the insurer the right to pursue any course of action, in its name or the name of the policy holder, against a third party who is liable for a loss paid by the insurer.

Surplus: That amount by which the assets exceed the potential liabilities of the insurer.

TIV: The total insured value on an insured’s schedule or appraisal of property coverage.

Third party administrator (TPA): A person or entity, which is not party to an insurance contract but is hired by the insurer to administer the benefits payable under the contract to the insured.

TTD (Temporary Total Disability): The weekly workers’ compensation benefit paid to an injured employee as determined by the Workers’ Compensation Act.

Unearned Premium: That portion of premium applicable to the unexpired or unused part of the period for which premium has been paid.

Urgent Care: Care for an illness, injury or condition serious enough that a reasonable person would seek care right away, but not so severe as to require emergency room care.

Workers’ Compensation: A schedule of benefits payable to an employee by his employer without regard to liability, which is required by state law in the case of injury, disability or death as a result of occupational hazards.

 

Sources:

Oklahoma Municipal Assurance Group

Department of Labor

Cigna Glossary