Commonly Used Healthcare Terms

Here are a few commonly used terms to help you navigate through the confusing world of healthcare benefits:

Preferred Provider Organization (PPO) – A PPO is a combination of hospitals and physicians that agrees to provide particular services at discounted rates to a group of people, perhaps under contract with a private insurer. Generally PPOs will offer more choice for the patient and will provide higher reimbursement to the providers. Participants of a PPO may seek care outside of the network of providers, but generally pay higher rates and face higher deductibles and co-payments.

Health Maintenance Organization (HMO) - An HMO is an entity that provides coverage of designated health services needed by members for a fixed, prepaid premium. HMOs offer prepaid, comprehensive health coverage for both hospital and physician services. An HMO contracts with health care providers, e.g., physicians, hospitals, and other health professionals, the members of an HMO are then required to use participating or approved providers for all health services. Additionally, it is often typical that all services will need approval by the HMO prior to administration. HMOs are the most restrictive form of managed care benefit plans because they restrict the procedures, providers and benefits; however, they often offer participants a lower deductible and co-payment.

Explanation of Benefits (EOB) – An EOB is a statement sent to covered individuals explaining the services that were provided, the amount billed by the provider, the amount to be paid out by the insurance plan, and the amount owed by the participant. The EOB is provided to participants by the insurance plan.

Deductibles – A deductible is the amount required to be paid by the participant under a health insurance contract, before the insurance benefits become payable. Different components of a health plan may have separate deductibles and deductibles are usually expressed in terms of an "annual" amount.

Co-Payment, Copayment, Co-pay – A co-payment is a cost-sharing arrangement in which the health plan participant pays a specified flat amount for a specific service (such as $10 for an office visit or $5 for each prescription drug). The amounts of co-pays can vary widely from plan to plan; however a co-payment does not vary with the cost of the service.

Out of Pocket Expenses, Out of Pocket Costs – Out of pocket expenses are dollar amounts set by insurance plans that limit the amount a participant has to pay out of his or her own pocket for particular healthcare services during a particular time period.