Glossary of Billing & Insurance Terms

Authorization/precertification – Permission to provide health care services to a patient. Permission may be required by one or more of the following: a health insurance plan, medical group or hospital.

Birthday rule – Used to determine primary and secondary coverage for children when both parents have health insurance coverage. The word “birthday” refers only to the month and day in a calendar year, not the year in which the person was born. If the parents are not separated or divorced, the health insurance of the parent whose birthday occurs first in a calendar year is considered the primary insurance while the other parent’s benefits are considered the secondary coverage. If the parents have the same birthday, the health insurance plan that has covered the parent for the longest time is considered the primary insurance. In situations when the parents are separated or divorced and there is more than one health insurance plan covering the child, the benefits are determined in the following order:*

1. The health insurance plan of the parent with legal custody of the child.
2. The plan of the spouse of the parent with legal custody of the child.
3. The plan of the parent who does not have legal custody of the child.

*There can be some discrepancy, depending on a court decree. If the court decree states only that the parents share joint custody and does not include specific terms, the benefit determination would be the same as the above paragraph regarding parents who are not separated or divorced – the insurance of the parent whose birthday occurs first in a calendar year is considered the primary insurance, while the other parent’s benefits are considered the secondary coverage.

Coordination of benefits (COB) – A health insurance policy provision that helps determine the primary carrier in situations when an insured person is covered by more than one policy.

Deductible (DED) – The amount of money, as determined by the benefit plan, that a person must pay for authorized, covered health care services before insurance payment begins. Deductibles usually are calculated on a calendar year basis. However, they also can be based on the anniversary date of a patient’s coverage under the plan or the plan year of the insured person or subscriber.

Guarantor – The person or entity responsible for paying a bill. A parent or legal guardian/trustee is the guarantor for patients who are 18 and younger.

Medicaid – A federal health insurance program administered and operated by the state that provides health care benefits to low-income individuals.

Medicare – Medicare is a federal insurance program that primarily serves people age 65 or older, people who are disabled and dialysis patients with end-stage renal disease. Medicare is divided into three parts:

1. Medicare Part A covers inpatient hospital services, nursing home care, home health care and hospice care.
2. Medicare Part B helps pay the cost of doctors’ services, outpatient hospital services, medical equipment and supplies, and other health care services.
3. Medicare Part D is the prescription drug benefit.

Medicare supplement – A supplemental private insurance policy to help cover the patient’s liability after benefits are paid by Medicare.

Noncovered service – A cost incurred by the patient for a service that is not covered by his or her health insurance plan or policy.

Out of network (OON) – Services rendered by a provider who does not have a contractual agreement with the patient’s health insurance plan. Typically, managed care plans enter into contracts with a panel of providers. If a patient seeks care outside that network, he or she may be financially responsible for some or all of the care provided.

Point of service (POS)/tiered plan – Health coverage that allows the patient to receive services from a provider by using different levels of benefits.

Preferred provider organization (PPO) – Health coverage that allows the member to direct his or her own health care. A patient may self-refer within a contracted network of physicians after paying a deductible, copayment or coinsurance amount. A patient may choose to receive treatment from a provider outside of the PPO network, thereby increasing his or her deductible or out-of-pocket maximum. The patient may be required to get authorization from the health insurance plan for some services such as physical therapy or MRI.

Primary care physician (PCP) – A physician who contracts with a health insurance plan to manage a person’s health care needs. A primary care physician can provide a wide range of general care or, when medically necessary, refer a patient to a specialist. Primary care physicians are typically internists, general practitioners, pediatricians or OB/GYNs. Most health maintenance organization, exclusive provider organization and point of service plans require members to choose or be assigned to a primary care physician.

Workers’ compensation – Health insurance coverage that is provided by employers to cover employees injured on the job. This coverage is separate from regular medical coverage.