GLOSSARY OF COMMONLY
USED TERMS

Annual out-of-pocket maximum for prescription

The most a patient has to pay for prescription medications in a plan year. After a patient spends this amount on deductibles, co-payments, and co-insurance, their insurance plan pays 100% of the costs of prescription medications. The out-of-pocket limit doesn't include monthly premiums or anything spent on prescription medications that their plan doesn't cover.

Appeal

An appeal is a way for offices and patients to request insurers to reconsider their decision to reject a claim. An appeal is typically conducted following a prior authorization denial. Appeals are filed using a process specific to each health plan; therefore, you should inquire about the specific process for a given insurer.

Appeals process

You use the appeals process to formally disagree with any insurer decision about a patient's healthcare services. It requires the insurer to review its initial decision again. Insurers must tell patients in writing how to appeal. Patients' appeals rights and the appeals process are covered in plan documents and on the back of each explanation of benefits (EOB) form.

Co-insurance

Co-insurance is the percentage of healthcare costs the patient pays after meeting their deductible, but before reaching their out-of-pocket maximum. For example, an insurer might pay 75% and the patient would pay 25%.

Commercial health insurance

Commercial health insurance is any type of health insurance policy not offered or provided by the government. Providers are generally for profit and offer group and individual plans. The majority of Americans receive their insurance through an employer that covers all or part of the premium, with the remaining cost deducted from the employee's payroll.

Co-pay accumulator program

An approach that some health plans take that does not count the cost of a prescription drug to be applied to the annual deductible if a co-pay card or co-pay reimbursement is used.

Co-payment

A co-payment, or co-pay, is a predictable, pre-set, flat amount a patient pays when they receive a covered service—like doctor visits, prescription drugs, and other healthcare services.

Deductible

A deductible is the dollar amount patients must pay themselves before their insurer starts contributing to the cost of medications and other services. After they meet the deductible, patients pay a co-payment for covered services and the insurance company pays the rest. Some plans have separate deductibles for prescription drugs and other specific services.

Formulary

A formulary is a list of prescription drugs covered by an insurer. If a specific drug isn't listed on the formulary, the insurer may deny coverage and require the use of an alternative drug. Formularies organize prescription drugs into categories, or tiers, based on the co-payment the patient is responsible for paying— for example, a patient may pay $5, $10, $20 or more depending on the drug. Generic drugs have the lowest co-payments—sometimes even $0. Brand-name and specialty drugs can have much higher co-payments or percentage-based prices associated with the cost of the drug.

HIPAA

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) is a federal law that required the creation of national standards to protect sensitive patient health information from being disclosed without the patient's consent or knowledge. The US Department of Health and Human Services issued the HIPAA Privacy Rule to implement the requirements of HIPAA. The HIPAA Security Rule protects a subset of information covered by the Privacy Rule.

In-network providers

The providers that a patient's plan has contracted with to provide healthcare services.

Medical exception

A medical exception is a request asking an insurer to waive its rules for a patient's particular circumstance. Common exceptions that may be requested include drug limits, coverage for nonformulary drugs, and tier pricing. To be approved for coverage, a request for an exception must include information from the prescriber about the medical necessity of the change.

Out-of-network providers

Providers who do not contract with a patient's health insurance or plan. Out-of-network co-insurance and co-payments are usually more than those in-network.

PA—prior authorization or prior approval

Some insurers require patients to receive authorization or approval before they'll cover a particular prescription. The reasons vary and can include the medication itself, the quantity prescribed, or the frequency of its administration. If the plan doesn't grant approval, it may not provide coverage. Prior authorizations may take up to 72 hours to process.

Pharmacy benefit

The prescription medications covered under an insurance plan.

Premium

The amount people pay for health insurance every month. In addition to premiums, people pay other costs for their healthcare, including a deductible, co-payments, and co-insurance.

Prescription deductible

The amount a patient pays for drugs before their health plan starts to pay a portion of the costs.

Prescription drug coverage

Health insurance (or plan) that helps pay for prescription drugs and medications.

Step therapy

In some cases, patients are required to first try certain drugs to treat their medical condition before the insurer will cover another drug for that condition. The prescriber and plan work together to ensure coverage.

Tiers

Most formularies are divided into different categories, called tiers, with increasingly higher co-payments. A typical 5-tier formulary organizes prescription drugs into preferred generic, preferred brand name, nonpreferred generic or brand name, specialty, and all others.

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