Answer Center > HSA Basics

Adjudication — The administrative procedure used to process a claim for service according to the covered benefit.

Advocacy — Activities done to help a person or group get something the person or group needs or wants.

Agent — Advisors who work with you to assess your insurance needs and help plan for long-term financial security and stability.

Allowable Charge (PPO) — The charge that a Participating or Preferred Provider is allowed to charge you based on a contract between Health Net Life and such provider.

Annual Enrollment Period — A period of time prior to the beginning of the plan year during which eligible employees may change their benefit elections.

Beneficiary — The person(s) designated to inherit any proceeds or income from your account after your death.

Benefit — Amount payable by the health plan to a claimant, assignee, or beneficiary when the insured suffers a loss.

Balance Billing — A bill for the difference between what your insurer will pay and what the physician charges for a service.

Cafeteria — A benefits plan that allows employees to select from a pool of choices, some or all of which may be tax-advantaged. Potential choices include cash, retirement plan contributions, vacation days, and insurance.

Calendar Year — January 1 through December 31 of the same year.

Capitation — A set dollar limit that you or your employer pays regardless of the level or type of care provided.

Catch-up Contributions — Additional contributions, above those listed as the maximum annual contribution limits, available to the HSA owner in the year which they reach 55.

Certification (PPO) — The requirement that certain covered expenses require review and approval, frequently prior to the expenses being incurred. Services that are not certified will be subject to penalties.

Claim — A request by an individual (or his or her provider) to the health plan for payment or reimbursement for services obtained from a healthcare professional.

Coinsurance — The amount you are required to pay for medical care in a fee-for-service plan after you have met your deductible. The coinsurance rate is usually expressed as a percentage. For example, if the insurance company pays 80 percent of the claim, you pay 20 percent.

Consolidated Omnibus Budget Reconciliation Act (COBRA) — A Federal legislation requiring employers to offer continued health insurance coverage to employees who have had their health insurance coverage terminated. A federal law that requires most employers to allow eligible employees and their beneficiaries to continue to self-pay for their coverage after it normally terminates for up to 18, 24, 29 or 36 months.

Consumer-Driven Healthcare (CDH)/ Consumer-Directed Health Care — A term that refers to health plans in which employees have a personal health account, such as a health savings account (HSA) and/or a health reimbursement arrangement (HRA), from which they pay medical expenses directly.

Consumer-Driven Health Plans (CDHP) — Consumer-directed health plans typically offer reduced premium costs, in exchange for a higher deductible. In addition, many provide incentives and tools to manage both healthcare decisions and the costs associated with them.

Coordination of Benefits (COB) — A system to eliminate duplication of benefits when a person is covered under more than one health plan; benefits under both plans are usually limited to no more than 100% of the claim.

Copayment — A way of sharing medical costs. You pay a flat fee every time you receive a medical service (for example, $10 for every visit to the doctor). The insurance company pays the rest.

Coverage — The different types of options selected and the benefits paid under a plan or insurance contract.

Covered Expenses/Services — Most insurance plans, whether they are fee-for-service, HMOs, or PPOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures the insurer agrees to pay for. They are listed in the policy.

Creditable Coverage (PPO) — In accordance with state and federal law, you are entitled to "creditable coverage," which will reduce or offset the time pre-existing conditions are excluded under this plan. Creditable coverage is any individual, group or governmental health care coverage plan (other than a supplemental plan) that you were covered by prior to becoming eligible for this plan, unless there is a significant bread in coverage* before you become eligible for this plan. We will assist you in obtaining proof of creditable coverage if you are unable to do so. *A significant break in coverage generally means that you were without coverage for more than 63 days prior to becoming eligible for this plan. If you lost coverage because you lost your job, or your employer canceled coverage, you may be entitled to creditable coverage as long as you become eligible for this plan within 180 days of losing your prior coverage.

Custodian — An agent, bank, credit union, trust company or other organization which holds and safeguards an individual's assets for them.

Date of Service — The day the services are received by a patient.

Deductible — The amount of money you must pay each year to cover your medical care expenses before your insurance policy starts paying; often determined on a calendar year or plan year basis.

Denial of Claim — Refusal by the health plan to pay or reimburse a claim.

Effective Date — The date coverage begins for a covered person under the contract.

EFT — Electronic funds transfer; also referred to as direct deposit.

Eligibility — A generic term applying to enrollment benefits, service reimbursement, (etc.), most commonly defined as the determination of whether a member qualifies for coverage.

Elimination Period — The number of days in which you receive covered care or services before benefits are payable.

Emergency Care (HMO/PPO) — Any otherwise covered service that a reasonable person with an average knowledge of health and medicine would seek if he or she was having serious symptoms, and believed that without immediate treatment, any of the following would occur:
his or her health would be put in serious danger (and in the case of a pregnant woman, would put the health of her unborn child in serious danger)
his or her bodily functions, organs or parts would become seriously damaged
his or her bodily organs or parts would seriously malfunction
Emergency care also includes ambulance and ambulance transport services provided through the "911" emergency response system, if the request is made for emergency care. Emergency care also includes severe pain or active labor.
Emergency care also includes additional screening, examination and evaluation by a physician (or other health care provider acting within the scope of his or her license) to determine if a psychiatric emergency medical condition exists, and the care and treatment necessary to relieve or eliminate such condition within the capacity of the facility.
When your situation is life threatening, call 911. All ambulance services provided as a result of a 911 call will be covered, if the request is made for an emergency.

Exclusions — Specific conditions or circumstances for which the policy will not provide benefits.

Explanation of Benefits (EOB) — A formalized statement to a subscriber and/or provider showing action taken on a claim.

Family Coverage — Any coverage specified for more than one individual (individual coverage).

Flexible Spending Account (FSA) — An employee benefit that allows you to have pre-tax dollars withheld from your paycheck to pay for un-reimbursed medical, dental, or dependent care expenses. You choose how much money you want to contribute to an FSA at the beginning of each plan year. FSA's cannot be used in conjunction with an HSA account.

First-dollar Coverage — Immediate reimbursement or no payment required for specific covered expenses, without meeting a deductible. Some preventative services may have first-dollar coverage under the terms of your health plan.

Generic Drug — The identical or bioequivalent medicine to a brand name drug in dosage form, safety, strength, route of administration, quality, performance characteristics and intended use; although generic drugs are chemically identical to their branded counterparts, they are typically sold at substantial discounts from the branded price.

Health Maintenance Organization (HMO) — An organization set up and operated to provide health services under a pre-paid or Capitated arrangement; monthly fees to the HMO remain the same regardless of the types or levels of service provided.

High Deductible Health Plan (HDHP) — An HDHP is a health benefit plan that typically offers lower premiums in exchange for higher annual deductibles when compared to traditional health plans. To be an HSA compatible or "qualified" HDHP, the plan must meet the requirements of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 for minimum deductibles and out-of-pocket maximums. High deductible plans may offer first-dollar coverage of preventive care and still remain qualified.

HIPAA — Legislation that has several national, administrative, and financial provisions. Enacted in 1996, it addresses subjects including healthcare reform, medical savings accounts, COBRA revisions, and fraud and abuse. Health reform rules include rules pertaining to pre-existing conditions, crediting of prior coverage, and guaranteed renewability. The HIPAA Administrative Simplification section mandates specified electronic formats for claims and other transactions in addition to mandates for national identifiers, security and privacy.

Health Reimbursement Arrangement (HRA) — A tax-favored savings account employees can use to pay for healthcare expenses. It is employer-funded and lets employees build up savings for future needs. An HRA can be coupled with a standard or high deductible health plan (HDHP), or can be offered on its own.

Health Savings Account (HSA) — A tax-favored savings account you can use to pay for healthcare expenses. It is owned by you, is 100% vested, and lets you build up savings for future needs. A requirement for opening an HSA is that it be coupled with a qualified high deductible health plan (HDHP) that covers catastrophic medical expenses after the deductible. Specifically, for 2007 the plan must have a deductible of at least $1,100 for individual coverage and $2,200 for family coverage.
Important Note: If you own an HSA and later become ineligible to make deposits, you can still receive distributions from your HSA. All that is limited is your ability to put additional contributions into an HSA.

Indemnity Health Plan — Individuals pay the deductible plus a pre-determined percentage of the cost of healthcare services, and the health plan pays the remaining portion; fees for services are defined by the providers and vary from physician to physician.

Individual Coverage — Coverage for only one individual.

Insurability — The health status of an insurance applicant, which makes him/her acceptable to an insurance company, i.e. health, financial condition, occupation.

Lifetime Maximum — When benefits to the covered individual total this amount, no more benefits will be paid for the person under the contract.

Line of Credit — An approved extension of credit used for payment of qualified medical expenses. An application for credit is submitted and approved or declined based on the member's qualifications.

LTC Insurance — Long-Term Care Insurance is intended to help an insured pay for long-term, chronic care needs. It is sometimes referred to as Nursing Home Insurance, but can also be used for at-home care, skilled facility care, assisted living facilities and other care for chronic needs.

Managed Care — The way a health care system manages costs, use, and quality. All HMOs and PPOs, and even many fee-for-service plans, apply managed care techniques.

Maximum Annual Contribution — The total amount the government allows an HSA holder to add to their account in a given calendar year.

Medicaid (MediCal in California) — State programs with federal matching funds for public health assistance to persons, regardless of age, whose income and resources are insufficient to pay for health care.

Medical Necessity — Term used by insurers to describe medical treatment that is appropriate and in accordance with generally accepted standards of medical practice.

Medicare — Federally sponsored program under the Social Security Act that provides hospital benefits, supplementary medical care, and catastrophic coverage to persons 65 years of age and older and to some younger persons who are covered under Social Security benefits.

Member — Often used to refer to the contract holder, policy holder, or subscriber in a health plan; also known as employee, covered person, enrollee, or insured.

Minimum Available Balance — Balance required in the HSA account before an initial or subsequent investment trades can be made.

Mutual Fund — A pool of securities (stocks, bonds, money market assets, or trusts) managed by an investment adviser.

Network — A group of doctors, hospitals and other healthcare providers contracted to provide services to insurance company customers for less than their usual fees.

Noncancellable Policy — A policy that guarantees that you will receive insurance as long as you pay the premium. This is also known as a guaranteed renewable policy.

Not subject to Deductible — From your fist day of coverage, you can receive these services for the standard copayment or coinsurance, without having to first satisfy the deductible.

Open Enrollment — The period of time during which a person is first eligible to enroll under the contract, starting on the date of the person's initial date of eligibility and ending several weeks later, also used to refer to the annual enrollment period.

Out-of-Pocket Maximum — The total amount of the calendar year deductible plus the amount of any coinsurance and/or copays a covered person must pay each calendar year for covered services before benefits will be paid at 100%; some services may not apply to the out-of-pocket maximum.

Overdraft — When the HSA has insufficient funds required for payment, the difference is paid out of a third party line of credit (subject to credit approval).

Plan Year — Twelve month period between health plan renewals.

Point-of-Service (POS) Plans — Combination of HMO and PPO features. They provide a comprehensive set of health benefits and offer a full range of health services much the same as the HMO. However, the member does not have to choose how to receive services until they need them. The member can then opt to use the defined managed care program, or can go out-of-plan for services but pay the difference for non-plan benefits (e.g. 100 percent coverage for managed care Vs. 80 percent coverage out-of-plan).

Policy (PPO) — The written document including all riders and supplements, if any, setting forth the insurance benefits to which you are entitled, to whom the benefits are payable, and any limitations or requirements applicable to you.

Preferred Provider Organizations (PPO) — Type of health insurance program where a limited group of physicians and hospitals provide a broad range of medical care for a predetermined fee; individuals who do not use the preferred providers for care usually have to pay a higher portion of their medical expenses.

Premium — The amount you or your employer pay, in addition to copayments and coinsurance, on a periodic basis in exchange for insurance coverage.

Prescription Drug List — A list of drugs covered by the health plan often listed as 1st tier (generic), 2nd tier (brand name preferred), or 3rd tier (brand name non-preferred).

Preventive Care — Healthcare services intended to prevent a medical condition from occurring, or to detect the onset of a condition early so that it can be more effectively treated. Preventive care includes regular medical check-ups, screening tests, vaccination, and the encouragement of a healthy lifestyle.

Pre-existing Condition — A health problem that existed before the date a person's health plan became effective.

Primary Care Physician — Usually the first contact for healthcare, often a family physician or internist; a primary care physician monitors your health, diagnoses and treats minor health problems, and refers you to specialists if another level of care is needed. This is often a family physician or internist, but some women prefer to use their gynecologist.

Provider — Any person (doctor, nurse, dentist, therapist) or institution (hospital, clinic) that provides medical care.

Qualified Medical Expense (QME) — Internal Revenue Code Section 213(d) defines qualified expenses, in part, as "medical care" amounts paid for insurance or "for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body." To be eligible, these expenses must be to alleviate or prevent a physical defect or illness. Expenses solely for cosmetic reasons generally are not considered expenses for medical care. Examples include facelifts, hair transplants and hair removal (electrolysis). Expenses that are merely beneficial to your general health (e.g., vacations) are not expenses for medical care. One fact or circumstance that often, but not always, indicates that medical care involves the treatment or prevention of disease is whether the care is prescribed by a physician. A mere suggestion by a physician probably is not enough. In addition, there should be a doctor-patient relationship between you and the physician prescribing the care.

Referral — A form provided by a member's doctor authorizing services from other network providers if the attention of a specialist is required.

HSA Saver — A term used to describe an HSA holder who chooses to save money in their HSA and use a line of credit to pay for health expenses. The member has the option to "save" money in the HSA and use a line of credit as the primary account for payment of qualified medical expenses.

HSA Spender — A term used to describe an HSA holder who chooses to spend money in their HSA rather than saving it. The member has the option to " spend" money from the HSA first and a line of credit can be used as overdraft protection.

Tax-Free Contributions — When enrollees participate in a payroll deduction program through their employer, deductions may be taken from payroll before calculating the member's taxable Federal income, social security and (for most states) taxable state income.

Third-Party Payer — Any payer for health care services other than you. This can be an insurance company, an HMO, a PPO, or the Federal Government.

Trades — Buying and selling of mutual funds.

Usual, Customary and Reasonable (UCR) — The amount customarily charged for a service or supply; most plans will only cover services up to UCR and individuals may be required to pay the full cost of the difference.

Utilization Review — A set of formal techniques designed to monitor the use of, or evaluate the clinical necessity, appropriateness, efficacy, or efficiency of healthcare services, procedure or settings.

Waiting Period — The waiting period is the length of time an employee must continuously work for the employer before he is eligible to enroll for coverage under the contract.