Common Insurance Terms to Know

We understand that many insurance and health care terms may be difficult to understand— it can almost seem like a different language. Below is a list of common insurance terms and simple definitions to help you throughout your decision-making process. Understanding these terms will help you make informed decisions and speak to your insurance provider with knowledge and confidence.

All definitions are based on the website glossary, unless otherwise noted.

Americans with Disabilities Act (ADA)

Americans with Disabilities Act (ADA) is the law that prohibits discrimination against people with disabilities. ADA applies to employment, transportation, public accommodation and even communications. Four federal agencies enforce ADA: Department of Justice, Department of Transportation, Federal Communications Commission (FCC) and the Equal Employment Opportunity Commission (EEOC). 1

Affordable Care Act (ACA)

Affordable Care Act (ACA) is the comprehensive health care reform law enacted in March 2010. The purpose of the Affordable Care Act is to increase the accessibility and quality of health insurance in the United States. It was also created to reduce overall health care costs. The name 'Affordable Care Act' refers to the final version of the law.

Appeal Process

Appeal process is a request for your health insurer to review and reconsider a decision. If your health insurer refuses to pay a claim or ends your coverage, you have the right to appeal the decision and have it reviewed by a third party. Insurers are required by law to tell you why they’ve denied your claim or ended your coverage. Information about the appeal process and how to appeal an insurance decision can be found on You can also find more local information about appeals through the New Jersey Department of Banking and Insurance at

The Autism Mandate of the State of New Jersey

The Autism Mandate of the State of New Jersey requires fully-insured plans to cover a specific list of therapies, services and screenings related to autism. 2 3
Therapies, services and screenings covered by a fully-insured plan include:

  • screening and diagnosis of autism spectrum disorders (ASD)
  • medically necessary occupational therapy, physical therapy and speech therapy
  • select family cost-share expenses incurred through the New Jersey Early Intervention Program


Coinsurance is a form of cost sharing with your insurance company. You contribute to part of your health care costs, and so does your insurer. Coinsurance requires that you pay a percentage of the cost of your health care services and your insurer pays the rest. For example, if you have a 20% coinsurance for physical therapy, this means that you pay for 20% of the cost of the therapy, and your health insurer pays 80%. It’s important to note that as your health care premium goes down, your copays and your coinsurance often will go up.


Copayment is the fixed amount you pay for a covered health care service. For example, you might have a $20 copay to see a primary care doctor, a $30 copay to see a specialist, and a $25 copay to fill a prescription. A copayment is a form of cost sharing with your insurance company: You contribute to part of your health care costs, and your insurance company usually pays the rest.


Deductible is what you owe for covered services before your insurance policy kicks in. For example, if you have a $2,500 deductible, you will have to pay for the first $2,500 of your covered health care services yourself, before your insurance starts contributing. It’s important to note that not all health care services you use (and pay for) will count toward your deductible.

Developmental Delay

Developmental delay describes a circumstance in which a child does not reach developmental milestones at the expected time. Developmental delays are ongoing in the process of development. A situation in which a child temporarily lags behind is not the same thing. Developmental delays can occur in different forms, and may affect motor skills, thinking skills, language skills or social skills.


Disabilities are limitations affecting a range of major life activities, including seeing, hearing, walking, thinking and working. Please check the insurance plan you are interested in for disability standards that will determine whether or not a specific disability will be covered. A legal definition of disability can be found at 4


Disorders disrupt normal physical or mental functions. Medical disorders can be divided into categories depending on their nature. Disorder categories include mental disorders, genetic disorders, physical disorders, emotional disorders and behavioral disorders. The terms “disease,” “disorder” and “illness” are often used interchangeably, depending on context and preference. 5 6

Durable Medical Equipment (DME)

Durable medical equipment (DME) describes equipment or supplies used regularly in a home setting. DME covered by health care an insurance provider may include oxygen equipment, wheelchairs, crutches or blood testing strips for diabetics, etc. 7

Essential Health Benefits

Essential Health Benefits are health service categories that must be covered by certain health plans (such as those offered on the federal health insurance marketplace and through Medicaid), as required by the Affordable Care Act. The categories include ambulatory patient services; emergency services; hospitalization; maternity and newborn care; mental health and substance use disorder services (including behavioral health treatment); prescription drugs; rehabilitative and habilitative services and devices; laboratory services; preventive and wellness services and chronic disease management; and pediatric services(including oral and vision care).

Flexible Spending Account (FSA)

Flexible spending account (FSA) is a health care expense account set up through your employer. FSAs allow you to assign an amount of your pre-tax wages to the account, which can be used to pay health care and insurance expenses. FSAs can be used for payments such as deductibles, copayments, prescription drugs and medical devices. FSAs allow you to pay for medical expenses with tax-free dollars. Funds in an FSA do not roll over from year to year if they are not spent.

Habilitative/Habilitation Services

Habilitative/Habilitation Services are health care services that can help teach or improve skills required in daily life. These services may include speech therapy, physical therapy and occupational therapy. Children who are not walking or talking by the expected age often work with habilitation services.

Health Insurance Marketplace

Health Insurance Marketplace is a government-run resource and marketplace where individuals, families, and small businesses can learn about health insurance, compare different insurance plans, and purchase coverage. Other marketplace resources include information on how to reduce health care costs and information about other government-provided medical programs, such as the Children's Health Insurance program (CHIP.) While commonly thought of as a website, (health, the marketplace is also accessible through call centers and through in-person assistance. Open enrollment on the federal health insurance marketplace begins on November 15. Visit health for more information.

Health Maintenance Organizations (HMO)

Health Maintenance Organizations are a type of health insurance plan that usually limits coverage to care from doctors who work for or contract with the HMO. It generally won't cover out-of-network care except in an emergency. An HMO may require you to live or work in its service area to be eligible for coverage. HMOs often provide integrated care and focus on prevention and wellness.

Health Savings Account (HSA)

Health Savings Account (HSA) is a medical savings account available to individuals who are enrolled in a high deductible health plan. Like an FSA, funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike an FSA, funds in an HSA roll over from year to year if they are not spent.

In-home Nursing Care

In-home nursing care is provided by a licensed nurse in your own home.


In-network refers to a health care provider who is part of your “network.” Your network of providers (doctors, hospitals, etc.) is specified by your insurance plan. When you visit an in-network provider, the amount that you pay out-of-pocket will likely be significantly less than if you see a provider who is not in your network.

Medical Necessity

Medical necessity refers to health care services and supplies that are considered the standard of care for the evaluation and treatment of a disease, condition or illness. 9 Insurance companies will typically not cover treatment that is not “medically necessary” as a matter of cost and safety. Decisions on what care and services are “necessary” are based upon the opinion of your doctor. However, even after a doctor prescribes a treatment, your insurance company may not agree that a treatment is medically necessary.

Most major insurance policies often require you to get preauthorization from your insurer for major procedures and services, such as hospital stays and surgeries. If you do not get preauthorization, your insurance may not pay for the service.

Narrow-Network Plans

Narrow-network plans place limits on the doctors and hospitals available to their subscribers. While you will have less choice in terms of where you can receive care through a narrow network, you will also pay a lower premium. 13


Out-of-Network refers to a health care provider that is not part of your “network.” Your network of providers (doctors, hospitals, etc.) is specified by your insurance plan. When you see an out-of-network provider, you may be responsible for the full cost of your treatment. Some health plans do offer coverage for out-of-network providers, but a trip to an out-of-network provider will likely be significantly more expensive. It is important to find out if a specific service is covered before you utilize a doctor or hospital that is out-of-network.

Out-of-Pocket Costs

Out-of-Pocket Costs are expenses that are not paid by your insurance. Examples include deductibles, coinsurance and copayments and any other costs for services that are not covered by your plan.

Out-of-Pocket Maximum (OOPM)

Out-of-pocket maximum (OOPM) is the most you will pay for covered services during a policy period (usually one year) before your health insurance begins to pay for all covered costs and services. This limit takes into account deductibles, coinsurance, copayments and any other required spending for health benefits. Services you pay for that are not covered by your insurance (i.e. an uncovered therapy session) do not count toward your OOPM.

Outpatient Care

Outpatient care is treatment that does not require you to stay overnight at a health care facility.


Preauthorization is a decision by your insurance provider that a certain health service, treatment or piece of equipment is medically necessary. A preauthorization does not mean that your insurer will cover all of the costs. (Also called prior authorization, prior approval or pre certification.)

Preferred Provider Organization (PPO)

Preferred provider organization (PPO) is a type of health plan that contracts with hospitals and doctors to create a network of providers. Generally, you will pay less if you use providers that belong to your plan's network.


Premium is a fixed amount that must be paid for your health insurance. It is paid monthly, quarterly or yearly. Your premium is paid by you and/or your employer. You may also qualify for premium subsidies through the federal health insurance marketplace.

Primary Care Physician

Primary care physician is a doctor who serves as your first and primary medical source. Primary care physicians are also able to refer you to specialists and will help coordinate your use of the entire health care system. 10


Referral is an order from your doctor for you to receive a particular medical service or see a specialist. Some health plans require you to get a referral before seeking the service or else it may not be covered.

Respite Care

Respite care is temporary care that gives families a break from caring for children or adults with special needs. It may be provided by other family members, friends or professional care providers. It can last from a few hours to a more extended period of time, and is designed to help families balance the emotional and physical demands of caring for a special needs individual. 11

Self-Funded/Self-Insured Plans

Self-funded/Self-insured plans are commonly offered by employers in New Jersey. The employer collects premiums from employees and takes on the responsibility of paying the medical claims of its employees and their dependents. State insurance regulations (and some federal regulations) do not apply to self-funded insurance plans. (To find out if you have a self-funded/self-insured plan, look at your health care ID card. The phrase 'administered by' or your employer’s logo indicates that the plan is likely self-funded. 'Insured by' indicates that your plan is not self-funded, but rather fully-insured. Ask your employer's benefit manager for more information.)


Self-pay means you pay for your medical care either because you do not have insurance or because you have to pay out-of-pocket for a service to satisfy your coinsurance or meet your deductible.

Skilled Nursing

Skilled nursing is care provided by a licensed nurse either in your own home or in a nursing home.


Specialist is a doctor whose expertise is in specific area of medicine. A non-physician specialist is a health care provider who has more training in a specific area of health care, but is not a doctor.


Therapeutic is a broad term that refers to the treatment of a disease. “Therapeutic medicine,” for example, is a general description of any branch of medicine that is concerned with treating patients. 12

Tiered Plans

Tiered Plans are an approach to ranking the providers in your health network. In a tiered network, health insurers sort providers into tiers based on how well they handle costs and the quality of the treatment they deliver. Doctors and providers that are more cost efficient and perform at a higher standard are placed in the preferred tier. You will be charged a lower co-pay if you see a doctor in the preferred tier. 14

  1. United States Department of Labor
  2. Autism New Jersey
  3. American Speech-Language-Hearing Association
  4. University of Michigan Hospital Systems
  5. Oxford English Dictionary definition, “disorder”
  6. WebMD Types of Disorders
  7. page on Durable Medical Equipment Coverage
  8. page on Managed Care
  9. State Government of Illinois Department of Insurance
  10. American Academy of Family Physicians
  11. Department of Human Services
  12. definition, “therapeutic”
  13. McKinsey Center for US Health Reform study
  14. National Institute for Health Care Management

The content on this website is presented for general informational purposes only. You should not construe it as advice for your specific circumstances, and should consult with qualified professionals for advice on your specific needs. Terms and Conditions: Please contact Children's Specialized Hospital for further information.

Patient Stories

  • "She's happy, making progress, developing beautifully, and thriving. I credit this to the staff that works with her. They are devoted and never gave up on Sophia.

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