Benefits and Coverage Terminology

Benefits describe the services and items a plan offers. Coverage rules determine when and how those benefits apply. A covered benefit can still involve cost sharing, network conditions, authorization requirements, or limits.

Coverage and plan documents

• Benefit: A service, item, or category of care included under a plan’s terms.
• Covered service: A service eligible for payment when applicable coverage requirements are met.
• Exclusion: A service, item, or circumstance the plan does not cover.
• Limitation: A restriction on a benefit, such as frequency, quantity, or duration.
• Medical necessity: A standard used to assess whether a service or item is appropriate for a health need under applicable clinical and coverage rules.
• Evidence of Coverage (EOC): A document explaining a plan’s benefits, costs, rules, and member rights, commonly used in Medicare plans.
• Summary of Benefits: An overview of a plan’s benefits and costs.
• Summary of Benefits and Coverage (SBC): A standardized summary used for many private health plans; it is not the same document as a Medicare EOC.
• Member handbook: A guide explaining benefits, procedures, and rights under a plan or program.

Premiums and member costs

• Premium: A payment to maintain health coverage, commonly due monthly.
• Deductible: An amount a member pays for certain covered care before the plan begins paying under the applicable benefit rules.
• Copayment: A fixed member payment for a covered service or item.
• Coinsurance: A member’s share of an allowed cost, calculated as a percentage.
• Cost sharing: The portion of covered costs assigned to the member, such as deductibles, copayments, or coinsurance.
• Out-of-pocket limit: A limit on specified member costs for covered care during a defined period; exclusions and separate benefit limits may apply.
• Allowed amount: The amount recognized under a plan’s payment rules for a service or item.
• Balance billing: Billing a patient for the difference between a provider’s charge and the allowed amount, where permitted by law and applicable contracts.

Claims and explanations

• Claim: A request for payment or benefits submitted to a health plan.
• Explanation of Benefits (EOB): A statement explaining how a claim was processed and what amounts may be assigned to the member; it is not itself a bill.
• Denial: A decision not to approve coverage or payment for all or part of a request.
• Supplemental benefit: An additional benefit beyond a program’s basic benefit package, subject to the plan’s rules.
• Benefit period: A defined period used to measure certain benefits or costs; its meaning depends on the program and benefit.

Benefit definitions, cost-sharing rules, exclusions, and coverage documents vary by program and plan. A plan representative can explain the terms that apply. Covered does not necessarily mean free, and a general description is not a promise of payment for a specific claim.