Common Health Insurance Terms for Insurance-Covered Medical Supplies

Health Insurance Terminology

Allowed Amount
The maximum dollar amount your insurance plan will pay for a specific product.

Certificate of Medical Necessity (CMN)
A specific form completed by your healthcare provider that explains why a product is medically necessary for a specific condition. Some insurance plans require this before approving coverage.

Coinsurance
Instead of a set dollar amount, you may be responsible for a percentage of the cost (for example, 10% or 20%) after insurance pays its portion.

Copay
A fixed dollar amount you may be responsible to pay for some of your covered supplies (for example, $5 or $20 per order), depending on your plan.

Coverage Benefits
These are the types and amounts of supplies your insurance plan will pay for. Coverage is based on your diagnosis and your plan’s rules.

Documentation Requirements
Insurance plans often require medical records, clinical notes, and forms from your doctor to confirm medical necessity before approving the coverage of medical products.

Dual Eligible / Dual Benefits
This refers to individuals who have both Medicare and Medicaid.
Typically:

• Medicare pays first (primary)
• Medicaid pays second (secondary), often covering remaining costs

Explanation of Benefits (EOB)
A document sent by your insurance company that explains what was covered, what was paid, and what (if any) amount is your responsibility.

Letter of Medical Necessity (LMN)
A written letter from your provider that gives clinical justification for why certain medical supplies are needed.

Medicaid
A state and federally funded health program that helps cover medical costs for individuals with limited income. Coverage rules can vary by state and plan.

Medical Necessity
This means your doctor has determined that a product is clinically required to treat or manage your condition. Insurance plans only cover items they consider medically necessary.

Medicare (also referred to as Red, White, and Blue Medicare or Traditional Medicare)
A federal health insurance program primarily for individuals age 65 and older, and some younger individuals with disabilities or certain health conditions. This coverage includes Part A (hospital insurance) and Part B (medical insurance). Part D (Prescription coverage, must be added separately).

Medicare Advantage
Coverage that is offered by private insurance companies and approved by Medicare. Combines Part A, Part B, and usually Part D (prescription drug coverage) into one plan. Many plans may also include vision, dental, hearing, and wellness programs.

Network Provider
A health insurance plan that partners with HCD so that HCD can provide covered products and services.

Out-of-Pocket Cost
Any amount you may be responsible for paying that is not covered by your insurance.

Physician Order (sometimes referred to as a prescription)
A signed order from your doctor confirming that medical supplies are required for your condition. This is different from a retail prescription and is required for insurance coverage.

Prior Authorization
Some insurance plans require approval before a product can be shipped or a specific amount of a product (typically over the allowed amount) can be shipped. This process confirms that the item meets plan rules before it is covered.

Title XIX (Medicaid Form)
Title XIX is the federal name for Medicaid.
Some Medicaid plans require special state-specific Title XIX forms to be completed by your doctor before supplies can be approved for coverage and shipped.