Health Insurance Terms
AAOI (As Any Other Illness) - Insurance coverage whereby any eligible charges are covered as any other medical expense under the provisions of the plan. Usually associated with maternity benefits.
Access - The patient's ability to obtain medical care. The ease of access is determined by such components as the availability of medical services and their acceptability to the patient, the location of health care facilities, transportation, hours of operation and cost of care. An individual's ability to obtain appropriate health care services. Barriers to access can be financial (insufficient monetary resources), geographic (distance to providers), organizational (lack of available providers) and sociological (e.g., discrimination, language barriers). Efforts to improve access often focus on providing/improving health coverage.
Accreditation - The process by which an organization recognizes a program of study or an institution as meeting predetermined standards. Two organizations that accredit managed care plans are the National Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation of Health Care Organizations (JCAHO).
Actuarial - Refers to the statistical calculations used to determine a managed care company's rates and premiums charged their customers based on projections of utilization and cost for a defined population.
Actuary - In insurance, a person trained in statistics, accounting and mathematics who determines policy rates, reserves, and dividends by deciding what assumptions should be made with respect to each of the risk factors involved (such as the frequency of occurrence of the peril, the average benefit that will be payable, the rate of investment earnings, if any, expenses, and persistency rates), and who endeavors to secure as valid statistics as possible on which to base assumptions. Professionally trained individual, usually with experience or education in insurance, who conducts statistical studies such as determining insurance policy rates, dividend reserves and dividends, as well as conducts various other statistical studies. A capitated health provider would not accept or contract for capitated rates, or agree to a capitated contract without an actuarial determining the reasonableness of the rates.
Acute Care - A pattern of health care in which a patient is treated for an acute (immediate and severe) episode of illness, for the subsequent treatment of injuries related to an accident or other trauma, or during recovery from surgery. Acute care is usually given in a hospital by specialized personnel using complex and sophisticated technical equipment and materials. Unlike chronic care, acute care is often necessary for only a short time.
Adjudication - Processing claims according to contract.
Administrative Costs - Costs related to utilization review, insurance marketing, medical underwriting, agents' commissions, premium collection, claims processing, insurer profit, quality assurance programs, and risk management. Administrative costs also refer to certain allowable costs on hospital HCFA cost reports, usually considered overhead. Rules exist which disallow certain expenses, such as marketing.
Administrative Services Only (ASO) - A relationship between an insurance company or other management entity and a self-funded plan or group of providers in which the insurance company or management entity performs administrative services only, such as billing, practice management, marketing, etc., and does not assume any risk. The client bears the financial risk for the claims. Clients contracting for ASO can include health plans, hospitals, delivery networks, IPAs, etc. A provider system wishing to capitate may contract with a TPA or ASO for certain services for which the provider group does not want to bring in house. This is a form of outsourcing.
Admission Certification - A method of assuring that only those patients who need hospital care are admitted. Certification can be granted before admission (preadmission) or shortly after (concurrent). Length-of-stay for the patient's diagnosed problem is usually assigned upon admission under a certification program.
Adverse Selection - Usually refers to a person with impaired health or with an expected medical need who applies for insurance coverage financially favorable to him/herself and detrimental to an insurance company. The problem of attracting members who are sicker than the general population, specifically, members who are sicker than was anticipated when developing the budget for medical costs. A tendency for utilization of health services in a population group to be higher than average or the tendency for a person who is in poor health to be enrolled in a health plan where he or she is below the average risk of the group. From an insurance perspective, adverse selection occurs when persons with poorer-than-average health status apply for, or continue, insurance coverage to a greater extent than do persons with average or better health expectations. Occurs when premium doesn't cover cost. Some populations, perhaps due to age or health status, have a great potential for high utilization. Some population parameter such as age (e.g., a much greater number of 65-year-olds or older to young population) that increases the potential for higher utilization and often increases costs above those covered by a payer's capitation rate. Among applicants for a given group or individual program, the tendency for those with an impaired health status, or who are prone to higher than average utilization of benefits, to be enrolled in disproportionate numbers and lower deductible plans.
Affiliated Provider - A health care provider or facility that is part of the HMO's network usually having formal arrangements to provide services to the HMO member.
Age/Sex Factor (ASF) - Underwriting measurement representing the medical risk costs of one population compared to another based on age and sex factors.
Age/Sex Rates (ASR) - Also called table rates, they are given group products' set of rates where each grouping, by age and sex, has its own rates. Rates are used to calculate premiums for group billing and demographic changes are adjusted automatically in the group.
Age-At-Issuance Rating - A method for establishing health insurance premiums whereby an insurer's premium is based on the age of individuals when they first purchased health insurance coverage. This is an older form of actuarial assessment.
Age-Attained Rating - Similar to Age-at-Issuance Rating, this method for establishing health insurance premiums is based on the current age of the beneficiary. Age-attained-rated premiums increase in price as the purchasers grow older.
Agency - An insurance sales office which is directed by a general agent, manager, independent agent, or company manager.
Agency for Health Care Policy and Research (AHCPR) - The agency of the Public Health Service responsible for enhancing the quality, appropriateness and effectiveness of health care services.
Agent - A licensed individual who represents several insurance companies and sells their products.
Aggregate Deductible - A required number of deductibles that must be met by a family unit before the family deductible is met. (i.e. An insurance company offers a $250 deductible and a 2X aggregate deductible. Under this coverage, the family must meet the equivalent of two deductibles, or $500. This can be met by any combination of family members but one person cannot satisfy the entire family deductible.)
Aggregate Stop Loss - The form of excess risk coverage that provides protection for the employer against accumulation of claims exceeding a certain level. This is protection against abnormal frequency of claims in total, rather than abnormal severity of a single claim.
Allowable Charge - The maximum charge for which a third party will reimburse a provider for a given service. An allowable charge is not necessarily the same as either a reasonable, customary, maximum, actual, or prevailing charge.
Allowed Amount - Maximum dollar amount assigned for a procedure based on various pricing mechanisms. Also known as a maximum allowable.
Alternate Delivery Systems - Health services provided in other than an inpatient, acute-care hospital or private practice. Examples within general health services include skilled and intermediary nursing facilities, hospice programs, and home health care. Alternate delivery systems are designed to provide needed services in a more cost-effective manner. Most of the services provided by community mental health centers fall into this category.
Ambulatory Care - Health services provided without the patient being admitted. Also called outpatient care. The services of ambulatory care centers, hospital outpatient departments, physicians' offices and home health care services fall under this heading provided that the patient remains at the facility less than 24 hours. No overnight stay in a hospital is required.
Anniversary Date - The beginning of an employer group's benefit year. The first day of effective coverage as contained in the policy Group Application and subsequent annual anniversaries of that date. An insured has the option to transfer from an indemnity plan (which may have maximum benefit levels) to an HMO.
Approval - A term used extensively in managed care and, to many, implies the primary process of "managing" managed care. Approval usually is used to describe treatments or procedures that have been certified by utilization review. Can also refer to the status of certain hospitals or doctors, as members of a plan. Can describe benefits or services which will be covered under a plan. Generally, approval is either granted by the managed care organization (MCO), third party administrator (TPA) or by the primary care physician (PCP), depending on the circumstances.
Approval Date - The date an employer group is approved with all paperwork processed and accepted. Case is considered covered by the plan at this point. It is possible for a case to be approved for a retroactive coverage. The condition which exists when the person or object to be insured meets the underwriting standards of the insurer.
Approved Charge - Limits of expenses paid by Medicare in a given area of covered service. Charges approved by payment by private health plans. Items that are likely to reimbursed by the insurance company.
Approved Health Care Facility, Hospital or Program - A facility or program authorized to provide health services and allowed by a given health plan to provide services stipulated in contract.
APS (Attending Physicians Statement) - A form completed by a medical doctor who has treated an insured or proposed insured for injury or illness. The form provides the insurance company with information to help underwrite the risk or settle the claim.
ASO (Administrative Services Only) - An arrangement whereby a self-funded employer hires an outside firm to perform specific administrative services, usually including claims administration, while retaining financial responsibility for claim payment.
Assignment of Benefits - Method used when a claimant directs that payment be made directly to the health care provider by the health plan.
Balance Billing - The practice of billing a patient for the fee amount remaining after insurer payment and co-payment have been made. Under Medicare, the excess amount cannot be more than 15 percent above the approved charge.
Base Capitation - Specified amount per person per month to cover healthcare cost, usually excluding pharmacy and administrative costs as well as optional coverages such as mental health/substance abuse services.
Base Year Costs - In Medicare, the amount a hospital actually spent to render care in a previous time period. Depending on the hospital's Medicare cost reporting period, the base year was the fiscal year ending on or after September 30, 1982 and before September 30, 1983 for hospitals in operation at that time.
Beneficiary (Also eligible; enrollee; member) - Individual who is either using or eligible to use insurance benefits, including health insurance benefits, under an insurance contract. Any person eligible as either a subscriber or a dependent for a managed care service in accordance with a contract. An individual who receives benefits from or is covered by an insurance policy or other health care financing program.
Beneficiary Liability - The amount beneficiaries must pay providers for Medicare-covered services. Liabilities include copayments, deductibles, and balance billing amounts. HCFA has very strict rules about health providers billing patients for their liabilities. Cost based facilities are not allowed to charge non-payment by beneficiaries to bad debt unless a clear history of collection activity is recorded.
Benefits - Benefits are specific areas of plan coverages, i.e., outpatient visits, hospitalization and so forth, that make up the range of medical services that a payer markets to its subscribers. Also, a contractual agreement, specified in an Evidence of Coverage, determining covered services provided by insurers to members.
Benefit Limitations - Any provision, other than an exclusion, which restricts coverage in the Evidence of Coverage, regardless of medical necessity.
Benefit Package - Aggregate services specifically defined by an insurance policy or HMO that can be provided to patients. The services a payer offers to a group or individual.
Benefit Payment Schedule - List of amounts an insurance plan will pay for covered health care services.
Blended Census - Refers to groups requesting a "mix and match" dual option quote. Employees are coded as HMO, PPO or POS and quoted as such. This allows a more accurate calculation of final rates.
Brand-name drug - Prescription drug which is marketed with a specific brand name by the company that manufactures it. May cost insured individuals a higher co-pay than generic drugs on some health plans. (see "generic.")
Broker - A licensed insurance professional who represents a client or insured in solicitation, negotiation, or procurement of contracts of insurance, and who may render services incidental to those functions. By law, the broker may also be an agent of the insurer for certain purposes such as delivery of the policy or collection of the premium.
Cal-COBRA (California Continuation Benefits Replacement Act) - California law requiring employers with 2-19 employees to offer continued health care coverage (medical, dental, and vision) to employees and their dependents who lose coverage through qualifying events similar to Federal COBRA.
Calendar Year Deductible - A deductible that applies to any eligible medical expenses incurred by the insured during any one calendar year.
Capitated Plan - An HMO's provider-contracting model whereby a physician is paid a flat fee per year, per subscriber who uses that particular doctor. The physician in return must treat that subscriber as often as needed. Providers are not reimbursed for services that exceed the allotted amount. The flat fee may be fixed for all members or it can be adjusted for the age and gender of the member, based on actuarial projections of medical utilization.
Carrier - An insurer; an underwriter of risk, that finances health care. Also refers to any organization which underwrites or administers life, health or other insurance programs.
Carryover Deductible - An insurer; an underwriter of risk, that finances health care. Also refers to any organization which underwrites or administers life, health or other insurance programs.
Carve-Out - A program separate from the primary group health plan designed to provide a specialized type of care, such as a mental health carve-out. A sub-group within a company applying for coverage (e.g. management carve-out).
Case - A quote is considered a case when enrollment application is received at the Underwriting department. A case evolves through a life cycle of the following stages: Received, Pending, Rolled, Approved, Declined. Also may be known as a sold case.
Case Management - Method designed to accommodate the specific health services needed by an individual through a coordinated effort to achieve the desired health outcome in a cost effective manner. The monitoring and coordination of treatment rendered to patients with specific diagnosis or requiring high-cost or extensive services. The process by which all health-related matters of a case are managed by a physician or nurse or designated health professional. Physician case managers coordinate designated components of health care, such as appropriate referral to consultants, specialists, hospitals, ancillary providers and services. Case management is intended to ensure continuity of services and accessibility to overcome rigidity, fragmented services, and the misutilization of facilities and resources. It also attempts to match the appropriate intensity of services with the patient's needs over time.
Catastrophic Health Insurance - Health insurance that provides protection against the high cost of treating severe or lengthy illnesses or disability. Generally such policies cover all, or a specified percentage of, medical expenses above an amount that is the responsibility of another insurance policy up to a maximum limit of liability.
Certificate of Authority (COA) - Issued by state governments, it gives a health maintenance organization or insurance company its license to operate within the state.
Certificate of Coverage (COC) - Outlines the terms of coverage and benefits available in a carrier's health plan.
Chronic Care - Long term care of individuals with long standing, persistent diseases or conditions. It includes care specific to the problem as well as other measures to encourage self-care, to promote health, and to prevent loss of function.
Claim - A formal request made by an insured person for the benefits provided by a policy.
Claims Review - The method by which an enrollee's health care service claims are reviewed prior to reimbursement. The purpose is to validate the medical necessity of the provided services and to be sure the cost of the service is not excessive.
Closed Access - Gatekeeper model health plan that requires covered persons to receive care from providers within the plan's coverage. Except for emergencies, the patient may only be referred to and treated by providers within the plan. A managed health care arrangement in which covered persons are required to select providers only from the plan's participating providers.
Closed Panel - Medical services are delivered in the HMO-owned health center or satellite clinic by physicians who belong to a specially formed, but legally separate, medical group that only serves the HMO. This term usually refers to a group or staff HMO models.
COBRA (Consolidated Omnibus Budget Reconciliation Act) - Federal legislation that requires group health plans to provide health plan members the opportunity to purchase continued coverage in the event their insurance is terminated. Applies only to employer groups with 20 or more employees. Coverage for dependents can be extended for 36 months. COBRA premium payments are the sole responsibility of the insured. Learn more about COBRA at the Department of Labor's website. Please note this may take a few minutes to appear.
Coding - A mechanism for identifying and defining physicians' and hospitals' services. Coding provides universal definition and recognition of diagnoses, procedures and level of care. Coders usually work in medical records departments and coding is a function of billing. A national certification exists for coding professionals, and many compliance programs are raising standards of quality for their coding procedures.
Co-Insurance - The percentage of covered expenses an insured individual shares with the carrier. (i.e., for an 80/20 plan, the health plan member's co-insurance is 20%.) If applicable, co-insurance applies after the insured pays the deductible and is only required up to the plan's stop loss amount. (see "stop loss.")
Community Rating - Using the claims experience of the general population to determine the premium for a group risk, as opposed to relying on the claims experience of a specific employer. For small groups, this rating method has tremendous advantages, since claims experience over two or three years may not be accurate. Community rating is used by most HMOs, which use the plan's entire client population to set the standard risk rate.
Community Rating By Class (Class Rating) - For federally qualified HMOs, the Community Rating by Class (CRC)--adjustment of community-rated premiums on the basis of such factors as age, sex, family size, marital status, and industry classification. These health plan premiums reflect the experience of all enrollees of a given class within a specific geographic area, rather than the experience of any one employer group.
Competitive Bidding - Can be viewed by some as a pricing method that elicits information on costs through a bidding process to establish payment rates that reflect the costs of an efficient health plan or health care provider. Competitive bidding is also the process of offering reduced rates to health plans to obtain exclusive contracts from payers.
Compliance - Accurately following the government's rules on Medicare billing system requirements and other regulations. A compliance program is a self-monitoring system of checks and balances to ensure that an organization consistently complies with applicable laws relating to its business activities.
Composite Rating - A rating method where each employee's age, sex, and number of dependents is evaluated together in determining the same rate for each employee and dependent unit, as opposed to rating each employee separately.
Comprehensive Major Medical Insurance - A policy designed to provide the protection offered by both a basic and major medical health insurance policy. It is generally characterized by a low deductible, a co-insurance feature, and high maximum benefits.
Concurrent Review - Review of a procedure or hospital admission done by a health care professional (usually a nurse) other than the one providing the care, during the same time frame that the care is provided. Usually conducted during a hospital confinement to determine the appropriateness of hospital confinement and the medical necessity for continued stay.
Contingent Beneficiary - The party designated to receive life insurance policy proceeds if the primary beneficiary should die before the person whose life is insured. Also called the secondary beneficiary or the successor beneficiary.
Continuation Coverage - Mandatory coverage without a waiting period that is provided to an eligible employee (and dependents) who: 1) has been without previous insurance 30 days or less; 2) has been without previous insurance 180 days or less, and previous policy was terminated by their employer.
Continued Stay Review - A review conducted by an internal or external auditor to determine if the current place of service is still the most appropriate to provide the level of care required by the client.
Contract Provider - Any hospital, skilled nursing facility, extended care facility, individual, organization, or agency licensed that has a contractual arrangement with an insurer for the provision of services under an insurance contract.
Contributory Program - Program where the cost of group coverage is shared by the employee and the employer or a union.
Conversion Factor (CF) - The dollar amount used to multiply the Relative Value Schedule (RVS) of a procedure to arrive at the maximum allowable for that procedure.
Conversion Factor Update - Annual percentage change to a conversion factor, either set annually by the government or by the formula reflecting actual expenditure growth from two years falling below or above the original target rate.
Conversion Privilege - The right of an individual insured under a group policy to certain kinds of individual coverage, without a medical examination, upon termination of his association with the group.
Conversion Provision or Policy - A provision in most policies which allows an individual to convert their group policy to an individual policy, without evidence of insurability, if they are terminated for reasons other than their own request.
Coordination of Benefits (COB) - Provision regulating payments to eliminate duplicate coverage when a claimant is covered by multiple group plans. The procedures set forth in a Subscription Agreement to determine which coverage is primary for payment of benefits to Members with duplicate coverage. Used by insurers to avoid duplicate payment for losses insured under more than one insurance policy. A coordination of benefits, or nonduplication, clause in either policy prevents double payment by making one insurer the primary payer, and assuring that not more than 100 percent of the cost is covered. Standard rules determine which of two or more plans, each having COB provisions, pays its benefits in full and which becomes the supplementary payer on a claim.
Co-Pay/Co-Payment - A designated dollar amount that an insured must pay to a contracted provider or hospital for eligible service rendered instead of submitting claims or paying a co-insurance percentage. For example, a plan might require a $10 co-pay for each doctor's office visit. It usually applies to HMO or PPO plans.
Cost Containment - The control of the overall cost of health care services within the health care delivery system. Insurance companies often penalize those who do not use cost containment (i.e. Requiring a second surgical opinion and paying a lesser benefit if a second opinion is not obtained.)
Cost Outlier - A case which is more costly to treat compared with other patients in a particular diagnosis related group. Outliers also refer to any unusual occurrence of cost, cases which skew average costs or unusual procedures.
Cost Sharing - Payment method where a person is required to pay some health costs in order to receive medical care. The general set of financing arrangements whereby the consumer must pay out-of-pocket to receive care, either at the time of initiating care, or during the provision of health care services, or both. Cost sharing can also occur when an insured pays a portion of the monthly premium for health care insurance.
Cost Shifting - Charging one group of patients more in order to make up for underpayment by others. Most commonly, charging some privately insured patients more in order to make up for underpayment by Medicaid or Medicare.
Coverage or Covered Services - Services provided within a given health care plan. Health care services provided or authorized by the payer's Medical Staff or payment for health care services.
Covered Benefit - A medically necessary service that is specifically provided for under the provisions of an Evidence of Coverage. A covered benefit must always be medically necessary, but not every medically necessary service is a covered benefit. For example, some elements of custodial or maintenance care, which are excluded from coverage, may be medically necessary, but are not covered.
Credentialing - Review procedure where a potential or existing provider must meet certain standards in order to begin or continue participation in a given health care plan, on a panel, in a group, or in a hospital medical staff organization.
Current Procedural Terminology (CPT) - A standardized mechanism of reporting services using numeric codes as established and updated annually by the AMA. A manual that assigns five digit codes to medical services and procedures to standardize claims processing and data analysis.
DE-6 (formerly DE-3)/State Quarterly Wage Report - A quarterly report that must be filed by all businesses with the state. Most California carriers require this report to verify eligibility for coverage.
Declined - Employer Group does not meet criteria(s) to receive an approval for coverage by Underwriting.
Deductible - A flat amount the insured must pay before the insurance company will make any benefit payments under a policy.
Deductible Carry Over Credit - Charge incurred during the last three months of a year that may be applied to the deductible and which may be carried over into the next year.
Defined Contribution Coverage - A payment process for procurement of health benefit plans whereby employers contribute a specific dollar amount toward the costs of insurance coverage for their employees. Sometimes this includes an undefined expectation of guarantee of the specific benefits to be covered.
Dependent - Person covered by someone else's health plan. In a payer's policy of insurance, a person other than the subscriber eligible to receive care because of a subscriber's contract.
Dependents - Usually the spouse and unmarried children (adopted, step or natural) of an employee.
Designated Mental Health Provider - Person or place authorized by a health plan to provide or suggest appropriate mental health and substance abuse care.
DHMO (Dental Health Maintenance Organization) - An entity that provides comprehensive dental services to a particular group for a fixed fee.
Diagnosis Related Group (DRG) - An inpatient or hospital classification system used to pay a hospital or other provider for their services and to categorize illness by diagnosis and treatment.
Direct Contracting - Providing health services to members of a health plan by a group of providers contracting directly with an employer.
Direct Payment Subscriber - A person enrolled in a prepayment plan who makes individual premium payments directly to the plan rather than through a group. Rates of payment are generally higher, and benefits may not be as extensive as for the subscriber enrolled and paying as a member of the group.
Disallowance - When a payer declines to pay for all or part of a claim submitted for payment.
Discounted Fee-For-Service - A financial reimbursement system whereby a provider agrees to supply services on an FFS basis, but with the fees discounted by a certain percentage from the physician's usual and customary charges.
Disease Management - A type of product or service now being offered by many large pharmaceutical companies to get them into broader healthcare services. Bundles use of prescription drugs with physician and allied professionals, linked to large databases created by the pharmaceutical companies, to treat people with specific diseases. The claim is that this type of service provides higher quality of care at more reasonable price than alternative, presumably more fragmented, care.
DMO (Dental Maintenance Organization) - An entity that provides comprehensive dental services to a particular group for a fixed fee.
DRG (Diagnosis Related Group) - An inpatient or hospital classification system used to pay a hospital or other provider for their services and to categorize illness by diagnosis and treatment.
Drug Formulary - Varying list of prescription drugs approved by a given health plan for distribution to a covered person through specific pharmacies. See also Formulary.
Drug Utilization Review (DUR) - Review of an insured population's drug utilization with the goal of determining how to reduce the cost of utilization. Reviews often result in recommendations to practitioners, including generic substitutions, use of formularies, use of co-payments for prescriptions and education.
Dual Option - A mix and match program typically offering HMO and PPO coverage to employees of a single group.
Duplicate Coverage Inquiry (DCI) - Method used by an insurance company or group medical plan to inquire about the existing coverage of another insurance company or group medical plan.
Duplication of Benefits - When a person is covered under two or more health plans with the same or similar coverage.Durable Medical Equipment (DME) - Items of medical equipment owned or rented which are placed in the home of an insured to facilitate treatment and/or rehabilitation. DME generally consist of items which can withstand repeated use. DME is primarily and customarily used to serve a medical purpose and is usually not useful to a person in the absence of illness or injury.
EAP (Employee Assistance Program) - Designed to help employees whose job performance is being adversely affected by personal problems. The program may also apply to many types of health education, prevention, counseling and control of specific conditions (i.e. alcoholism, hypertension, smoking, fitness, etc.)
Effective Date - The date on which a policy's coverage of a risk goes into effect. The date on which a policy's coverage of a risk goes into effect.
Electronic Claim - A digital representation of a medical bill generated by a provider or by the provider's billing agent for submission using telecommunications to a health insurance payer.
Eligible Dependent - Person entitled to receive health benefits from someone else's plan.
Eligible Employee - Employee who qualifies to receive benefits.
Eligible Expenses - Charges covered under a health plan.
Eligible Person - Person who meets the qualifications of a health plan contract.
Elimination Period - Most often used to designate the waiting period in a health insurance policy.
Emergency Center - Non-hospital affiliated health facility that provides short-term care for minor medical emergencies or procedures needing immediate treatment.
Employee Contribution - The amount of the premium that a group member pays in a contributory group insurance plan.
Encounter - An episode of service. HMOs keep encounter data, especially when there are no claims generated, because provider received a capitation payment from that member.
Enrolled Group - Persons with the same employer or with membership in an organization in common, who are enrolled collectively in a health plan. Often, there are stipulations regarding the minimum size of the group and the minimum percentage of the group that must enroll before the coverage is available.
Enrollee - Any person eligible as either a subscriber or a dependent for service in accordance with a contract.
EPO (Exclusive Provider Organization) - An insured medical plan that is very similar to an HMO. An EPO provides benefits or levels of benefits only if care is rendered by an institution and/or professional providers within a specified network (sometimes waived for emergency situations).
Exclusive Provider Arrangement (EPA) - An indemnity or service plan that provides benefits only if care is rendered by the institutional and professional providers with which it contracts (with some exceptions for emergency and out-of-area services).
ERISA (Employee Retirement Income Security Act) -
This 1974 Federal Act that requires persons involved with pension
funds to have fiscal responsibility to ensure that investments are
made with care and prudence, and that all investments are
diversified to minimize risk. Self-funded medical plans are also
covered under ERISA provisions.
Evidence of Insurability (E of I) - Proof of a person's physical condition that affects acceptability for insurance or a health care contract.
Evidence or Explanation of Coverage (EOC) or Explanation of Benefits (EOB) - A booklet provided by the carrier to the insured summarizing benefits under an insurance plan.
Excess Risk - Either specific or aggregate stop loss coverage. Deny coverage for select individuals, groups, locations, properties or risks.
Exclusions - Expenses which are not covered under an insurance plan. These are listed in the Certificate Booklet.
Experience - The relationship of premium to claims, coverage or benefits of a plan for a specified period of time. Usually in the form of a percentage or ratio.
Experience Rating - The process of using a group's own premium and claims experience to calculate premium rates.
Explanation of Benefits (EOB) - A statement sent to covered individuals explaining services provided, amount to be billed, and payments made. A summary of benefits provided subscribers by the carrier.
Extended Care Facility (ECF) - A nursing or convalescent home offering skilled nursing care and rehabilitation services on a 24 hour basis.
Family Out-Of-Pocket Maximum - A preventive measure built into most group plans which limits the number of family members who must incur the out-of-pocket maximum in a given year.
Federally Qualified HMO - An HMO that agrees to follow specific federal guidelines regarding plan design, benefits, and rating structure in return for certain legal entitlements. These include federal grants for feasibility studies, federal loans or loan guarantees.
Federally Qualified Health Center (FQHC) - A federal payment option that enables qualified providers in medically underserved areas to receive cost-based Medicare and Medicaid reimbursement and allows for the direct reimbursement of nurse practitioners, physician assistants and certified nurse midwives. Many outpatient clinics and specialty outreach services are qualified under this provision which was enacted in 1989.
Fee Disclosure - Physicians and caregivers discussing their charges with patients prior to treatment.
Fee-For-Service - Traditional method of payment for health care services where specific payment is made for specific services rendered.
Fee Schedule - A list of maximum benefits that will be paid under a group medical contract for certain listed procedures.
Fiscal Intermediary - The agent (e.g., Blue Cross) that has contracted with providers of service to process claims for reimbursement under health care coverage. In addition to handling financial matters, it may perform other functions such as providing consultative services or serving as a center for communication with providers and making audits of providers' needs. This entity may also be referred to as TPA or third party administrator. A private organization, usually an insurance company, that serves as an agent for the Health Care Financing Administration (HCFA), which is part of HHS, that determines the amount of payment due to hospitals and other providers and paying them for the Medicare services they have provided. Intermediaries make initial coverage determinations and handle the early stages of beneficiary appeals.
Formulary - A list of approved prescription drugs; a list of selected pharmaceuticals and their appropriate dosages felt to be the most useful and cost effective for patient care. Organizations often develop a formulary under the aegis of a pharmacy and therapeutics committee. In HMOs, physicians are often required to prescribe from the formulary.
Funding Method - System for an employers to pay for a health benefit plan. Most common methods are prospective and / or retrospective premium payment, shared risk arrangement, self-funded, or refunding products.
Gag Clause - A provision of a contract between a managed care organization and a health care provider that restricts the amount of information a provider may share with a beneficiary or that limits the circumstances under which a provider may recommend a specific treatment option.
Gatekeeper - A primary care physician or managed care entity responsible for determining when and what services a patient can access and receive reimbursement for. A PCP is involved in overseeing and coordinating all aspects of a patient's medical care.
Generic Drug The chemical equivalent to a "brand name drug." These drugs cost less, and the savings is passed onto health plan members in the form of a lower co-pay.
Global Budgeting - Limits placed on categories of health spending. A method of hospital cost containment in which participating hospitals must share a prospectively set budget. Method for allocating funds among hospitals may vary but the key is that the participating hospitals agree to an aggregate cap on revenues that they will receive each year.
Global Fee - A total charge for a specific set of services, such as obstetrical services that encompass prenatal, delivery and post-natal care. Managed care organizations will often seek contracts with hospitals which contain set global fees for certain sets of services.
Grace Period - Period past the due date of a premium during which coverage may not be cancelled.
Grievance Procedures - The process by which an insured can air complaints and seek remedies.
Gross Charges Per 1,000 - An indicator calculated by taking the gross charges incurred by a specific group for a specific period of time, dividing it by the average number of covered members or lives in that group during the same period, and multiplying the result by 1,000. This is calculated in the aggregate and by modality of treatment, e.g., inpatient, residential, partial hospitalization, and outpatient. A measure used to evaluate utilization management performance.
Group Insurance - Any insurance policy or health services contract by which groups of employees (and often their dependents) are covered under a single policy or contract, issued by their employer or other group entity.
Group Model HMO - Health care plan involving contracts with physicians organized as a partnership, professional corporation, or other legal association. It can also refer to an HMO model in which the HMO contracts with one or more medical groups to provide services to members. In either case, the payer or health plan pays the medical group, which is, in turn, is responsible for compensating physicians. The medical group may also be responsible for paying or contracting with hospitals and other providers.
Guaranteed Access - Under AB 1672, California's Small Group Reform Act, no 4-50 employee size group (3-50 in July, 1995) may be denied if they meet the plan's participation and contribution requirements, and, when relating to HMOs, if they are within the approved service area.
Guaranteed Issue - Requirement that health plans offer coverage to all businesses during some period each year.
Health Insurance Purchasing Cooperative - Public or private organizations which secure health insurance coverage for the workers of all member employers. The goal of these organizations is to consolidate purchasing responsibilities to obtain greater bargaining clout with health insurers, plans and providers, to reduce the administrative costs of buying, selling and managing insurance policies.
Health Service Agreement (HSA) - Detailed explanation of procedures and benefits provided to an employer by a health plan.
HIPAA - Health Insurance Portability and Accountability Act of 1996, P.L. 104-91. This law relates to underwriting, pre-existing limitations, guaranteed renewal, COBRA and certification requirements in the event someone terminates from the plan. The new law, commonly known as the "Kennedy-Kassebaum Bill," establishes new requirements for self-funded, fully-insured group plans (including church plans) and Individual Health policies. Learn more about HIPAA at the Department of Labor's website. Please note this may take a few minutes to appear.
HMO (Health Maintenance Organization) - An institution that offers prepaid medical care to subscribing members. For a set fee, participants receive all their health care from the HMO's own facilities and doctors, or from independents contracted by the HMO. Many HMOs require enrollees to see a particular primary care physician (PCP) who will refer them to a specialist if deemed necessary. The HMO may be sponsored by the government, employer, school, hospital, credit union, insurance company and hospital-medical plans.
Hold Harmless Clause - A clause frequently found in managed care contracts whereby the HMO and the physician hold each other not liable for malpractice or corporate malfeasance if either of the parties is found to be liable. Many insurance carriers exclude this type of liability from coverage. It may also refer to language that prohibits the provider from billing patients if their managed care company becomes insolvent. State and federal regulations may require this language.
Home Health Care - Full range of medical and other health related services such as physical therapy, nursing, counseling, and social services that are delivered in the home of a patient, by a provider.
Hospice - Facility or program providing care for the terminally ill.
Hospital - Any institution duly licensed, certified, and operated as a Hospital. In no event shall the term "Hospital" include a convalescent facility, nursing home, or any institution or part thereof which is used principally as a convalescence facility, rest facility, nursing facility, or facility for the aged.
Hospital Affiliation - A contractual agreement between an health plan and one or more hospitals whereby the hospital provides the inpatient services offered by the health plan.
Hospital Alliances - Groups of hospitals joined together to share services and develop group purchasing programs to reduce costs. May also refer to a spectrum of contracts, agreements or handshake arrangements for hospitals to work together in developing programs, serving covered lives or contracting with payers or health plans.
Hour Bank - A method of crediting hours worked by an employee to their individual account and then drawing out the required hours at each determination date, to establish or maintain the worker's eligibility for health insurance benefits.
Incidence - In epidemiology, the number of cases of disease, infection, or some other event having their onset during a prescribed period of time in relation to the unit of population in which they occur. Incidence measures morbidity or other events as they happen over a period of time. Examples include the number of accidents occurring in a manufacturing plant during a year in relation to the number of employees in the plant, or the number of cases of mumps occurring in a school during a month in relation to the number of pupils enrolled in the school. It usually refers only to the number of new cases, particularly of chronic diseases. Hospitals also track certain risk management or quality problems with a system called incidence reporting.
Incurred But Not Reported (IBNR) - Refers to a financial accounting of all services that have been performed but, as a result of a short period of time, have not been invoiced or recorded. Estimates of costs for medical services provided for which a claim has not yet been filed. Refers to claims which reflect services already delivered, but, for whatever reason, have not yet been reimbursed.
Incurred Claims - All claims with dates of service within a specified period.
Incurred Claims Loss Ratio - Incurred claims divided by premiums.
Indemnify - To make good a loss.
Indemnity - A benefit paid by an insurer for a loss insured under a policy.
Indemnity Carrier - Usually an insurance company or insurance group that provides marketing, management, claims payment and review, and agrees to assume risk for its subscribers at some pre-determined rate.
Indemnity Insurance Plans - traditional insurance plans (not HMOs or PPOs) which permit insured individuals to choose their doctors and hospitals. Insured individuals do not have to choose doctors or hospitals from a specific list of providers. Also called "fee-for-service" plans.
Indemnity Plan - Traditional insurance plans (not HMOs or PPOs) which permit insured individuals to choose their doctors and hospitals. Insured individuals do not have to choose doctors or hospitals from a specific list of providers. Also called "fee-for-service" plans.
Individual Plans - A type of insurance plan for individuals and their dependents who are not eligible for coverage through an employer group coverage.
Individual (Independent) Practice Association (IPA) - An organized form of prepaid medical practice in which participating physicians remain in their independent office settings, seeing both enrollees of the IPA and private-pay patients. Participating physicians may be reimbursed by the IPA on a fee-for-service basis or a capitation basis. Sometimes thought of as an HMO model in which the HMO contracts with a physician organization that in turn contracts with individual physicians. The IPA physicians provide care to HMO members from their private offices and continue to see their fee-for-service patients.
In-Network - Describes a provider or health care facility which is part of a health plan's network. When applicable, insured individuals usually pay less when using an in-network provider.
Inpatient - A person who is hospitalized while under observation, care, diagnosis or treatment for at least 24 hours
IPA (Independent Practice Association) - An HMO that consists of a central administrative authority with a panel of physicians and other providers practicing in their own separate offices. Providers are typically reimbursed individually on a fee-for-service or capitation basis. Such physicians usually see both private patients and HMO members.
Job-Lock - The inability of individuals to change jobs because they would lose crucial health benefits. Laws have now been enacted by congress which include continuance of benefits (COBRA) and other requirements that eliminate pre-existing clauses for those individuals who change coverage plans but have maintained continuance of coverage overall.
Lapse - Termination of a policy upon the policyholder's failure to pay the premium within the time required.
Last Invoiced Premium - Last generated month's premium.
Late Pay - Payment status for groups who have not been current in their premium payments.
Legend Drug - Drug that the law says can only be obtained by prescription.
Lifetime Maximum - The maximum lifetime benefit which will be paid by the insurance company per person.
Limitation - Conditions for which payable benefits are limited. Detailed information about limitations is usually found in the certificate of insurance.
Line(s) of Coverage - Coverage offered by the plan.Loss or Claims Ratio - The relationship of premium paid to claims incurred or claims paid (usually a percentage). California law requires that the carrier disclose the percentage each year.
Major Medical Expense Insurance - Policies designed to help offset the heavy medical expenses resulting from catastrophic or prolonged illness or injury. They generally provide benefits payments for 75 to 80 percent of most types of medical expenses above a deductible paid by the insured.
Malpractice Insurance - Insurance against the risk of suffering financial damage due to professional misconduct or lack of ordinary skill. Malpractice requires that the patient prove some injury and that the injury was the result of negligence on the part of the professional. A practitioner is liable for damages or injuries caused by malpractice.
Managed Behavioral Health Program - A program of managed care specific to psychiatric or behavioral health care. This usually is a result of a carve-out by an insurance company or managed care organization (MCO). Reimbursement may be in the form of sub-capitation, fee for service or capitation.
Managed Care - Control of utilization, quality and claims using a variety of current cost containment methods. The primary goal is deliver quality healthcare in a cost effective manner.
Managed Care Organization (MCO) - A health plan that seeks to manage care. Generally, this involves contracting with health care providers to deliver health care services on a capitated (per-member per-month) basis. (For specific types of managed care organizations, see also health maintenance organization and independent practice association.)
Managed Care Plan - A health plan that uses managed care arrangements and has a defined system of selected providers that contract with the plan. Enrollees have a financial incentive to use participating providers that agree to furnish a broad range of services to them. Providers may be paid on a pre-negotiated basis.
Managed competition - A health insurance system that bands together employers, labor groups and others to create insurance purchasing groups; employers and other collective purchasers would make a specified contribution toward insurance purchase for the individuals in their group; the employer's set contribution acts as an incentive for insurers and providers to compete.
Management services organization (MSO) - Usually an entity owned by a hospital, physician group, PHO or IDS which provides management services and administrative systems to one or more medical practices. The management services organization provides administrative and practice management services to physicians. An MSO may typically be owned by a hospital, hospitals, or investors. Large group practices may also establish an MSO to sell management services to other physician groups.
Mandated Benefits - Benefits that health plans are required by law to provide.
Mandated Providers - Providers whose services must be included in coverage offered by a health plan. These mandates can be required by state or federal law.
Manual Rates - Rates based on a health plan's average claims data and adjusted for certain factors, such as group demographics or industry.
Market Area - The targeted geographic area or areas of greatest market potential. The market area does not have to be the same as the post acute facility's catchment area.
Market Basket Index - A common term in the field of economics. In the healthcare business, this refers to a ratio or index of the annual change in the prices of goods and services providers used to produce health services. Different market baskets exist for PPS based hospital inputs and capital inputs, DRG exempt facility operating inputs (such as SNF, home health agency and renal dialysis facility). Also called input price index.
Maximum Plan Limits - The maximum amount payable under a health plan. The three types of limits are: defined, per cause (disability) maximum and all causes maximum.
Defined - The limit is the maximum amount the plan will pay for covered medical expenses.
Per Cause (Disability) Maximum - The maximum limit applies separately to each accident or illness incurred by a covered person. For example, if a covered person under a per cause plan is receiving treatment for both a psychiatric illness and a heart condition, the overall maximum limit under the plan would apply separately to each. Often separate dollar limits are applied for psychiatric causes only in terms of maximum limits per year or a lower lifetime maximum for psychiatric causes.
All Causes Maximum - The maximum limit applies to all covered expenses incurred by a covered
person or persons during a specified period of coverage
Medical Loss Ratio (MLR) - Cost ratio of total benefits used compared to revenues received. Usually referred to by a ratio, such as 0.96--which means that 96% of premiums were spent on purchasing medical services. The goal is to keep this ratio below 1.00--preferably in the 0.80 range, since the MCO's or insurance company's profit comes from premiums. Currently, successful HMOs do have MLRs in the 0.70-0.80 range. The ratio between the cost to deliver medical care and the amount of money that was taken in by a plan. Insurance companies often have a medical loss ratio of 96 percent or more: tightly managed HMOs may have medical loss ratios of 75 percent to 85 percent, although the overhead (or administrative cost ratio) is concomitantly higher.
Medically Necessary/Medical Necessity - Services or supplies which meet the following tests: They are appropriate and necessary for the symptoms, diagnosis, or treatment of the medical condition; They are provided for the diagnosis or direct care and treatment of the medical condition; They meet the standards of good medical practice within the medical community in the service area; They are not primarily for the convenience of the plan member or a plan provider; and They are the most appropriate level or supply of service which can safely be provided.
Medical Savings Account (MSA) - An account in which individuals can accumulate contributions to pay for medical care or insurance. Some states give tax-preferred status to MSA contributions, but such contributions are still subject to federal income taxation. The MSA differs from the Medical reimbursement account, sometimes called flexible benefits or Section 115 account, in that it need not be associated with an employer. The MSA is not currently recognized in federal statute.
Medical Services Organization (MSO) - An organized group of physicians, usually from one hospital, into an entity able to contract with others for the provision of services.
Medigap - Private health insurance plans that supplement Medicare benefits by covering some costs not paid for by Medicare.
Midlevel Practitioner - Nurse practitioners, certified nurse-midwives and physicians' assistants who have been trained to provide medical services that otherwise might be performed by a physician. Midlevel practitioners practice under the supervision of a doctor of medicine or osteopathy who takes responsibility for the care they provide. Physician extender is another term for these personnel.
Miscellaneous Expenses - Hospital charges, other than room and board, such as those for x-rays, drugs, laboratory fees, and other ancillary services.
Modified Community Rating - Rating of medical service usage in a given area, adjusted for data such as age, sex, etc.
Modified Fee-for-Service - System that pays providers fees for services provided, with certain maximum fees for each service.
Morbidity - The extent of illness, injury, or disability in a defined population. It is usually expressed in general or specific rates of incidence or prevalence.
Multiple Employer Trust (MET) - A multi-employer risk-spreading mechanism devised by insurance companies to protect them against financial problems in the event one group files a catastrophic medical claim. METs insulate the shock loss group by putting risk throughout an entire block of employers rather than only one.
Multiple Employer Welfare Arrangement (MEWA) - As defined in 1983 Erlenborn ERISA Amendment, an employee welfare benefit plan or any other arrangement providing any of the benefits of an employee welfare benefit plan to the employees of two or more employers. MEWAs that do not meet the ERISA definition of employee benefit plan and are not certified by the U.S. Department of Labor may be regulated by states. MEWAs that are fully insured and certified must only meet broad state insurance laws regulating reserves.
Multiple Option Plan - Health care plan that lets employees or members choose their own plan from a group of options, such as HMO, PPO or major medical plan.
National Committee for Quality Assurance (NCQA) - A non-profit organization created to improve patient care quality and health plan performance in partnership with managed care plans, purchasers, consumers, and the public sector.
National Drug Code (NDC) - Classification system for drug identification, similar to UPC code.
Negotiated Fee Schedule - A schedule of fees, pre-determined and established by the carrier with each contracted provider individually, for services rendered by the provider physician or hospital. The insured will receive these fees as payment up to their coinsurance amount for claims submitted.
Network - An affiliation of providers through formal and informal contracts and agreements. Networks may contract externally to obtain administrative and financial services. A list of physicians, hospitals and other providers who provide health care services to the beneficiaries of a specific managed care organization.
Network Model HMO - This type of HMO contracts with more than one physician group and may contract with single or multi-specialty groups as well as hospitals and other health care providers. A health plan that contracts with multiple physician groups to deliver health care to members. Generally limited to large single or multi-specialty groups. Distinguished from group model plans that contract with a single medical group, an IPA that would contract through an intermediary, and direct contract model plans that contract with individual physicians in the community.
Non-Participating Physician (or Provider) - A provider, doctor or hospital that does not sign a contract to participate in a health plan, usually which requires reduced rates from the provider. In the Medicare Program, this refers to providers who are therefore not obligated to accept assignment on all Medicare claims. In commercial plans, non-participating providers are also called out of network providers or out of plan providers. If a beneficiary receives service from an out of network provider, the health plan (other than Medicare) will pay for the service at a reduced rate or will not pay at all.
Non-Plan Provider - A health care provider without a contract with an insurer.Nurse Practitioner - A registered nurse qualified and specially trained to provide primary care, including primary health care in homes and in ambulatory care facilities, long-term care facilities, and other health care institutions. A nurse practitioner will function under the supervision of a physician but not necessarily in his or her presence.
Occupational Health - Occupational health programs include employer activities undertaken to protect and promote the health and safety of employees in the workplace, including minimizing exposure to hazardous substances, evaluating work practices and environments to reduce injury, and reducing or eliminating other health threats. Many health providers offer occupational health consultations as well as occupational health screenings, treatments and case management. Employers and health providers often enter agreements whereby health providers will provide these services as well as the related workers compensation case management and rehabilitation programs.
Ombudsman/Ombudsperson - A person within a managed care organization or a person outside of the health care system (such as an appointee of the state) who is designated to receive and investigate complaints from beneficiaries about quality of care, inability to access care, discrimination, and other problems that beneficiaries may experience with their managed care organization. This individual often functions as the beneficiary's advocate in pursuing grievances or complaints about denials of care or inappropriate care.
Open Access - Health plan members' abilities, rights or invitation to self-refer for specialty care.
Open Enrollment Period - A period of time when eligible subscribers may elect to enroll in, or transfer between, available programs that are providing health care coverage. Under an open enrollment requirement, a plan must accept all who apply during a specific period each year.
Out-of-Area Benefits - Benefits supplied to a patient by a payer or managed care organization when the patient needs services while outside the geographic area of the network. MCOs often attempt to negotiate a case by case discount with providers when patients utilize their services while out of area.
Out-of-Network Benefits - With most HMOs, a patient cannot have any services reimbursed if provided by a hospital or doctor who is not in the network. With PPOs and other managed care organizations, there may exist a provision for reimbursement of out of network providers. Usually this will involve a higher co-pay or a lower reimbursement.
Out-of-Network Provider - A health care provider with whom a managed care organization does not have a contract to provide health care services. Because the beneficiary must pay either all of the costs of care from an out-of-network provider or their cost-sharing requirements are greatly increased, depending on the particular plan a beneficiary is in, out-of-network providers are generally not financially accessible to Medicaid beneficiaries.
Out-of-Pocket Expenses, Out-of-Pocket Costs - Portion of health services or health costs that must be paid for by the plan member, including deductibles, co-payments and co-insurance.
Out-of-Pocket Maximum - Medical expenses which an insured is required to pay up to a certain amount. Once the maximum is satisfied, the insurance company will pay 100% of all eligible expenses. Out-of-pocket maximum may include the deductible.Outpatient Care - Care given a person who is not bedridden. Also called ambulatory care. Many surgeries and treatments are now provided on an outpatient basis, while previously they had been considered reason for inpatient hospitalization.
Paid Claims Loss Ratio - Paid claims divided by premiums.
Part A Medicare - The inpatient portion of benefits under the Medicare Program, covering beneficiaries for inpatient hospital, home health, hospice, and limited skilled nursing facility services. Beneficiaries are responsible for deductibles and co-payments.
Part B Medicare - The outpatient benefits of Medicare. Medicare Supplementary Medical Insurance (SMI) under Part B of Title XVII of the Social Security Act covers Medicare beneficiaries for physician services, medical supplies, and other outpatient treatment. Beneficiaries are responsible for monthly premiums, co-payments, deductibles, and balance billing. Part B services are financed by a combination of enrollee premiums and general tax revenues.
Participating Physician or Participating Provider - A provider under contract with a health plan. A physician or hospital that has agreed to provide services for a set payment provided by a payer, or who agrees to other arrangements, or who agrees to provide services to a set of covered lives or defined patients. Also refers to a provider or physician who signs an agreement to accept assignment on all Medicare claims for one year.
Patient Liability - The dollar amount which an insured is legally obligated to pay for services rendered by a provider.
PCP Capitation - A reimbursement system for healthcare providers of primary care services who receive a pre-payment every month. The payment amount is based on age, sex and plan of every member assigned to that physician for that month.
Peer Review - The mechanism used by the medical staff to evaluate the quality of total health care provided by the Managed Care Organization. The evaluation covers how well services are performed by all health personnel and how appropriate the services are to meet the patients' needs.
Pending Item - An item that requires follow up from group before case is reviewed by Underwriting.
Per Diem Rates - A form of payment for services in which the provider is paid a daily fee for specific services or outcomes, regardless of the cost of provision. Per diem rates are paid without regard to actual charges and may vary by level of care, such as medical, surgical, intensive care, skilled care, psychiatric, etc.
Persistency - Retained renewal business due to the continued payment of a policy's premiums.
Physician-Hospital Organization (PHO) - An organization representing hospitals and physicians as an agent. A legal entity formed by a hospital and a group of physicians to further mutual interests and to achieve market objectives. A PHO generally combines physicians and a hospital into a single organization for the purpose of obtaining payer contracts. It is typically owned and governed jointly by a hospital and shareholder physicians.
Plan Administration - A term often used to describe the management unit with responsibility to run and control a managed care plan - includes accounting, billing, personnel, marketing, legal, purchasing, possibly underwriting, management information, facility maintenance, servicing of accounts. This group normally contracts for medical services and hospital care.
Plan Document - The document that contains all of the provisions, conditions, and terms of operation of a pension or health or welfare plan. This document may be written in technical terms as distinguished from a summary plan description (SPD) which, under ERISA, must be written in a manner calculated to be understood by the average plan participant.
PMG (Primary Medical Group) - An HMO where the physicians share a central facility.
Pooling - Combining risks for groups into one risk pool.
Portability - Requirement that health plans guarantee continuous coverage without waiting periods for persons moving between plans. This involves the issuance of a certificate of coverage from previous health plan to be given to new health plan. Under this requirement, a beneficiary who changes jobs is guaranteed coverage with the new plan, without a waiting period or having to meet additional deductible requirements. Primarily, this refers to the requirement that insurers waive any pre-existing condition exclusion for beneficiaries previously covered through other insurance.
POS (Point of Service) - A managed care plan that includes the option for an insured to self-refer themselves out of a managed care network, triggering indemnity-style benefit provisions.
PPO (Preferred Provider Organization) - Similar to an indemnity plan, but with a network of physicians, the insured is allowed to choose a doctor or hospital from a preferred list, which are doctors and hospitals who have agreed to group pricing and will follow the procedures and policies of the plan, or any other non-network provider. Lower fees are arranged with the network of providers, giving a financial incentive to stay within the network. A higher cost or co-pay is generally required for medical services obtained from outside sources.
Practical Nurses - Practical nurses, also known as vocational nurses, provide nursing care and treatment of patients under the supervision of a licensed physician or registered nurse. Licensure as a licensed practical nurse (L.P.N.) or in California and Texas as a licensed vocational nurse (L.V.N.), is required.
Preadmission Review - A screening process with the insured or doctor that is required by insurers before authorizing non-emergency hospitalization. The insured is often required to initiate this review via a phone call in order to avoid a reduction of benefit or an additional deductible.
Pre-Existing Condition - In individual health, it refers to an injury or sickness that occurred before the policy was issued, and that was not reported on the application. For group medical insurance, it refers to any care received by an individual during a specified period of time immediately before the policy effective date. AB 1672 specifies this period of time as six months.
Preferred Risk - Under AB 1672, offered a risk adjusted discount (up to 20%) off their standard rates.
Premium - Amount paid to a carrier for providing coverage under a contract.
Premium Deposit Statement - The invoice for the first month of coverage premium reflecting deposits made and balance due.
Premium Month - The coverage month for which the premium is invoiced.
Prepaid Capitation - A prospectively paid, fixed, annual, quarterly, or monthly premium per person or per family which covers specified benefits. A cost containment alternative to fee-for-service usually employed by HMOs.
Prepaid Group Practice - Prepaid Group Practice Plans involve multi-specialty associations of physicians and other health professionals, who contract to provide a wide range of preventive, diagnostic and treatment services on a continuing basis for enrolled participants.
Prepayment - A method providing in advance for the cost of predetermined benefits for a population group, through regular periodic payments in the form of premiums, dues, or contributions, including those contributions which are made to a Health and Welfare Fund by employers on behalf of their employees.
Preventive Care - Health care that emphasizes prevention, early detection and early treatment, presumably reducing the costs of healthcare in the long run.
Primary Care - Basic or general health care usually rendered by general practitioners, family practitioners, internists, obstetricians and pediatricians -- who are often referred to as primary care practitioners or PCPs.
Primary Care Provider/Physician (PCP) - A primary care provider such as a family practitioner, general internist, pediatrician and sometimes an Ob/Gyn. Generally, a PCP supervises, coordinates and provides medical care to members of a plan. The PCP is accountable for the total health services of enrollees including referrals, procedures and hospitalization.
Primary Coverage - Plan that pays its expenses without consideration of other plans, under coordination of benefits rules.
Primary Physician Capitation - The amount paid to each physician monthly for services based on the age, sex and number of the members selecting that physician.
Prior Authorization - A formal process requiring a provider obtain approval to provide particular services or procedures before they are done. This is usually required for nonemergency services that are expensive or likely to be abused or overused. A managed care organization will identify those services and procedures that require prior authorization.
Provider - Usually refers to a hospital or doctor who provides care. A health plan, managed care company or insurance carrier is not a healthcare provider. Those entities are called payers. The lines are blurred sometimes, however, when providers create or manage health plans. At that point, a provider is also a payer. A payer can be provider if the payer owns or manages providers, as with some staff model HMOs.
Purchaser - This entity not only pays the premium, but also controls the premium dollar before paying it to the provider. Included in the category of purchasers or payers are patients, businesses and managed care organizations. While patients and businesses function as ultimate purchasers, managed care organizations and insurance companies serve a processing or payer function.
Quality Assurance (QA) - Activities and programs intended to assure the quality of care in a defined medical setting. Such programs include peer or utilization review components to identify and remedy deficiencies in quality. The program must have a mechanism for assessing its effectiveness and may measure care against pre-established standards.
Qualified Plan - A pension or benefit plan that meets set federal requirements, allowing it special tax advantages.
Rate Adjustment Factor (RAF) - In California during initial underwriting, health insurance carriers are permitted to adjust or set a groups health insurance monthly premiums +/-10%. Rates are determined at the time of underwriting and may be based on several factors, including medical conditions, industry, group size, etc.
Referral - The process of sending a patient from one practitioner to another for health care services. Health Plans may require that designated primary care providers authorize a referral for coverage of specialty services.
Referral Pool - An amount set aside to pay for non-capitated services provided by a PCP, services provided by a referral specialist and/or emergency services.
Registered Nurse (R.N.) - Registered nurses are responsible for carrying out the physician's instructions. They supervise practical nurses and other auxiliary personnel who perform routine care and treatment of patients. Registered nurses provide nursing care to patients or perform specialized duties in a variety of settings from hospital and clinics to schools and public health departments. A license to practice nursing is required in all states. For licensure as a registered nurse (R.N.), an applicant must have graduated from a school of nursing approved by the state board for nursing and have passed a state board examination.
Reinsurance - A method of limiting the risk that a provider or managed care organization assumes by purchasing insurance that becomes effective after set amount of health care services have been provided. This insurance is intended to protect a provider from the extraordinary health care costs that just a few beneficiaries with extremely extensive health care needs may incur.
Renewal - Continuance of coverage for a new policy term.
Renewal Date - The anniversary of the group's enrollment date, when employees are allowed to make coverage changes.
Requested Effective Date - The date an employer group has requested a quote for coverage with the plan. It is not necessarily the coverage effective date since quotes may be declined or effective dates may be rolled.
Rider - a modification to a Certificate of Insurance regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.
Risk - The chance or possibility of loss. For example, physicians may be held at risk if hospitalization rates exceed agreed upon thresholds. Potential financial liability, particularly with respect to who or what is legally responsible for that liability. With insurance, risk is shared by the patient and insurance company but the company's risk is limited by the policy's dollar limitations. In HMO's, the patient is at risk only for co-payments and the cost of non-covered services. The HMO, however, with its income fixed, is at risk for whatever volume of care is entailed, however costly it turns out to be. Providers may also bear risk if they are paid a fixed amount (capitation) by the HMO. The sharing of risk is often employed as a utilization control mechanism within the HMO setting. Risk is also defined in insurance terms as the possibility of loss associated with a given population.
Risk Adjustment - A process whereby premium dollars are shifted from a plan with relatively healthy enrollees to another with sicker members. It is intended to minimize any financial incentives health plans may have to select healthier than average enrollees. In this process, health plans which attract higher risk providers and members would be compensated for any differences in the proportion of their members that require high levels of care compared to other plans.
Risk-Bearing Entity - An organization that assumes financial responsibility for the provision of a defined set of benefits by accepting prepayment for some or all of the cost of care. A risk-bearing entity may be an insurer, a health plan or self-funded employer; or a PHO or other form of PSN. Health plans (except under employer self-insured programs) usually are risk bearing. Providers and provider organizations, if capitated, can also be risk bearing. There are 2 types of risk: insurance risk and business risk, each calculated and considered separately.
Risk Factor - Any characteristic, behavior, or condition which, based on history, utilization, or theory, is thought to directly influence susceptibility to a specific health problem, increase costs or result in increased utilization.
Risk Load - In underwriting, a factor that is multiplied into the rate to offset some adverse parameter of the group.
Risk Selection - Occurrence when a disproportionate share of high or low users of care join a health plan.
Risk Sharing - The distribution of financial risk among parties furnishing a service. For example, if a hospital and a group of physicians from a corporation provide health care at a fixed price, a risk-sharing arrangement would entail both the hospital and the group being held liable if expenses exceed revenues.
Rolled Effective Date - When an employer group has not met the requirements after the case has been reviewed by Underwriting, the case's requested effective date is rolled to the next month's effective date.
Sanction - Reprimand of a provider by a health plan.
SDI (State Disability Insurance) - Insurance provided by the state against short term loss of income should an employee become disabled and unable to work. The amount of coverage is determined by the state as an actual average value of income for the position held to a flat maximum dollar amount.
Secondary Care - Services provided by medical specialists who generally do not have first contact with patients (e.g., cardiologist, urologists, dermatologists).
Secondary Coverage - Health plan that pays costs not covered by primary coverage under coordination of benefits rules. Also any insurance that supplements Medicare coverage. The three main sources for secondary insurance are employers, privately purchased Medigap plans, and Medicaid.
Self-Funding - Employer or organization assume complete responsibility for health care losses of its covered employees. This usually includes setting up a fund against which claim payments are drawn and claims processing is often handled through an administrative services contract with an independent organization. In this case, the employer does not pay premiums to an insurance carrier, but, rather pays administrative costs to the insurance company or health plan, and, in essence, treats them as a third party administrator (TPA) only.
Self-Insured - Group insurance where the employer or other sponsoring group-- not an insurance company -- is financially responsible for payment of all claims up to a certain amount.
Sentinel Event - An adverse health event that may have been avoided through appropriate care or alternate interventions. Providers are required to alert JCAHO and often state licensing authorities of all sentinel events, including a review of risk factors, preventative measures and case analysis.
Separate Deductible - The required number of family members who must meet the deductible separately before the family deductible is satisfied. (For example, an insurance company offers a $250 deductible and a 2X separate deductible. If a family takes the coverage, two family members must each satisfy the $250 deductible before the family deductible will be satisfied.)
Short-Term Medical - Temporary health coverage for an individual for a short period of time, usually from 30 days to six months.
Skilled Nursing Facility (SNF) - A licensed institution, as defined by Medicare, which is primarily engaged in the provision of skilled nursing care. SNFs are usually DRG or PPS exempt and are located within hospitals, but, sometimes are located in rehab facilities or nursing homes.
Small-Group Market - The insurance market for products sold to groups that are smaller than a specified size, typically employer groups. The size of groups included usually depends on state insurance laws and thus varies from state to state, with less than 50 employees the most common size.
Specific Stop Loss - The form of excess risk coverage that provides protection for the employer against high claim on any one individual. This is protection against abnormal severity of a single claim rather than abnormal frequency of claims in total.
Spend down - A term used in Medicaid for persons whose income and assets are above the threshold for the state's designated medically needy criteria, but are below this threshold when medical expenses are factored in. The amount of expenditures for health care services, relative to income, that qualifies an individual for Medicaid in States that cover categorically eligible, medically indigent individuals. Eligibility is determined on a case-by-case basis.
Staff Model HMO - A model in which the HMO hires its own physicians. All premiums and other revenues accrue to the HMO, which, in turn, compensates physicians. Very much like the group model, except the doctors are employees of the HMO. Generally, all ambulatory health services are provided under one roof in the staff model.
Standard Risk - Under AB 1672, plans must publish their "street" or standard rate. The final rate cannot be more than 20 percent higher or lower than this standard rate.
Standing Referral - A referral to a specialist provider that covers routine visits to that provider. It is a common practice to permit the gatekeeper to make referrals for only a limited number of visits (often 3 or fewer). In cases where the medical condition requires regular visits to a specialist, this type of referral eliminates the need to return to the gatekeeper each time the initial referral expires.
Step Rating - A method of quoting where each employee's rate is determined separately by their age, sex and number of dependents.
Stop Loss Insurance - Insurance purchased by an insurance company or health plan from another insurance company to protect itself against losses. Reinsurance purchased to protect against the single overly large claim or the excessively high aggregated claim during a set period. Also see Reinsurance and Specific Stop Loss.
Stop Loss Provision - The total amount of eligible charges at which point the insurance company pays the balance of all eligible expenses at 100%. The insured is responsible for the out-of-pocket expenses until this maximum is reached.
Subrogation - Procedure where insurance company recovers from a third party when the action resulting in medical expense (e.g. auto accident) was the fault of another person. The recovery of the cost of services and benefits provided to the insured of one health plan when other parties are liable.
Subscriber - Person responsible for payment of premiums, or person whose employment is the basis for membership in a health plan.
Subscriber Contract - A written agreement that describes the individual's health care policy.
Summary of Benefits (SOB) – Typically the section of a quote that summarizes the plan benefits.
Summary Plan Description (SPD) - In self-funded plans, a written explanation of the eligibility for and benefits available to employees as required by ERISA.
Supplemental Insurance - Any private health insurance plan held by a Medicare beneficiary or commercial beneficiary, including Medigap policies and post-retirement health benefits. Supplemental usually pays the deductible or co-pay and sometimes will pay the entire bill when the primary carrier's benefits are exhausted.
Supplemental Medical Insurance (SMI) - Part B of the Medicare program. Part B normally covers the outpatient services, as opposed to Part A which covers inpatient. This voluntary program requires payment of a monthly premium, which covers 25 percent of pro-ram costs. Beneficiaries are responsible for a deductible and coinsurance payments for most covered services.
Supplemental Services - Optional services a health plan covers or provides.
Takeover Benefit - Refers to a transfer of coverage from a prior group medical plan to a new group medical plan. Unless otherwise stated or limited by dollar amount, the benefit provides that employees covered under a prior group plan shall not be required to satisfy a pre-existing waiting period, subject to the employee's time under the prior plan, and shall have continuous coverage from one plan to the next. Full takeover would be continuous with no restrictions; partial takeover usually specifies a limit as to how much the insurance company will pay for any pre-existing conditions. AB 1672 provides full takeover for an insured who is with coverage for no more than 30 days when replacing an existing insurance plan or no more than 180 days if employment or an employer-sponsored health plan is terminated.
TEFRA (Tax Equity and Fiscal Responsibility Act of 1982) - Legislation that restricted tax deductions on certain investments, including some life insurance and pension products.
Telemedicine - The use of telecommunications (i.e., wire, radio, optical or electromagnetic channels transmitting voice, data and video) to facilitate medical diagnosis, patient care, and/or medical learning. Many rural area are finding uses for telemedicine in providing oncology, home health, ER, radiology and psychiatry among others. Medicaid and Medicare provide some limited reimbursement for certain services provided to patients via telecommunication.
Termination Date - Date that a group contract expires or an individual is no longer eligible for benefits.
Tertiary Care - Services provided by highly specialized providers such as neurosurgeons, thoracic surgeons and intensive care units. These services often require highly sophisticated technology and facilities.
Therapeutic Alternatives - Drug products that provide the same pharmacological or chemical effect in equivalent doses.
Third Party Administrator (TPA) - An independent organization that provides administrative services including claims processing and underwriting for other entities, such as insurance companies or employers. Often insurance companies will contract as TPAs with other insurance companies or health plans. TPAs are not always insurance companies. TPAs are organizations with expertise and capabilities which may include may include accounting, sales, underwriting, certificate of issue and claims settlement without financial responsibility for the risk. Self-insured employers will often contract with TPAs to handle their insurance functions. Insurance companies will sometimes outsource the claims, UR or membership functions to a TPA. Sometimes TPAs will only manage provider networks, only claims or only UR. Hospitals or provider organizations desiring to set up their own health plans will often outsource certain responsibilities to TPAs.
Third-Party Payer - Any organization, public or private, that pays or insures health or medical expenses on behalf of beneficiaries or recipients. An individual pays a premium for such coverage in all private and in some public programs; the payer organization then pays bills on the individual's behalf
Third-Party Payment - Payment by a financial agent such as an HMO, insurance company or government rather than direct payment by the patient for medical care services. The payment for health care when the beneficiary is not making payment, in whole or in part, in his own behalf.
Triple Option - A multi-option plan that typically offers HMO, PPO and indemnity options.
UCR (Usual, Customary & Reasonable) - Charges that do not exceed the amount customarily charged for the service by other physicians or hospitals in the area or are otherwise reasonable.
Underinsured - People with public or private insurance policies that do not cover all necessary health care services, resulting in out-of-pocket expenses that exceed their ability to pay.
Underwriter - Entity that assumes responsibility for the risk, issues insurance policies and receives premiums.
Underwriting - Process of selecting, classifying, analyzing and assuming risk according to insurability. The insurance function bearing the risk of adverse price fluctuations during a particular period. Analysis of a group that is done to determine rates or to determine whether the group should be offered coverage at all.
Uninsured - People who lack public or private health insurance.
Universal Access -The right and ability to receive a comprehensive, uniform, and affordable set of confidential, appropriate, and effective health services. Universal service is a reality in countries with national medicine programs or socialized healthcare, such as the UK, Canada, and France.
Universal Coverage - A type of government sponsored health plan which would provide healthcare coverage to all citizens.
Urgent Services - Benefits covered in an Evidence of Coverage that are required in order to prevent serious deterioration of an insured's health that results from an unforeseen illness or injury.
Utilization - Use of services and supplies. Utilization is commonly examined in terms of patterns or rates of use of a single service or type of service such as hospital care, physician visits, and prescription drugs. Measurement of utilization of all medical services in combination is usually done in terms of dollar expenditures. Use is expressed in rates per unit of population at risk for a given period such as the number of admissions to the hospital per 1,000 persons over age 65 per year, or the number of visits to a physician per person per year for an annual physical.
Utilization Review - A method of quality control used by an insurer to analyze a case before, during or after the fact to see if the treatment given was necessary and appropriate.
Variances - The differences obtained from subtracting actual results from expected or budgeted results.
Waiting Period - A period of time which must elapse before a new employee is eligible to enroll in the company's group insurance plan.
Withdrawn - Status given to case for two reasons:
Group does not submit requested pending items to complete the review process in Underwriting or,
Broker asks to withdraw the case from Underwriting.
Waiver of Coverage - a section on the enrollment form which states that an employee was offered insurance coverage but opted to waive this coverage.
Worker's Compensation Insurance - Government-mandated insurance that provides benefits to employees and their dependents if the employees suffer job-related injury, disease or death.
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