Health Insurance Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

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.

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.

Ancillary Services (Ancillary Charges) - Supplemental services, including laboratory, radiology, physical therapy, and inhalation therapy, that are provided in conjunction with medical or hospital care.

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 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.

B

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.

C

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.

D

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.

E

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.
ERISA has strict rules on reporting and various notification requirement to participants. This Act also created an insurance program to protect and guarantee benefits for individuals should their employer-sponsored fund fail or be terminated.

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.

F

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.

G

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.

H

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.

I

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.

J

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.

K

L

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.

M

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.

N

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.

O

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 -