Here, you will find definitions of terms and phrases frequently used in the health care industry.
Ancillary Services: Health care services conducted by providers other than physicians and surgeons. These will usually include such services as physical therapy and home health care.
Actuary: A professional who mathematically analyzes and determines the price of the risk associated with providing insurance coverage. An actuary may also determine the anticipated cost of providing future benefits.
Assisted Living: A non-medical institution providing room, board, laundry, some form of personal care and usually recreational and social services.
Beneficiary: The person entitled to receive benefits under a plan, including the covered employee and his/her dependents.
Benefit: Amount an insurance company pays to a claimant, assignee, or beneficiary when the insured suffers a loss covered by the policy.
Claim: Demand to the insurer by an insured person for the payment of benefits under a policy.
Co-insurance: An agreement between the insured and the insurance company entailing the sharing of payment for all claims by the policy. An example is 80%/20% up to $5,000. The insurance company pays 80%; and the insured pays 20% of the $5,000.
Co-payment: A small charge paid at the time a medical service is rendered. It does not count towards a plan's deductible or out-of-pocket maximum.
Coverage: The different options selected and the benefits paid under a plan.
Covered Expense(s): An expense that will be reimbursed according to the terms of the plan.
Deductible: The amount of covered expenses that the insured must pay before a plan begins to reimburse for eligible expenses.
Dual Choice: An arrangement where an employer will offer an alternative in addition to its original health plan.
Eligible Expense(s): The portion of the medical care provider's services that are covered for payment.
Elimination Period: The time in which you receive covered care or services before benefits are payable.
Employee Retirement Income Security Act of 1974 (ERISA): A federal law that originally set minimum standards for funding, vesting, and terminating employer-sponsored pension plans.
Evidence of Insurability: A process used to review factors concerning a person's physical condition and medical history. From this information, the plan or insurance company evaluates the risk of the individual to determine coverage.
Exclusion: Specific conditions or services that are not covered by the plan.
Expected Claims: A dollar amount, which represents the expected claims, which will be paid during the plan period.
Explanation of Benefits (EOB): A document sent to an insured when the plan or insurance company handles the claim.
Extended Benefits: Benefits that continue, or become payable, after the termination of plan coverage.
Fee-for-Service Reimbursement: Payment for services for each visit or service rendered.
Fee Schedule: Maximum cost for health services that apply under a specific plan.
Fiduciary: Per ERISA, anyone who exercises discretionary authority or control over a plan or plan assets.
Fixed Costs: Refers to those costs that are payable monthly and which do not relate to actual claims paid or incurred, for example, premium and administration costs.
Flexible Spending Accounts: Special accounts generally funded by an employee's salary reduction to help pay certain expenses not covered by the employer’s plan or insurance contract.
Fraud: Fraud in health care may include offering free tests or services and billing the insurer or plan, or charging for services not provided.
Freestanding Plan: Unbundled or separate health care benefits separate from the basic health care plan, usually dental or vision care.
Fully Insured Plan: The employer pays the entire premium and transfers all risk and responsibility for claim payments to the insurance company.
Geriatrics: The study of physical and mental changes in people as they age - including the diagnostic, treatment, and prevention of disorders.
Grace Period: The time period following the premium due date when the coverage and policy remain in-force.
Global Fees: Negotiated fees that are all-inclusive (one fee is paid for all services provided for a specific episode or episode of care.)
Group-Model HMO: HMO staffing that occurs by contracting with multi-specialty medical groups to care for covered members.
Guaranteed Issue Underwriting: The applicant is guaranteed coverage up to an agreed level without evidence of insurability (see Evidence of Insurability).
Guaranteed Renewable: The insured's right to continue an in-force policy by the timely payment of premiums. The insurance company cannot change the coverage or refuse to renew the coverage for other than non-payment of premiums (includes health conditions and/or marital or employment status).
Health Alliances: Health Alliances or Health Insurance Purchasing Cooperatives (HIPCs) are groups or entities whose primary purpose is to negotiate with health plans to provide coverage at competitive prices to members of the alliance.
Health Care Prepayment Plan (HCPP): HCFA program allowing managed care groups that organize, finance, and deliver Medicare Part B services to be reimbursed for services at a reasonable cost.
Health Maintenance Organization (HMO): An organization that provides a variety of comprehensive health care services for a specified group of enrollees for a fixed, pre-paid premium. HMO models include: Group Model, Individual Practice Association (IPA), Staff Model and Network Model.
HIPAA: Stands for Health Insurance Portability & Accountability Act. Established in 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.
Home and Community-Based Care Benefits: To be eligible for Home and Community-Based Care Benefits, you must require covered services while your policy is in force that are resulting from (1) medical necessity, or (2) your inability to perform two or more activities of daily living, or (3) cognitive impairment.
Home Health Services: Comprehensive medically necessary services provided by a recognized provider to an in-home patient.
Hospice: Care provided to terminally ill patients and their families that relate to emotional needs and coping with pain and death.
Hospital Indemnity Insurance: This is insurance that pays a fixed reimbursement for each day you are hospitalized up to a designated number of days. Some coverage may include benefits such as surgical benefits or skilled nursing home confinement benefits.
Inability to Perform Activities of Daily Living: Dependence on another person because of need; due to injury, sickness, or frailty of age, for regular human assistance or supervision in performing normal activities of daily living.
Incurred But Not Reported (IBNR): Claims incurred by the insured but not submitted to the plan or insurance company for reimbursement (also known as lagged claims).
Indemnity Insurance: Health care insurance plan providing benefits in a predetermined amount for covered services. Traditionally, the insurer pays on a fee-for-service basis without involvement in the actual delivery of health care services.
Insurability: The health status of an insurance applicant, which makes him/her acceptable to an insurance company. Examples: health, financial condition, occupation.
Integrated Coverage: Combinations of HMOs, indemnity plans, or PPOs in one health care plan.
Intermediate Care: Care that may need to be delivered by a skilled professional.
Joint Commission on Accreditation of Healthcare Organizations (JCAHO): Private voluntary accrediting organization for all types of health care organizations. Its focus is the outcome, process, and excellence in health care.
Lagged Claims: The time between the service and when it is submitted and processed for payment.
Lapse: Termination of insurance coverage for failure to pay premiums.
Lifetime Aggregate or Maximum: The maximum benefit payment provided under a plan or insurance contract.
Long-term Care (LTC): Continuous maintenance, custodial, and health services to the chronically ill, disabled, or mentally impaired over a lengthy period of time. Services may be provided in long-term care or on an outpatient basis (subacute care, rehabilitation facility, nursing home, mental hospital, outpatient, or at-home basis).
Long-Term Care Facility: A place which is (1) licensed by the state; (2) provides skilled, intermediate, or custodial nursing care on an inpatient basis under the supervision of a physician; (3) keeps a daily medical record of each patient.
Malpractice: Unprofessional, incompetent, or inappropriate medical care.
Managed Care: Term used to describe the coordination of financing and provision of health care to produce high-quality health care for the lowest possible cost. A system that imposes control on the utilization of medical services and on the providers who renders the care. Managed care is provided through managed indemnity plans; Preferred Provider Organizations (PPOs), Exclusive Provider Organizations (EPOs), Health Maintenance Organizations (HMOs), or any other cost management environment.
Managed Indemnity: Use of utilization controls in traditional fee-for-service health insurance plans in order to reduce cost and inappropriate care.
Mandated Benefits: Health care coverage required by state and federal law to be included in health insurance contracts.
Medicaid: State programs with federal matching funds for public health assistance to persons, regardless of age, whose income and resources are insufficient to pay for health care.
Medical Necessity: Term used by insurers to describe medical treatment that is appropriate and in accordance with generally accepted standards of medical practice.
Medicare: Federally sponsored program under the Social Security Act that provides hospital benefits, supplementary medical care, and catastrophic coverage to persons 65 years of age and older and to some younger persons who are covered under Social Security benefits.
Medicare-Approved Amount: Medicare has a fee schedule that list the dollar amount that Medicare considers to be the reasonable charge for the services provided by a doctor that Medicare approves for a covered service provided by a doctor is the lesser of the Medicare fee schedule amount for a particular service or the amount charged by the doctor.
Medicare Part A (Hospital Insurance): Helps pay for medically necessary inpatient care in a hospital, skilled nursing facility or psychiatric hospital, and for hospice and home health care.
Medicare Part B (Medical Insurance): Helps pay for medically necessary physician services and many other medical services and supplies not covered by Part A.
Medicare-Qualified Providers: Providers who have been approved by Medicare.
Medicare Risk Plan: A type of Medicare supplement coverage where the Medicare recipient "assigns" his/her benefits to an HMO. The HMO contracts with the Federal Government to provide medical services to the Medicare recipient at a discounted rate to the government.
Medicare Select: Federal programs designed to introduce Medicare beneficiaries to managed care plans through Preferred Provider Organization supplemental (MedSup) health insurance.
Medigap-Medicare Supplement Insurance: Medigap insurance is specifically designed to supplement Medicare's benefits and is regulated by federal and state law. It must be clearly identified as Medicare supplemental insurance and it must provide specific benefits that help fill the gaps in your Medicare coverage. Other kinds of insurance may help you with out-of- pocket health care costs but they do not qualify as Medigap plans.
Multiple Employer Trust (MET): A trust established by a sponsor that allows small employers in the same or related industries to provide medical insurance under a trust arrangement.
Multiple Provider Arrangement: Managed care plan consisting of group, staff, or IPA structures in combination.
National Association of Insurance Commissioners (NAIC): An organization that assists state insurance departments and helps draft models laws.
National Committee on Quality Assurance (NCQA): Private, voluntary organization for accrediting managed care. It assesses quality, credentialing utilization management, customer rights, preventive health services, and medical records. Developed the Health Plan Employer Data Set.
Negotiated Fees: Managed care plans and providers mutually agree on set fees for each service. This negotiated rate is usually based on services defined by the Current Procedural Terminology (CPT) codes, generally at a discount from what the provider would usually charge. Providers cannot charge more than this fee.
Network or Mixed-Model HMO: Provider arrangements that contract with a number of Independent Practice Associations or group practices to provide physician services to HMO enrollees in return for higher patient volume. This model is a multiple provider arrangement that can be either an open or closed panel.
Network Providers: Limited grouping or panels of providers in a managed care arrangement with several delivery points. Enrollees may be required to use only network providers or may have financing liability for using non-network providers for medical services.
Non-Network Providers: Non-contracted or unapproved health providers who are outside a managed care arrangement.
Omnibus Budget Reconciliation Act (OBRA): Term given by Congress to many of its annual tax and budget reconciliation acts. Most of these tax and budget acts have language or provisions related to health care and managed care, particularly in relation to Medicare.
Open-Ended HMO: Hybrid HMO product that allows members to use physicians outside the plan in exchange for additional financial liability in the form of a deductible, coinsurance, or co-payment.
Open Panel: A right included in an HMO which allows the covered person to obtain non-emergency covered services from a specialist without a referral from the primary care physician or gatekeeper.
Out-of-Network Care: Medical services obtained by managed care plan members from unaffiliated or non-contracted health care providers. In many plans, such care will not be reimbursed unless previous authorization is obtained.
Out-of-Pocket Expenses: Those health care costs that must be borne by the insured.
Out-of-Pocket Maximum: The maximum amount that an insured is required to pay under a plan or insurance contract.
Overutilization: Inappropriate or excessive use of medical services that add to health care costs.
Paid Claims: The total claims payment made by the plan or insurance company. It does not include any employee cost sharing or provider discounts.
Participating Provider: A provider who has agreed to contract with a managed care program to provide eligible services to covered persons.
Physician-Hospital Organization (PHO): Group practice arrangement that occurs when hospitals and physicians organize for purposes of contracting with managed care organizations. These relationships are formally organized, contractual, or corporate in character and include physicians outside the boundaries of a hospital's medical staff.
Point of Service Plans (POS): Combination of HMO and PPO features. They provide a comprehensive set of health benefits and offer a full range of health services much the same as the HMO. However, the member does not have to choose how to receive services until they need them. The member can then opt to use the defined managed care program, or can go out-of-plan for services but pay the difference for non-plan benefits (e.g. 100 percent coverage for managed care Vs. 80 percent coverage out-of-plan).
Portability: Provides access to continuous health insurance coverage so the insured does not lose coverage due to any change in health or personal status (such as employment, marriage, or divorce).
Pre-authorization: Previous approval required for referral to a specialist or non-emergency health care services.
Pre-certification: Utilization management program that requires the individual or provider to notify the insurer before hospitalization or surgical procedure. Notification allows the insurer to authorize payment and to recommend alternate courses of action.
Pre-existing Condition: A condition or diagnosis which existed (or for which treatment was received) before coverage began under a current plan or insurance contract, and for which benefits are not available or are limited.
Pre-existing Condition Clause: A clause in an insurance contract or plan that specifies if benefits will or will not be paid for a pre-existing condition. (Example: "the insured must be covered by the plan for a certain period of time or have gone a certain amount of time without any treatment.") Additionally, the clause may limit the benefit payable for treatment of pre existing conditions until a certain time period of coverage has elapsed, usually six months to a year.
Preferred Provider Organization (PPO): Managed care arrangement with a group of hospitals, physicians, and other providers who have contracts with an insurer, employer, third-party administrator, or other sponsoring group to provide health care services to covered persons in exchange for prompt payment and increased patient volume.
Premiums: Periodic payment to keep an insurance policy in force.
Premium Tax: A state tax on insurance premiums.
Prepaid Group Practice: A type of HMO plan where participating providers render specific services to the insured in exchange for an advance fixed patient.
Prevailing Charges: Amounts charged by health care providers that are consistent with charges from similar providers for identical or similar services in a given locale.
Primary Care: Non-specialist, basic routine medical care provided by family physician.
Providers: Term used to describe medical professionals and services organizations that provide health care services.
Qualified Provider: Health care provider contracted with or authorized to provide reimbursable health care services from an insurer or payer.
Reasonable and Customary: The maximum amount a plan will consider eligible for reimbursement, based on fees in a geographic area.
Referral: Primary care physician-directed transfer of a patient to a specialty physician or specialty care.
Reinsurance: The transfer of partial insurance risk to another insurer or insurers--self-funded plans generally buy specific and/or aggregate stop-loss coverage to cover losses in excess of certain limits.
Retention: The portion of the insurance premium which is allocated for expenses, administration, commissions, risk charges and profit.
Rider (Exclusion): An amendment to insurance contracts limiting, or excluding an existing coverage for certain conditions. For example, a rider to a policy may exclude coverage for treatment to an applicant's knee.
Risk Adjustment: Correction of capitation or fee rates based upon factors that can cause an increase in medical costs such as age or sex.
Risk Sharing: Apportionment of chance of incurring financial loss by insurers, managed care organization, and health care providers.
Self-Insurers: Employers, businesses, and other entities that chose to assume the responsibilities of an insurance company to insure their beneficiaries.
Self-Funding: An arrangement under which all or some of the risk associated with providing coverage is not covered by an insurance contract.
Self-Referral: Choice by the insured or patient of medical specialists or specialty services without need for primary care physician or health plan controls.
Seventy-five/twenty-five (75/25) Rule: HMOs participating in the Medicaid program are required to limit Medicaid and Medicare recipients to no more that 75 percent of enrollees and to draw at least 25 percent of their enrollees from the private sector to ensure that care provided to Medicaid enrollees is comparable to that provided to enrollees with private insurance.
Social Security Act: Law under which the federal government operates the Old Age, Survivors, Disability, and Health Insurance Program (OASDHI).
Stop-Loss Insurance: Protection purchased by self-insured and some managed care arrangements against the risk of large losses or severe adverse claim experience.
Supplementary Coverage: Insurance to help cover those parts of Medicare Part B that are non-reimbursable.
Third-Party Administrator (TPA): Method by which an outside person or firm, not a party to a contract, provides specific administrative duties (including premium accounting, claims review and payment, utilization review, and stop-loss coverage) for a self-funded plan.
Total Disability: Generally, a disability that prevents insureds from performing all occupational duties.
Triple Option Plan: An employer plan that usually offers an insured an opportunity to choose between an indemnity HMO or PPO level of benefits at time of claim.
Unbundled: Health services or benefits that are a stand-alone or carved-out benefit under a separate contract or bill.
Unbundling: To increase the reimbursement paid by a plan, each medical procedure is billed as a separate item instead of as part of one procedure.
Underwriters: Insurance professionals who determine if and on what basis an insurer will accept an application for insurance.
Usual, Customary, and Reasonable (UCR) Fees: Charges of health care providers that are consistent with charges from similar providers for identical or similar services in a given geography.
Utilization: Use patters for a medical service or type of service (hospital care, prescription drugs, physician visits). Measurement of utilization of all medical services in combination is generally done in terms of dollar expenditures.
Waiting Period: Date of hire and the employees’ eligibility to qualify for a plan of insurance or if already insured that time period before one is eligible for benefits (i.e. elimination period).
Waivers: Term typically associated with Medicare or Medicaid programs wherein the government waives certain regulations or rules for a managed care or insurance program to operate in a specific geographical area.
Waiver of Premium: A provision in a plan or insurance contract that relieves the insured of paying premiums while totally disabled or when receiving care for nursing home benefit.
Withhold Arrangements: Portion of a provider's salary, fees, or capitation that is withheld until performance in relation to quality and utilization are examined at the end of each year. If performance was satisfactory, withholds are released to the provider.