| Health Insurance Defined |
| |
|
| acquisition cost |
The cost to an insurer
to acquire new business. It includes costs such as underwriting the risk,
issuing a new policy, paying commissions and overhead or office
expenses. |
| |
|
| 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. Factors considered in the
study include the projection of future claims experience, administrative
expenses and anticipated investment return. |
| |
|
Administrative Services Only
(ASO)
|
A type of contract with
an insurance company or a third party administrator that provides an
employer with administrative services. It does not provide coverage for
risk or insurance protection. The usual expenses covered include claims
processing, plan design advice and printing benefit booklets. These
contracts are usually entered into by large employers who can afford the
risk of providing insurance protection with their own
money. |
| |
|
| administrator |
A person who is
designated to be responsible for the proper operation and administration
of a plan. When the plan sponsor does not designate a person for this
duty, then ERISA considers the plan sponsor to be the plan
administrator. |
| |
|
| adverse selection |
A tendency which occurs
when a person makes a decision based on his/her diminished health
condition or frequency of needed treatment and is, therefore, considered a
poorer claims risk than most others in the group. |
| |
|
| agent |
Licensed by the state,
performs the functions for sole proprietors and small businesses that
Human Resource Departments do for larger businesses, gathers census data,
prepares proposals, makes presentations to businesses, explains benefits
to employers, does field underwriting when required, delivers policies and
certificates, explains benefits to employees, assists in handling claims,
services the business in any other related tasks required by the employer
or sole proprietor |
| |
|
| aggregate amount limit |
Maximum amount a plan
sponsor (employer) is liable for any single loss or series of
losses. |
| |
|
| annual deductible |
The amount you pay for
covered expenses first, before an insurance plan begins to pay benefits.
Some plans require deductibles for all services, some for just certain
types of services; others require no deductible at all. |
| |
|
| assignment of
benefits |
Authorization by the
insured which allows the insurer or claims payer to pay benefits directly
to the medical care provider. |
| |
|
| attachment point |
For aggregate stop-loss
insurance, it is the point at which the stop-loss insurance carrier begins
to reimburse the employer based upon the cumulative total of claims paid
within a policy year. |
| |
|
| balance billing |
For specific stop-loss
insurance, it is the point at which the stop-loss insurance carrier begins
to reimburse the employer based upon the individual's total of claims paid
within a policy year.
The practice of medical care providers (such as
doctors, hospitals or other medical practitioners) billing the insurer for
full costs, then billing the insured for the portion of the bill which was
not paid. |
| |
|
| beneficiary |
The person
entitled to receive benefits under a plan, including the
covered employee and his or her dependents. |
| |
|
| benefit period |
A period of time during
which benefits are payable under a plan of insurance
contract. |
| |
|
| board certified |
This designates that
the provider is Board Certified by the American Board of Medical
Specialties (ABMS) in that particular specialty. The intent of the
certification of physicians is to provide assurance to the public that a
physician specialist certified by a Member Board of the ABMS has
successfully completed an approved educational program and evaluation
process which includes an examination designed to assess the knowledge,
skills, and experience required to provide quality patient care in that
specialty. |
| |
|
| Cafeteria Plan |
A plan which offers a
choice between two or more qualified benefits or a choice between cash and
one or more qualified benefits which complies with Section 125 of the
Internal Revenue Code (also known as flexible benefit plans or flex
plans). |
| |
|
| capitation |
A form of compensation
used primarily by HMOs to pay providers a periodic fee (usually a per
member/per month fee) in return for delivering as much necessary health
care services as the insured may need. |
| |
|
| Centers of Excellence |
Providers who are
selected to perform certain specialized procedures because of their
expertise and willingness to provide discounts. |
| |
|
| claim |
An insured s request
for reimbursement from an insurance company or plan for covered medical
expenses. |
| |
|
| closed panel |
Refers to a health care
program that requires the insured to use certain providers from a list
provided by the plan. The primary care provider is responsible for all
health care needs and refers to a specialty physician or hospitalization
only when medically needed. |
| |
|
| coalitions |
An association of
health care plan sponsors who pool their resources to negotiate with
insurers or other health care payers and providers. |
| |
|
| COBRA (Consolidated Omnibus Budget
Reconciliation Act of 1985) |
A federal law that
requires most employers to allow eligible employees and their
beneficiaries to continue to self-pay for their coverage after it normally
terminates for up to 18, 24, 29 or 36 months |
| |
|
| co-insurance |
An agreement between
the insured and the insurance company where payment is shared for all
claims covered by the policy. A typical arrangement is 80%/20% up to
$5,000. The insurance company pays 80% of the first $5,000 and the insured
pays 20%. Usually after 80% of $5,000, the insurance company then pays
100% of covered expenses during the remainder of the calendar year up to
any limits of the policy. |
| |
|
| commission |
Part of an insurance
premium which is paid by an insurance company to an agent or broker in
payment for procuring and servicing the business for the insurance
company/ client depending upon the size of the group being insured, these
commissions average between three and ten percent of the premium paid by
the employer. |
| |
|
| community rating |
A rating method that
determines a single average premium based on the characteristics and
claims experience of an entire membership such as an HMO or an insurance
pool. Age, lifestyle, industry, health factors and gender are not used to
determine rates (see Adverse Selection). |
| |
|
| competing health plans |
A health plan is an
insurer, PPO, HMO or other type of managed care arrangement. |
| |
|
| conversion privilege |
A contractual right
given to an insured person whose group coverage terminates to be able to
convert to an individual policy without providing evidence of
insurability. |
| |
|
| coordination of benefits |
A contractual provision
to prevent an insured from receiving duplicate benefits from two or more
group plans and profiting from over-insurance. |
| |
|
| co-pay / co-insurance |
The flat amount or
percentage you pay for a covered service after you satisfy the annual
deductible, if any. |
| |
|
| cost containment |
Efforts or activities
designed to reduce or slow down the cost increases of medical care
services. |
| |
|
| cost sharing |
The sharing of costs
between the payment of premium costs and medical expenses by the
health care plan and its insured through employee contributions,
deductibles, co-insurance and co-payments. |
| |
|
| cost shifting |
The increased cost of
medical care to other patients to make up for losses incurred in providing
care to patients who are under-insured or who have no
coverage. |
| |
|
| coverage |
The different types of
options selected and the benefits paid under a plan or insurance
contract. |
| |
|
| covered expenses |
Charges for services
which are medically necessary and eligible for payment under the plan. A
covered expense can be no more than the maximum amount stated in the
plan. |
| |
|
| deductible |
The amount that the
covered insured must pay before a plan or insurance contract starts to
reimburse for eligible expenses. |
| |
|
| drugs, formulary |
Drugs which the medical
literature indicates are clinically effective, safe and of reasonable
cost. |
| |
|
| drugs, non-formulary |
Prescription drugs not
on a formulary list. |
| |
|
| emergency |
A sudden, serious or
unexpected acute illness, injury or condition which could permanently
endanger your health if medical treatment is not received
immediately. |
| |
|
| extended benefits |
Benefits which
continue, or become payable, after the termination of coverage from a plan
or insurance contract, for example a hospitalization which continues after
coverage would normally cease. |
| |
|
| Fee for Service
Reimbursement |
The traditional
reimbursement system where the providers of medical care receive a benefit
payment calculated on the basis of their billed charge. Under this
arrangement Plans or Insurers have not established contracted or capitated
rates of payment with providers prior to the insured's claim
occurrence. |
| |
|
| Fiduciary |
Under ERISA, any person
who exercises discretionary authority or control over a plan or plan
assets. |
| |
|
| Fixed Costs |
Refers to those costs
which 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
typically funded by an employee's salary reduction to help pay for certain
expenses not covered by the employer's plan or insurance contract. The
advantage of these accounts is that after-tax dollars are converted to
before-tax dollars, thereby reducing the actual cost of
expenses. |
| |
|
| Fully Insured Plan |
The employer pays all
of the premium and, in return, transfers all of the risk and
responsibility for claims payment to the insurance company. |
| |
|
| GateKeeper Question |
A qualifying question
asked by an insurance company at the time of application to help identify
risk(s). Example: "Have you ever been treated for a heart attack or heart
condition?" |
| |
|
| Gatekeeper (Primary Care
Physician) |
A health professional
within a managed-care environment who determines the patient's access to
treatment. The primary care physician treats the patient and determines
access to further treatment and specialists. |
| |
|
| Guarantee Issue |
The applicant is
guaranteed coverage up to an agreed amount or level without evidence of
insurability (see Evidence of Insurability). |
| |
|
| Guaranteed Renewable |
The insured's right to
continue an enforce 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). |
| |
|
| group insurance |
A single policy issued
to an employer under which employees and their eligible family members may
be covered. Each employee receives a certificate of coverage
outlining his/her health plan benefits. |
| |
|
| Health Alliances |
Health Alliances or
Health Insurance Purchasing Cooperatives (HIPC's) are groups or entities
whose primary purpose is to negotiate with health plans to provide
coverage at competitive prices to members of the alliance. |
| |
|
| HMO (Health Maintenance
Organization) |
An organization that
provides a wide range of comprehensive health care services through a
designated group, or network of doctors, hospitals, labs and other
providers. To receive benefits, you must see the doctor you select as your
primary care physician first for care or a referral, except in the case of
an emergency. Your choice of doctors is restricted to those in the
network. |
| |
|
| Incontestability |
Provision in a policy
which provides that an insurance company cannot contest the validity of a
claim after the policy has been in force for a certain period, usually two
or three years. |
| |
|
| Independent Physicians
Association |
Primary Care Physicians
(PCP) who practice in their own office, but are part of a larger network
of many physicians. They will refer you to a specialist, usually
close by, or to a medical lab for special work. |
| |
|
| individual insurance |
Health care coverage
for individuals or single family units. |
| |
|
| Insurability |
The health status of an
insurance applicant which makes him/her acceptable to an insurance, i.e.
health, financial condition, occupation. |
| |
|
| Lapse |
Termination of
insurance coverage for failure to pay premium. |
| |
|
| Lifetime Aggregate or
Maximum |
The maximum benefit
payment provided under a plan or insurance contract. |
| |
|
| limited fee schedule |
A list of maximum
amounts we will pay for certain services provided by non-network
providers. You are responsible for paying your co-insurance and any amount
over the limited fee schedule. |
| |
|
| Long Term Care |
The services required
over a lengthy period of time due to an insured's chronic illness or
disability. It may include skilled nursing care and custodial care, or
adult day care or house care servers. |
| |
|
| Malpractice Reform |
Proposed changes may
include required arbitration and limits to the amount of attorneys'
fees. |
| |
|
| Managed Care |
A health care system
which imposes controls on the utilization of medical services and on the
providers who render 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. |
| |
|
| Mandate |
A specific procedure or
coverage that a plan or insurance contract must offer dictated by state or
federal law. |
| |
|
| Medicaid |
A medical benefits plan
available for low income persons paid by federal and state government, but
administered by the state. |
| |
|
| negotiated fee |
The discounted rates
that Prudent Buyer network doctors and hospitals agree to charge for
covered expenses. |
| |
|
| network / in-network |
The term used for
services received from doctors, hospitals and other providers contracting
with us to provide care at the negotiated fee and to handle the
paperwork. |
| |
|
| out-of-network /
non-network |
The term used for
services received from doctors, hospitals or to the providers that are not
part of the network. You pay substantially more for out-of-network
services. |
| |
|
| out-of-pocket maximum |
The most you pay for
covered expenses during the year before the plan begins paying 100% of
covered expenses for the rest of the year. Only covered expenses count
toward the maximum. For example, any charges above the limited fee
schedule for out-of-network doctor's services do not count. |
| |
|
| Participating Provider |
A provider who has
agreed to contract with a managed care program to provide eligible
services to covered persons. |
| |
|
| Play or Pay |
A concept that would
require employers to provide health insurance to their employees and
dependents (play) or pay a tax or premium toward a publicly-provided
system that covers people without private insurance (pay). |
| |
|
| Point of Service |
Each time health care
services are needed, the patient can choose from different types of
provider systems (indemnity plan, PPO or HMO); each choice may provide
different benefit payments. |
| |
|
| Pool(ing) |
Used by insurance
companies to combine all premiums, claims and expenses in order to spread
the risk of insurance coverage. This process ensures that small employers
will not be singled out and unfairly assessed with a large rate increase
due to unanticipated medical catastrophic claims of its insured
employee(s). |
| |
|
| Portability |
Provides access to
continuous health coverage so the insured does not lose insurance coverage
due to any change in health or personal status (such as employment,
marriage or divorce). |
| |
|
| PCP (Primary Care
Physician) |
The doctor who serves
as your HMO health care manager and coordinates virtually all of the
health care services you receive. Your PCP provides you with routine
medical care and refers you to a specialist if necessary. |
| |
|
| PMG (Participating Medical
Group) |
A group of doctors,
both primary care physicians and specialists, who are practicing in one
location to provide health care services. Most medical services,
including special exams, X-Ray and laboratory tests are available in one
convenient location. |
| |
|
| PPO (Preferred Provider
Organization) |
Health care providers
who are under contract to provide care at discounted or fixed fees. Unlike
HMOs, health plans with a PPO allow you to choose any doctor at any time.
However, if you select a non-PPO provider you will pay more out of pocket
for services than you would if you selected a PPO "network"
provider. |
| |
|
| Pre-existing condition or pre-existing
waiting period |
If you receive medical
advice, or treatment was recommended or received for any accident,
illness, or other medical condition during six months before you enroll in
a plan, you won't be covered for the care you receive as a result of that
condition until you've been enrolled in the plan for six months. If you
satisfied the six-month waiting period while enrolled in another medical
plan, and enrolled within 30 days of completing that waiting period, you
won't need to complete another pre-existing waiting period. You will
receive partial credit if you were insured under another plan for less
than six months. |
| |
|
| Pre-Existing Condition
Clause |
A clause in an
insurance contract or plan which 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. |
| |
|
| 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 payment. |
| |
|
| Primary Care |
Routine office medical
care provided by a family physician. |
| |
|
| Provider |
A physician, hospital,
skilled nursing facility, intensive care facility or health care
professional or other entity which provides health care
services. |
| |
|
| Qualifying prior
coverage |
Any individual or group
plan that provides medical, hospital, and surgical coverage, including
continuation or conversion coverage or coverage under a publicly sponsored
program such as Medicare or Medicaid. It does not include accident
only, credit, disability income, Medicare supplement, long term care
insurance, dental, vision, workers' compensation insurance, automobile
insurance, no-fault insurance, or any medical coverage designed to
supplement other private or governmental plans. |
| |
|
| Reasonable and Customary |
The maximum amount a
plan or insurance contract will consider eligible for reimbursement, based
upon prevailing fees in a geographic area. |
| |
|
| Rebating |
The practice (illegal
in most states) of giving an insurance applicant anything of value as an
inducement to purchase or renew an insurance policy. |
| |
|
| Reinsurance |
The transfer of part of
the 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 (also known as stop loss). (See Attachment
Point) |
| |
|
| Reserves |
A specific a mount of
money pre-funded and set aside to assure adequate funds to cover future
claims. Both insurance companies and self-insured employers must "reserve"
in order to preserve cash-flow and protect solvency. |
| |
|
| Retention |
The portion of the
insurance premium which is allocated for expenses, administration,
commissions, risk charges and profit. |
| |
|
| Rider (Exclusion Rider) |
An amendment to an
insurance contract 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. |
| |
|
| Self Funding |
An arrangement under
which all or some of the risk associated with providing coverage is not
covered by an insurance contract. |
| |
|
| Service Area |
A geographic area of
operation for a managed care entity. |
| |
|
| Specialist |
A physician whose
practice is limited to a particular branch of medicine or
surgery. |
| |
|
| Staff Model HMO |
An HMO that employs
physicians to provide health care services to its members. Staff Models
usually operate their own health center or facilities. |
| |
|
| Third Party Administrator
(TPA) |
An organization that
provides specific administrative duties (including premium accounting,
claims review, and payment, arranges for utilization review and stop-loss
coverage) for self funded plans. |
| |
|
| Trend Factor |
The percentage of
increase used by an insurance company or plan to reflect the projected
rise in health care costs. Calculation factors also include inflation,
utilization, technology and geographic area. |
| |
|
| Triple Option Plan |
A plan which usually
offers an insured an opportunity to choose between an indemnity plan, HMO
and PPO. |
| |
|
| Unbundling |
To increase the
reimbursement paid by a plan or insurance contract, each medical procedure
is billed under a separate code as a separate item, instead of part of one
overall procedure. |
| |
|
| Utilization |
The number of times a
health care service is obtained by an insured during a specific period of
time. |
| |
|
| Utilization Review |
A program designed to
help reduce unnecessary medical expenses (usually hospital stays) by using
preliminary evaluations and patient discharge practices. |
| |
|
| Waiting Period |
The time period between
an employee's date of hire and their eligibility to receive benefits under
a plan or insurance contract. |
| |
|
| Waiver of Premium |
A provision in a plan
or insurance contract which relieves the insured of paying the premiums
while totally disabled. |
| |
|
| Wellness |
Programs or benefits
which are introduced to encourage fitness, preventive care and early
detection of illness to help reduce the cost of future health care (also
known as Preventive Care). |
| |
|
| Worker's Compensation
Coverage |
Programs mandated by
the states which require employers to provide coverage to compensate
employees for work- related injuries or disabilities. |
| |
|
