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Glossary | Benefit Plan Administrators

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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.

Actively-at-work Describes insurer’s policy requirement indicating that coverage will not go into effect until the employee’s first day of work on or after the effective date of coverage. May also apply to dependents disabled on the effective date.

Activities of daily living (ADL’s, ADL) An individual’s daily habits such as bathing, dressing and eating. ADLs are often used as an assessment tool to determine an individual’s ability to function at home, or in a less restricted environment of care.

Actuarial Refers to the statistical calculations used to determine the 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 his 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 for ASO for certain services for which the provider group does not want to bring in house. This is a form of outsourcing. See also TPA.

Adverse Selection The problem of attracting members who are sicker than the general population, specifically, members who are sicker than was anticipated when developing the budget for medical costs. A tendency for utilization of health services in a population group to be higher than average or the tendency for a person who is in poor health to be enrolled in a health plan where he or she is below the average risk of the group. From an insurance perspective, adverse selection occurs when persons with poorer-than-average health status apply for, or continue, insurance coverage to a greater extent than do persons with average or better health expectations. Occurs when premium doesn’t cover cost. Some populations, perhaps due to age or health status, have a great potential for high utilization. Some population parameter such as age (e.g., a much greater number of 65-year-olds or older to young population) that increases the potential for higher utilization and often increases costs above those covered by a payers capitation rate. Among applicants for a given group or individual program, the tendency for those with an impaired health status, or who are prone to higher than average utilization of benefits, to be enrolled in disproportionate numbers and lower deductible plans.

Age/Sex Factor 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.

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.

Aid to Families with Dependent Children (AFDC) The federal AFDC program provides cash welfare to: (1) needy children who have been deprived of parental support and (2) certain others in the household of such child. States administer the AFDC program with funding from both the federal government and state. The Personal Responsibility & Work Responsibility Act of 1996, enacted in August 1996, replaced AFDC with a new program called Temporary Assistance for Needy Families (TANF).

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.

Allowable costs Covered expenses within a given health plan. Items or elements of an institution’s costs which are reimbursable under a payment formula. Both Medicare and Medicaid reimburse hospitals on the basis of only certain costs. Allowable costs may exclude, for example, luxury travel or marketing. HCFA publishes an extensive list of rules governing these costs and provides software for determining costs. Normally the costs which are not reasonable expenditures, which are unnecessary, which are for the efficient delivery of health services to persons covered under the program in question are not reimbursed. The most common form of cost reimbursement is the “cost report” methodology used for DRG-exempt services, such as many out-patient hospital based programs, long-term care and skilled nursing units, physical rehab, psychiatric and substance abuse inpatient programs. Some specialty hospitals receive all of their HCFA reimbursement as cost based reimbursement.

Allowable costs Covered expenses within a given health plan. Items or elements of an institution’s costs which are reimbursable under a payment formula. Both Medicare and Medicaid reimburse hospitals on the basis of only certain costs. Allowable costs may exclude, for example, luxury travel or marketing. HCFA publishes an extensive list of rules governing these costs and provides software for determining costs. Normally the costs which are not reasonable expenditures, which are unnecessary, which are for the efficient delivery of health services to persons covered under the program in question are not reimbursed. The most common form of cost reimbursement is the “cost report” methodology used for DRG-exempt services, such as many out-patient hospital based programs, long-term care and skilled nursing units, physical rehab, psychiatric and substance abuse inpatient programs. Some specialty hospitals receive all of their HCFA reimbursement as cost based reimbursement.

Allowed Amount Maximum dollar amount assigned for a procedure based on various pricing mechanisms. Also known as a maximum allowable.

Allowed Charge This is the amount Medicare approves for payment to a physician, but may not match the amount the physician gets paid by Medicare (due to co-pay or deductibles) and usually does not match what the physician charges patients. Medicare normally pays 80 percent of the approved charge and the beneficiary pays the remaining 20 percent. The allowed charge for a nonparticipating physician is 95 percent of that for a participating physician. Non-participating physicians may bill beneficiaries for an additional amount above the allowed charge. These rates are published by the HCFA intermediary in each state.

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.

ANSI The American National Standards Institute. A national organization founded to develop voluntary business standards in the United States .

Appropriateness Appropriate health care is care for which the expected health benefit exceeds the expected negative consequences by a wide enough margin to justify treatment. This term is not to be confused with “usual and customary” or “approved” service.

Approval A term used extensively in managed care and, to many, implies the primary process of “managing” managed care. Approval usually is used to describe treatments or procedures that have been certified by utilization review. Can also refer to the status of certain hospitals or doctors, as members of a plan. Can describe benefits or services which will be covered under a plan. Generally, approval is either granted by the managed care organization (MCO), third party administrator (TPA) or by the primary care physician (PCP), depending on the circumstances.

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.

Assignment of Benefits Method used when a claimant directs that payment be made directly to the health care provider by the health plan.

Average Length of Stay (ALOS) Refers to the average length of stay per inpatient hospital visit. Figure is typically calculated for both commercial and Medicare patient populations.

Average Wholesale Price (AWP) Commonly used in pharmacy contracting, the AWP is generally determined through reference to a common source of information. Average cost of a non-discounted item to a pharmacy provider by wholesale providers.

Avoidable hospital condition Medical diagnosis for which hospitalization could have been avoided if ambulatory care had been provided in a timely and efficient manner.

Balance billing The practice of billing a patient for the fee amount remaining after insurer payment and copayment have been made. Under Medicare, the excess amount cannot be more than 15 percent above the approved charge.

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.

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.

Benefits Benefits are specific areas of Plan coverage’s, 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.

Billed Claims Fees submitted by a health care provider for services rendered to a covered person.

Board Certified (Boarded, Diplomate) Describes a physician who has passed a written and oral examination given by a medical specialty board and who has been certified as a specialist in that area.

Board Eligible Describes a physician who is eligible to take the specialty board examination by virtue of being graduated from an approved medical school, completing a specific type and length of training, and practicing for a specified amount of time. Some HMOs and other health facilities accept board eligibility as equivalent to board certification, significant in that many managed care companies restrict referrals to physicians without certification.

Broker One who represents an 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.

Bundled Payment A single comprehensive payment for a group of related services. Bundled payments have become the norm in recent years and unbundled services are investigated closely by HCFA and other payers. Unbundling service charges has been a common form of fraud as defined by HCFA.

Cafeteria Plan An arrangement under which employees may choose their own benefit structure. Sometimes these are varying benefit plans or add-ons provided through the same insurer or 3rd party administrator, other times this refers to the offering of different plans or HMOs provided by different managed care or insurance companies.

Capitation (Cap, Capped, Capitate) Specified amount paid periodically to health provider for a group of specified health services, regardless of quantity rendered. Amounts are determined by assessing a payment “per covered life” or per member. The method of payment in which the provider is paid a fixed amount for each person served no matter what the actual number or nature of services delivered. The cost of providing an individual with a specific set of services over a set period of time, usually a month or a year. A payment system whereby managed care plans pay health care providers a fixed amount to care for a patient over a given period. Providers are not reimbursed for services that exceed the allotted amount. The rate 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.

Carve-Outs Practice of excluding specific services from a managed care organization’s capitated rate. In some instances, the same provider will still provide the service, but they will be reimbursed on a fee-for-service basis. In other instances, carved out services will be provided by an entirely different provider. A payer strategy in which a payer separates (“carves-out”) a portion of the benefit and hires an MCO to provide these benefits. Common carve outs include such services as psychiatric, rehab, chemical dependency and ambulatory services. Increasingly, oncology and cardiac services are being carved out. This permits the payer to create a seperate health benefits package and assume greater control of their costs. Many HMOs and insurance companies adopt this strategy because they do not have in-house expertise related to the service “carved out.” A “carve-out” is typically a service provided within a standard benefit package but delivered exclusively by a designated provider or group. This process may or may not seem transparent to the subscriber, but, it often means that seperate UR and precertification entities are involved as well as different payers and providers. Carve-outs are also called sub-contractors, sub-capitators or junior capitation contracts.

Case Management Method designed to accomodate 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 which 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 Coverage (COC) Outlines the terms of coverage and benefits available in a carrier’s health plan.

CHAMPUS Civilian Health and Medical Program of the Uniformed Services.

Charges These are the published prices of services provided by a facility. HCFA requires hospitals to apply the same schedule of charges to all patients, regardless of the expected sources or amount of payment. Controversy exists today because of the often wide disparity between published prices and contract prices. The majority of payers, including Medicare and Medicaid, are becoming managed by health plans which negotiate rates lower than published prices. Often these negotiated rates average 40% to 60% of the published rates and may be all inclusive bundled rates.

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.

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.

Co-Insurance (coinsurance) A cost-sharing requirement under a health insurance policy which provides that the insured will assume a portion or percentage of the costs of covered services. Health care cost which the covered person is responsible for paying, according to a fixed percentage or amount. A policy provision frequently found in major medical insurance policies under which the insured individual and the insurer share hospital and medical expenses according to a specified ratio. A type of cost sharing where the insured party and insurer share payment of the approved charge for covered services in a specified ratio after payment of the deductible. Under Medicare Part B, the beneficiary pays coinsurance of 20 percent of allowed charges. Many HMOs provide 100% insurance (no coinsurance) for preventive care or routing care provided “in network”.

Co-Payment A cost-sharing arrangement in which the HMO enrollee pays a specified flat amount for a specific service (such as $10 for an office visit or $5 for each prescription drug). The amount paid must be nominal to avoid becoming a barrier to care. It does not vary with the cost of the service, unlike co-insurance which is based on some percentage of cost.

COBRA See Consolidated Omnibus Budget Reconciliation Act.

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. Medicare fraud investigators look closely at the medical record documentation which supports codes and looks for consistency. Lack of consistency of documentation can earmark a record as “upcoded” which is considered fraud. A national certification exists for coding professionals and many compliance programs are raising standards of quality for their coding procedures.

Complication A medical condition that arises during a course of treatment and is expected to increase the length of stay by at least one day for most patients.

Composite Rate Group rate billed to all subscribers of a given group.

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. See also Utilization Review, Medical Necessity, Appropriate and Continued Stay Review.

Consolidated Omnibus Budget Reconciliation Act (COBRA) Federal law that continues health care benefits for employees whose employment has been terminated. Employers are required to notify employees of these benefit continuation options, and, failure to do so can result in penalties and fines for the 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 A legal agreement between a payer and a subscribing group or individual which specifies rates, performance covenants, the relationship among the parties, schedule of benefits and other pertinent conditions. The contract usually is limited to a 12-month period and is subject to renewal thereafter. Contracts are not required by statute or regulation, and less formal agreements may be made.

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.

Contract Year A period of twelve (12) consecutive months, commencing with each Anniversary Date. May or may not coincide with a calendar year.

Contributory Program Program where the cost of group coverage is shared by the employee and the employer or the union.

Conversion In group health insurance, the opportunity given the insured and any covered dependents to change his or her group insurance to some form of individual insurance, without medical evaluation upon termination of his group insurance

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.

Cost Containment Control of inefficiencies in the consumption, allocation, or production of health care services that contribute to higher than necessary costs. Inefficiencies are thought to exist in consumption when health services are inappropriately utilized; inefficiencies in allocation exist when health services could be delivered in less costly settings without loss of quality; and, inefficiencies in production exist when the costs of producing health services could be reduced by using a different combination of resources. Cost containment is a word used freely in healthcare to describe most cost reduction activities by providers.

Cost Effectiveness (Evaluation) The efficacy of a program in achieving given intervention outcomes in relation to the program costs. Follow-up studies, outcome studies and TQM programs attempt to assess treatment efficacy, while cost effectiveness would provide a ratio of this measurement with costs.

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 outof-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. The process of reviewing a practitioners credentials, i.e., training, experience, or demonstrated ability, for the purpose of determining if criteria for clinical privileging are met. The recognition of professional or technical competence. The credentialing process may include registration, certification, licensure, professional association membership, or the award of a degree in the field. Certification and licensure affect the supply of health personnel by controlling entry into practice and influence the stability of the labor force by affecting geographic distribution, mobility, and retention of workers. Credentialing also determines the quality of personnel by providing standards for evaluating competence and by defining the scope of functions and how personnel may be used. In managed care arenas, one hears of a new basis for credentialing, referred to as financial credentialing. This refers to an organization’s evaluation of a provider based on that provider’s ability to provide value, or high quality care at a reasonable cost.

Customary charge One of the factors determining a physician’s payment for a service under Medicare. Calculated as the physician’s median charge for that service over a prior 12-month period.

Customary, Prevailing, and Reasonable (CPR) Current method of paying physicians under Medicare. Payment for a service is limited to the lowest of (1) the physician’s billed charge for the service, (2) the physician’s customary charge for the service, or (3) the prevailing charge for that service in the community. Similar to the Usual, Customary, and Reasonable system used by private insurers.

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.

Deductibles Amounts required to be paid by the insured under a health insurance contract, before benefits become payable.

Defensive Medicine Doctors in recent years have admitted to and have been accused of prescribing additional tests or procedures to justify their care, strengthen support for their decisions or simply to corraborate their diagnosis. This defensiveness is a result of law suits, malpractice claims and the onslaught of external UR entities questioning care decisions. Defensive medicine is said to be one of the primary causes of the increasing cost of health care. Many physicians and the AMA fight for tort reform to reduce the need for defensive medicine.

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.

Department of Health and Human Services (HHS) The federal agency that oversees Medicare, Medicaid and other federal health care programs. (also see DOJ, Fraud and FBI)

Department of Justice (DOJ) The federal agency that enforces the law and handles criminal investigations. As the nation’s largest law firm, the DOJ protects citizens through effective law enforcement, crime prevention and crime detection. It is the agency that prosecutes those in the health care system guilty of proven “fraudulent” activity. (also see Fraud and FBI)

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.

Designated Mental Health Provider Person or place authorized by a health plan to provide or suggest appropriate mental health and substance abuse care.

Direct Contracting Providing health services to members of a health plan by a group of providers contracting directly with an employer, thereby butting out the middleman or third party insurance carrier. This can be provider heaven, since middleman-MCO-is cut out and provider gets some portion of the money usually made by it. Key is to price services correctly, since provider is usually at full risk in this situation. Takes a strong IDS, MSO or AHP to do this successfully.

Disallowance When a payor declines to pay for all or part of a claim submitted for payment.

Discharge Planning Required by Medicare and JCAHO for all hospital patients. A procedure where aftercare services are determined for after discharge from the inpatient facility.

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. An agreed upon rate for service between the provider and payer that is usually less than the provider’s full fee. This may be a fixed amount per service, or a percentage discount. Providers generally accept such contracts because they represent a means to increase their volume or reduce their chances of losing volume.

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. The development of such products by hugely-capitalized companies should be all the indicator necessary to convince a provider of how the healthcare market is changing. Competition is coming from every direction–other providers of all types, payers, employers who are developing their own in-house service systems, the drug companies.

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 copayments for prescriptions and education. In some cases, practitioners are now penalized or rewarded depending on their drug prescription related costs and utilization. Some speculate that these incentives can adversely effect doctor decisions.

Dual Choice (Multiple Choice, Dual Option, DC) Section 1310 of the HMO Act provides for dual choice. A choice given to employees to select between two or more health plans offered by an employer. The opportunity for an individual within an employed group to choose from two or more types of health care coverage such as an HMO and a traditional insurance plan. Many states also have legislated mandates regarding choices offered within employer packages.

Duplicate Coverage Inquiry (DCI) Method used by an insurance company or group medical plan to inquire about the existing coverage of another insurance company or group medical plan.

Duplication of Benefits When a person is covered under two or more health plans with the same or similar coverage.

Durable Medical Equipment (DME) Items of medical equipment owned or rented which are placed in the home of an insured to facilitate treatment and/or rehabilitation. DME generally consist of items which can withstand repeated use. DME is primarily and customarily used to serve a medical purpose and is usually not useful to a person in the absence of illness or injury.

Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) EPSDT program covers screening and diagnostic services to determine physical or mental defects in recipients under age 21, as well as health care and other measures to correct or ameliorate any defects and chronic conditions discovered.

Effective Date 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.

Electronic Data Interchange (EDI) The automated exchange of data and documents in a standardized format. In health care, some common uses of this technology include claims submission and payment, eligibility, and referral authorization.

Electronic Medical Record (EMR) This technology, when fully developed, meets provider needs for real-time data access and evaluation in medical care. Together with clinical workstations and clinical data repository technologies, the EMR provides the mechanism for longitudinal data storage and access. A motivation for healthcare entities to implement this technology derives from the need for medical outcome studies, more efficient care, speedier communication among providers and management of health plans.

Eligible Dependent Person entitled to receive health benefits from someone else’s plan. See also Dependent.

Eligible Employee Employee who qualifies to receive benefits.

Eligible Expenses Charges covered under a health plan. See also Covered Services, Approved Services.

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 Sudden unexpected onset of illness or injury which requires the immediate care and attention of a qualified physician, and which, if not treated immediately, would jeopardize or impair the health of the Member, as determined by the payer’s Medical Staff. Significant in that Emergency may be the only acceptable reason for admission without pre-certification.

Emergency Center , Emergi-center Non-hospital affiliated health facility that provides short-term care for minor medical emergencies or procedures needing immediate treatment; also called urgi-center, urgent center or free standing emergency medical service center.

Employee Assistance Program (EAP) A service, plan or set of benefits which are designed for personal or family problems, including mental health, substance abuse, gambling addiction, marital problems, parenting problems, emotional problems or financial pressures. This is usually a service provided by an employer to the employees, designed to assist employees in getting help for these problems so that they may remain on the job. EAP began with a primary drug and alcohol focus with an emphasis on rehabilitating valued employees rather than terminating them for their substance problems. It is sometimes implemented with a disciplinary program which requires that the impaired employee participate in EAP in order to retain employment. With the advent of managed care, EAP has sometimes evolved to include case management, utilization review and gatekeeping functions for the psychiatric and substance abuse health benefits.

Employee Retirement Income Security Act of 1974 (ERISA) Also called the Pension Reform Act, this act regulates the majority of private pension and welfare group benefit plans in the U.S. . It sets forth requirements governing, among many areas, participation, crediting of service, vesting, communication and disclosure, funding, and fiduciary conduct. Key legislative battleground now, because ERISA exempts most large selffunded plans from State regulation and, hence, from any reform activities undertaken at state level–which is now the arena for much healthcare reform.

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. Same as Contract group.

Enrollee (Also beneficiary; individual; member) Any person eligible as either a subscriber or a dependent for service in accordance with a contract.

Enrollment Initial process whereby new individuals apply and are accepted as members of a prepayment plan.

Episode of Care A term used to describe and measure the various health care services and encounters rendered in connection with identified injury or period of illness.

Essential Community Providers Providers such as community health centers that have traditionally served low-income populations.

Evidence of Insurability (E of I) Proof of a person’s physical condition that affects acceptibility 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.

Exclusions Conditions or situations not considered covered under contract or plan. Clauses in an insurance contract that deny coverage for select individuals, groups, locations, properties or risks. Providers will negotiate for exclusions for outliers and carve-out of certain high cost procedures, while payers will negotiate for exclusions to avoid payment of higher cost care.

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).

Exclusive Provider Organization (EPO) A plan which limits coverage of non-emergency care to contracted health care providers. Operates similar to an HMO plan but is usually offered as an insured or self-funded product. Sometimes looks like a managed care organization that is organized similarly to a PPO in that physicians do not receive capitated payments, but the plan only allows patients to choose medical care from network providers. If a patient elects to seek care outside of the network, then he or she will usually not be reimbursed for the cost of the treatment. Uses a small network of providers and has primary care physicians serving as care coordinators (or gatekeepers). Typically, an EPO has financial incentives for physicians to practice costeffective medicine by using either a prepaid per-capita rate or a discounted fee schedule, plus a bonus if cost targets are met. Most EPOs are forms of POS plans because they pay for some out-of-network care.

Exclusivity Clause A part of a contract which prohibits physicians, providers or other care entities from contracting with more than one managed care organization. Exclusive contracts are common in staff model HMOs and IPAs but becoming less common in other health plan contracting.

Experience A term used to describe the relationship of premium to claims for a plan, coverage, or benefits for a stated time period. Usually expressed as a ratio or percent. See also Medical Loss Ratio .

Experience Rating The process of setting rates partially or in whole on evaluating previous claims experience for a specific group or pool of groups. The rating system by which the Plan determines the capitation rate or premium rate is determined by the experience of the individual group enrolled, based on actual or anticipated health care use by the specific group of insureds. Each group will have a different rate based on utilization. This system tends to penalize small groups with high utilization. A method of adjusting health plan premiums based on the historical utilization data and distinguishing characteristics of a specific subscriber group, such as determining the premium based on a group’s claims experience, age, sex or health status. Experience rating is not allowed for federally-qualified HMOs.

Experience-Rated Premium A premium with is based upon the anticipated claims experience of, or utilization of service by, a contract group according to its age, sex, constitution, and any other attributes expected to affect its health service utilization, and which is subject to periodic adjustment in line with actual claims or utilization experience.

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.

Extension of Benefits Insurance policy provision that allows medical coverage to continue past termination of employments. See also COBRA.

Favorable Selection Selection of subscribers or covered lives based on data which shows a tendency for utilization of health services in that population group to be lower than expected or estimated.

Fee Disclosure Physicians and caregivers discussing their charges with patients prior to treatment.

Fee Schedule A listing of accepted fees or established allowances for specified medical procedures. As used in medical care plans, it usually represents the maximum amounts the program will pay for the specified procedures.

Fiduciary Relating to, or founded upon, a trust or confidence. A legal term. A fiduciary relationship exists where an individual or organization has an explicit or implicit obligation to act in behalf of another person’s or organization’s interests in matters which affect the other person or organization. This fiduciary is also obligated to act in the other person’s best interest with total disregard for any interests of the fiduciary. Traditionally, it was generally believed that a physician had a fiduciary relationship with patients. This is being questioned in the era of managed care as the public becomes aware of the other influences which are effecting physician decisions. Doctors are provided incentives by managed care companies to provide less care, by pharmaceutical companies to order certain drugs and by hospitals to refer to their hospitals. With the pervasive monetary incentives influencing doctor decisions, consumer advocates are concerned because the patient no longer has an unencumbered fiduciary.

First-dollar Coverage Insurance coverage with no front-end deductible where coverage begins with the first dollar of expense incurred by the insured for any covered benefit.

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.

Fixed Costs Costs which do not change with fluctuations in census or in utilization of services.

Flexible Benefit Plan Program offered by some employers in which employees may choose among a number of health care benefit options. See also Cafeteria Plan.

Flexible Spending Account (FSA) A plan which provides employees a choice between taxable cash and non-taxable benefits for unreimbursed health care expenses or dependent care expenses. This plan qualifies under Section 125 of the IRS Code. See also Medical Spending Account.

Formulary An approved list of 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. See also Drug Formulary.

Fraud Intentional misrepresentations which can result in criminal prosecution, civil liability and administrative sanctions.

Freedom of Choice A principle of Medicaid which allows a recipient the freedom to choose among participating Medicaid providers.

Funding Method System for 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. See also Self-insured, Risk and Premium.

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. In order for a patient to receive a specialty care referral or hospital admission, the PCP must preauthorize the visit, unless there is an emergency. The term gatekeeper is also used in health care business to describe anyone (EAP, employer based casemanager, UR entity, etc.) which makes the decision of where a patient will recieve services.

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. Outliers and carveouts will be those services not included in the global negotiated rates.

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.

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.

Group Practice A group of persons licensed to practice medicine in the State, who, as their principal professional activity, and as a group responsibility, engage or undertake to engage in the coordinated practice of their profession primarily in one or more group practice facilities, and who in their connection share common overhead expenses if and to the extent such expenses are paid by members of the group, medical and other records, and substantial portions of the equipment and the professional, technical, and administrative staffs. Group practices use the acronyms PA, IPA, MSO and others. Group practices are far more common now than a decade ago because physicians seek to lower costs, increase contracting power and share payer contracts.

Group Practice without Walls (GPWW) Similar to an independent practice association, this type of physician group represents a legal and formal entity where certain services are provided to each physician by the entity, and the physician continues to practice in his/her own facility. It can include marketing, billing and collection, staffing, management, and the like. Also called clinic without walls.

Guaranteed Issue Requirement that health plans offer coverage to all businesses during some period each year.

Health The state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity. It is recognized, however, that health has many dimensions (anatomical, physiological, and mental) and is largely culturally defined. The relative importance of various disabilities will differ depending upon the cultural milieu and the role of the affected individual in that culture. Most attempts at measurement have been assessed in terms or morbidity and mortality.

Health and Human Services (HHS) The Department of Health and Human Services which is responsible for health-related programs and issues. Formerly HEW, the Department of Health, Education, and Welfare. The Office of Health Maintenance Organizations (OHMO) is part of HHS and detailed information on most companies is available here through the Freedom of Information Act.

Health Benefits Package The services and products a health plan offers.

Health Care Financing Administration (HCFA) The federal government agency within the Department of Health and Human Services which directs and oversees the Medicare and Medicaid programs (Titles XVIII and XIX of the Social Security Act) and conducts research to support those programs. Generally it oversees the state’s administrations of Medicaid, while directly administering Medicare.

Health Maintenance Organization (HMO) HMOs offer prepaid, comprehensive health coverage for both hospital and physician services. The HMO is paid monthly premiums or capitated rates by the payers, which include employers, insurance companies, government agencies, and other groups representing covered lives. The HMO must meet the specifications of the federal HMO act as well as meeting many rules and regulations required at the state level. There are 4 basic models: group model, individual practice association, network model and staff model. An HMO contracts with health care providers, e.g., physicians, hospitals, and other health professionals. The members of an HMO are required to use participating or approved providers for all health services and generally all services will need to meet further approval by the HMO through its utilization program. Members are enrolled for a specified period of time. HMOs may turn around and sub-capitate to other groups. For example, it may carve-out certain benefit categories, such as mental health, and subcapitate these to a mental health HMO. Or the HMO may subcapitate to a provider, provider group or provider network. HMOs are the most restrictive form of managed care benefit plans because they restrict the procedures, providers and benefits.

Health Resources and Services Administration HRSA is a component of the U.S. Department of Health and Human Services. Included in HRSA responsibilities is administration of the Ryan White Care funds with a budget of about $1 billion/year to support a continuum of care services for persons with HIV infection.

Health Service Agreement (HSA) Detailed explanation of procedures and benefits provided to an employer by a health plan.

Health Status The state of health of a specified individual, group, or population.It may be measured by obtaining proxies such as people’s subjective assessments of their health; by one or more indicators of mortality and morbidity in the population, such as longevity or maternal and infant mortality; or by using the incidence or prevalence of major diseases (communicable, chronic, or nutritional). Conceptually, health status is the proper outcome measure for the effectiveness of a specific population’s medical care system, although attempts to relate effects of available medical care to variations in health status have proved difficult.

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. See also Network, Integrated Delivery System, PHO, or Provider Health Plan.

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. These are bills “in the pipeline.” This is a crucial concept for proactive providers who are beginning to explore arrangements that put them in the role of adjudicating claims–as the result, perhaps, of operating in a sub-capitated system. Failure to account for these potential claims could lead to some very bad decisions. Good administrative operations have fairly sophisticated mathematical models to estimate this amount at any given time.

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 Managed care, particularly HMO and capitation, has evolved away from the indemnity method. Yet, many people are still covered under indemnity plans. Insurance program in which covered person is reimbursed for covered expenses. Health insurance benefits provided in the form of cash payments rather than services. An indemnity insurance contract usually defines the maximum amounts which will be paid for covered services. Indemnity insurance plans may have a PPO option, UR and case management features, or include a network or other preferred provider restrictions, but, will not have an HMO plan. Indemnity is the traditional form of insurance.

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 predetermined rate.

Indemnity Plan (Indemnity health insurance) A plan which reimburses physicians for services performed, or beneficiaries for medical expenses incurred. Such plans are contrasted with group health plans, which provide service benefits through group medical practice.

Individual Plans A type of insurance plan for individuals and their dependents who are not eligible for coverage through an employer group coverage.

Inpatient Care Care given a registered bed patient in a hospital, nursing home or other medical or post acute institution.

Interface A means of communication between two computer systems, two software applications or two modules. Real time interface is a key element in healthcare information systems due to the need to access patient care information and financial information instantaneously and comprehensively. Such real time communication is the key to managing health care in a cost effective manner because it provides the necessary decisionmaking information for clinicians, providers and payers.

Internal Medicine Generally, that branch of medicine that is concerned with diseases that do not require surgery, specifically, the study and treatment of internal organs and body systems; it encompasses many subspecialties; internists, the doctors who practice internal medicine, often serve as family physicians to supervise general medical care.

International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-CM) This is the universal coding method used to document the incidence of disease, injury, mortality and illness. A diagnosis and procedure classification system designed to facilitate collection of uniform and comparable health information. The ICD-9-CM was issued in 1979. This system is used to group patients into DRGs, prepare hospital and physician billings and prepare cost reports. Classification of disease by diagnosis codified into six-digit numbers. See also coding.

Intervention Strategy A generic term used in public health to describe a program or policy designed to have an impact on an illness or disease. Hence a mandatory seat belt law is an intervention designed to reduce automobile-related fatalities.

Job-Lock Laws have now been enacted by congress which include continuance of benefits (COBRA) and other requirements which eliminate pre-existing clauses for those individuals who change coverage plans but have maintained continuance of coverage overall. The inability of individuals to change jobs because they would lose crucial health benefits.

Joint Commission on the Accreditation of Healthcare Organizations (JCAHO) Formerly called JCAH, or Joint Commission on Accreditation of Hospitals, this is the peer review organization which provides the primary review of hospitals and healthcare providers. Many insurance companies require providers to have this accreditation in order to seek 3rd party payment, although, many small hospitals cannot afford the cost of accreditation. JCAHO usually surveys organizations once every 3 years, sending in a medical and administrative team to review policies, patient records, professional credentialling procedures, governance and quality improvement programs. JCAHO revises its “standards” annually.

K We do not have any terms in the glossary, at present, which begin with the letter “K“.

Large Claim Pooling System that isolated claims above a certain level and charges them to a pool funded by charges of all groups who share the pool. Designed to help stabilize significant premium fluctuations.

Large Claim Pooling System that isolated claims above a certain level and charges them to a pool funded by charges of all groups who share the pool. Designed to help stabilize significant premium fluctuations.

Legend Drug Drug that the law says can only be obtained by prescription.

Limiting Charge The maximum amount that a non-participating physician is permitted to charge a Medicare beneficiary for a particularly defined procedure or bundled service. These limits are published by the individual state intermediaries for Medicare and HCFA and are usually combined in reports with the allowed charges and regional payment schedules. In 1993, the limiting charge was set at 115 percent of the Medicare-allowed charge. However, this does not reflect what the physician will be paid.

Lock-in A contractual provision by which members are required to use certain health care providers in order to receive coverage (except in cases of urgent or emergent need).

Long Term Care Insurance Insurance designed to pay for some or all of the costs of long term care.

Long-term Care A set of health care, personal care and social services required by persons who have lost, or never acquired, some degree of functional capacity (e.g., the chronically ill, aged, disabled, or retarded) in an institution or at home, on a long-term basis. The term is often used more narrowly to refer only to long-term institutional care such as that provided in nursing homes, homes for the retarded and mental hospitals. Ambulatory services such home health care, which can also be provided on a long-term basis, are seen as alternatives to long-term institutional care.

Loss Ratio Incurred claims plus expenses, divided by paid premiums. See also Incurred Claims Loss Ratio.

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. See also Carve-Out.

Managed Care Systems and techniques used to control the use of health care services. Includes a review of medical necessity, incentives to use certain providers, and case management. The body of clinical, financial and organizational activities designed to ensure the provision of appropriate health care services in a cost-efficient manner. Managed care techniques are most often practiced by organizations and professionals which assume risk for a defined population (e.g., health maintenance organizations) but this is not always the case. Managed care is a broad term and encompasses many different types of organizations, payment mechanisms, review mechanisms and collaborations. Managed care is sometimes used as a general term for the activity of organizing doctors, hospitals, and other providers into groups in order to enhance the quality and cost-effectiveness of health care. Managed Care Organizations (MCO) include HMO, PPO, POS, EPO, PHO, IDS, AHP, IPA, etc. Usually when one speaks of a managed care organization, one is speaking of the entity which manages risk, contracts with providers, is paid by employers or patient groups, or handles claims processing. Managed care has effectively formed a “go-between”, brokerage or 3rd party arrangement by existing as the gatekeeper between payers and providers and patients. The term managed care is often misunderstood, as it refers to numerous aspects of healthcare management, payment and organization. It is best to ask the speaker to clarify what he or she means when using the term “managed care”. In the purest sense, all people working in healthcare and medical insurance can be thought of as “managing care.” Any system of health payment or delivery arrangements where the plan attempts to control or coordinate use of health services by its enrolled members in order to contain health expenditures, improve quality, or both. Arrangements often involve a defined delivery system of providers with some form of contractual arrangement with the plan. See Health Maintenance Organization, Independent Practice Association, Preferred Provider Organization.

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. This term first surfaced as a result of Bill Clinton’s health reform package in the early 90s.

Management Information System (MIS) The common term for the computer hardware and software that provides the support of managing the plan.

Mandated Benefits Benefits that health plans are required by law to provide.

Manual Rates Rates based on a health plan’s average claims data and adjusted for certain factors, such as group demographics or industry.

Market Basket Index A common term in the field of economics. In 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 Allowable Actual Charge (MAAC) A limitation on billed charges for Medicare services provided by nonparticipating physicians. For physicians with charges exceeding 115 percent of the prevailing charge for nonparticipating physicians, MAACs limit increases in actual charges to 1 percent a year. For physicians whose charges are less than 115 percent of the prevailing, MAACs limit actual charge increases so they may not exceed 115 percent.

Maximum Out-of-Pocket Expenses Limit on total number of co-payments or limit on total cost of deductibles and co-insurance under a benefit plan.

McCarran-Ferguson Act A 1945 Act of Congress exempting insurance businesses from federal commerce laws and delegating regulatory authority to the states.

Medicaid (Title XIX) Government entitlement program for the poor who are blind, aged, disabled or members of families with dependent children (AFDC). Each state has its own standards for qualification. A Federally aided, state-operated and administered program which provides medical benefits for certain indigent or low-income persons in need of health and medical care. The program, authorized by Title XIX of the Social Security Act, is basically for the poor. It does not cover all of the poor, however, but only persons who meet specified eligibility criteria. Subject to broad Federal guidelines, states determine the benefits covered, program eligibility, rates of payment for providers, and methods of administering the program. All states but Arizona have Medicaid programs.

Medical Group Practice The American Group Practice Association, the American Medical Association, and the Medical Group Management Association define medical group practice as: provision of health care services by a group of at least three licensed physicians engaged in a formally organized and legally recognized entity sharing equipment, facilities, common records and personnel involved in both patient care and business management.

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. See also Loss Ratio and Incurred Claims Loss Ratio.

Medical Management Information System (MMIS) A data system that allows payers and purchasers to track health care expenditure and utilization patterns.

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. MSAs differ from Medical reimbursement accounts, sometimes called flexible benefits or Section 115 accounts, in that they need not be associated with an employer. MSAs are not currently recognized in federal statute.

Medical Underwriting The federal health benefit program for the elderly and disabled that covers over 35,000,000 beneficiaries or over 14% of the US with an annual cost of over $120 billion. Medicare pays for 25% of all hospital care and 23% of all physician services. This high cost is the source of constant debate in Congress. This refers to the Medicare program, the largest single payer in US.

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.

Medically Needy Persons who are categorically eligible for Medicaid and whose income, less accumulated medical bills, is below state income limits for the Medicaid program. Often seen as a problem among the “working poor” or among the senior population. See spend down.

Medicare (Title XVIII) A federal program for the elderly and disabled, regardless of financial status. It is not necessary, as with Medicaid, for Medicare recipients to be poor. A U.S. health insurance program for people aged 65 and over, for persons eligible for social security disability payments for two years or longer, and for certain workers and their dependents who need kidney transplantation or dialysis. Monies from payroll taxes and premiums from beneficiaries are deposited in special trust funds for use in meeting the expenses incurred by the insured. It consists of two separate but coordinated programs: hospital insurance (Part A) and supplementary medical insurance (Part B). Medicare covers more than 34 million Americans (16% of population) at an annual estimated cost of more than $133 billion.

Medicare Approved Charge The amount Medicare approves for payment to a physician. Typically, Medicare pays 80 percent of the approved charge and the beneficiary pays the remaining 20 percent. Physicians may bill beneficiaries for an additional amount (the balance) not to exceed 15 percent of the Medicare approved charge. See balance billing.

Medicare Cost Report (MCR) An annual report required of all institutions participating in the Medicare program. The MCR records each institution’s total costs and charges associated with providing services to all patients, the portion of those costs and charges allocated to Medicare patients, and the Medicare payments received.

Medicare Supplement Policy A policy that pays for the cost of services not covered by Medicare.

Medigap Private health insurance plans that supplement Medicare benefits by covering some costs not paid for by Medicare.

Mental Health Provider Psychiatrist, social worker, hospital or other facility licensed to provide mental health services.

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 Fee-for-Service System that pays providers fees for services provided, with certain maximum fees for each service. See also Fee for Service, Benefits, Preferred Providers.

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.

Mortality Death. Used to describe the relation of deaths to the population in which they occur. The mortality rate (death rate) expresses the number of deaths in a unit of population within a prescribed time and may be expressed as crude death rates (e.g., total deaths in relation to total population during a year) or as death rates specific for diseases and, sometimes, for age, sex, or other attributes (e.g., number of deaths from cancer in white males in relation to the white male population during a given year).

Multi-specialty Group A group of doctors who represent various medical specialties and who work together in a group practice.

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. See also Cafeteria Plan or Flexible Benefits Plan.

National Committee for Quality Assurance (NCQA) A non-profit organization created to improve patient care quality and health plan performance in partnership with managed care plans, purchasers, consumers, and the public sector.

National Drug Code (NDC) Classification system for drug identification, similar to UPC code.

National Health Insurance Proposal by politicians to make government the single payor for all health care, similar to Great Britain or Canada . Providers like some aspects of this idea because it provides for “universal coverage” for all citizens. However, businesses and providers (as businesses themselves) dislike the idea of the government administering a program that they will either have to fund or be funded by. Proposals for national health insurance are surely to be debated by politicians for many years to come. See also Universal Coverage.

Neonatal Intensive Care Unit (Neo ICU) A hospital unit with special equipment for the care of premature and seriously ill newborn infants.

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. See also IDS, PPO, PHO or Hospital Alliances.

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. Same as nonparticipating provider.

Nurse Practitioner A registered nurse qualified and specially trained to provide primary care, including primary health care in homes and in ambulatory care facilities, long-term care facilities, and other health care institutions. Nurse practitioners generally function under the supervision of a physician but not necessarily in his/her or her presence. They are usually salaried rather than reimbursed on a fee-for-service basis, although the supervising physician may receive fee-forservice reimbursement for their services. Are also considered “midlevel practitioners”.

Occupancy Rate A measure of inpatient health facility use, determined by dividing available bed days by patient days. It measures the average percentage of a hospital’s beds occupied and may be institution-wide or specific for one department or service.

Occupational Health OSHA, county health departments and regulatory bodies oversee occupational health hazards in workplaces, including hospitals. Occupational health programs include the 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 casemanagement. Employers and health providers often enter agreements whereby health providers will provide these services as well as managed the related workers compensation case management and rehabilitation programs. Employers seek to remain in compliance with regulations and reduce costs associated with employee injury and benefit utilization. Often, EAPs and drug prevention or drug testing programs are also combined under this category.

Office of Inspector General (OIG) The office responsible for auditing, evaluating and criminal and civil investigating for HHS, as well as imposing sanctions, when necessary, against health care providers. (see also Fraud, FBI, Dept. of Justice)

Open Access Health plan members’ abilities, rights or invitation to self refer for specialty care. Also called Open Panel.

Open Enrollment Period A period of time which eligible subscribers may elect to enroll in, or transfer between, available programs providing health care coverage. Under an open enrollment requirement, a plan must accept all who apply during a specific period each year.

Out of Network Benefits With most HMOs, a patient cannot have any services reimbursed if provided by a hospital or doctor who is not in the network. With PPOs and other managed care organizations, there may exist a provision for reimbursement of “out of network” providers. Usually this will involve a higher copay or a lower reimbursement. See also point of service plans.

Out of Pocket Expenses, Out of Pocket Costs Portion of health services or health costs that must be paid for by the plan member, including deductibles, co-payments and co-insurance. In the age of managed care, out of pocket expenses can also refer to the payment of services not covered by or approved for reimbursement by the health plan.

Out of Pocket Limit A cap placed on out of pocket costs, after which benefits increase to provide full coverage for the rest of the year.

Out-of-Network Provider A health care provider with whom a managed care organization does not have a contract to provide health care services. Because the beneficiary must pay either all of the costs of care from an out-of-network provider or their cost-sharing requirements are greatly increased, depending on the particular plan a beneficiary is in, out-of-network providers are generally not financially accessible to Medicaid beneficiaries.

Outcome A clinical outcome is the result of medical or surgical intervention or nonintervention.

Outcomes Management Providers and payers alike wish to find a method of managing care in a way that would produce the best outcomes. Managed care organizations are increasingly interested in learning to manage the outcome of care rather than just managing the cost of care. It is thought that through a database of outcomes experience, caregivers will know better which treatment modalities result in consistently better outcomes for patients. Outcomes management may lead to the development of clinical protocols.

Outcomes Measurement System used to track clinical treatment and responses to that treatment. The methods for measuring outcomes are quite varied among providers. Much disagreement exists regarding the best practice or tools to utilize to measure outcomes. In fact, much disagreement exists in the medical field about the definition of outcome itself.

Outpatient Care Care given a person who is not bedridden. Also called ambulatory care. Many surgeries and treatments are now provided on an outpatient basis, while previously they had been considered reason for inpatient hospitalization. Some say this is the fastest growing segment of healthcare.

Paid Claims Loss Ratio Paid claims divided by premiums. See also Loss Ratio.

Part A Medicare Refers to the inpatient portion of benefits under the Medicare Program, covering beneficiaries for inpatient hospital, home health, hospice, and limited skilled nursing facility services. Beneficiaries are responsible for deductibles and copayments. Part A services are financed by the Medicare HI Trust Fund, which consists of Medicare tax payments. Part B, on the other hand, refers to outpatient coverage.

Part B Medicare Refers to the outpatient benefits of Medicare. Medicare Supplementary Medical Insurance (SMI) under Part B of Title XVII of the Social Security Act covers Medicare beneficiaries for physician services, medical supplies, and other outpatient treatment. Beneficiaries are responsible for monthly premiums, copayments, deductibles, and balance billing. Part B services are financed by a combination of enrollee premiums and general tax revenues.

Partial Risk Contract A contract between a purchaser and a health plan, in which only part of the financial risk is transferred from the purchaser to the plan. Forms of this are often seen in “self-funded” plans, competitive bidding arrangements and new health plans.

Participating Physician or Participating Provider Simply refers to a provider under a contract with a health plan. A physician or hospital that has agreed to provide services for a set payment provided by a payer, or who agrees to other arrangements, or who agrees to provide services to a set of covered lives or defined patients. Also refers to a provider or physician who signs an agreement to accept assignment on all Medicare claims for one year. See also Assignment, Preferred Provider or Network.

Participating Provider Any provider licensed in the state of provision and contracted with an insurer. Usually this refers to providers who are a part of a network. That network would be a panel of participating providers. Each payer assembles their own provider panels.

Patient Liability The dollar amount which an insured is legally obligated to pay for services rendered by a provider.

Patient Origin Study A study, generally undertaken by an individual health program or health planning agency, to determine the geographic distribution of the residences of the patients served by one or more health programs. Such studies help define catchment and medical trade areas and are useful in locating and planning the development of new services.

PCP Primary care physician who often acts as the primary gatekeeper in health plans. That is, often the PCP must approval referrals to specialists. Particularly in HMOs and some PPOs, all members must choose or are assigned a PCP.

Per Diem Rates A form of payment for services in which the provider is paid a daily fee for specific services or outcomes, regardless of the cost of provision. Per diem rates are paid without regard to actual charges and may vary by level of care, such as medical, surgical, intensive care, skilled care, psychiatric, etc. Per diem rates are usually flat all inclusive rates.

Per Member Per Month (PMPM) Applies to a revenue or cost for each enrolled member each month. The number of units of something divided by member months. Often used to describe premiums or capitated payments to providers, but can also refer to the revenue or cost for each enrolled member each month. Many calculations, other than cost or premium, use PMPM as a descriptor.

Physician Attestation The requirement that the attending physician certify, in writing, the accuracy and completion of the clinical information used for DRG assignment.

Physician Current Procedural Teminology (CPT) List of services and procedures performed by providers, with each service/procedure having a unique 5-digit identifying code. CPT is the health care industry’s standard for reporting of physician services and procedures. Used in billing and records.

Plan Administration A term often used to describe the management unit with responsibility to run and control a managed care plan – includes accounting, billing, personnel, marketing, legal, purchasing, possibly underwriting, management information, facility maintenance, servicing of accounts. This group normally contracts for medical services and hospital care.

Plan Document The document which contains all of the provisions, conditions, and terms of operation of a pension or health or welfare plan. This document may be written in technical terms as distinguished from a summary plan description (SPD) which, under ERISA, must be written in a manner calculated to be understood by the average plan participant.

Point-of-Service Plan (POS) Managed care plan which specifies that those patients who go outside of the plan for services may pay more out of pocket expenses. A health insurance benefits program in which subscribers can select between different delivery systems (i.e., HMO, PPO and fee-forservice) when in need of health care services and at the time of accessing the services, rather than making the selection between delivery systems at time of open enrollment at place of employment. Typically, the costs associated with receiving care from the “in network” or approved providers are less than when care is rendered by non-contracting providers. Or the costs are less if provided by approved providers in either the HMO or PPO rather than “out of network” or “out of plan” providers. This is a method of influencing patients to use certain providers without restricting their freedom of choice too severely.

Pooling Combining risks for groups into one risk pool. Also see Risk.

Portability Requirement that health plans guarantee continuous coverage without waiting periods for persons moving between plans. This is a new protection for beneficiaries involving the issuance of a certificate of coverage from previous health plan to be given to new health plan. Under this requirement, a beneficiary who changes jobs is guaranteed coverage with the new plan, without a waiting period or having to meet additional deductible requirements. Primarily, this refers to the requirement that insurers waive any pre-existing condition exclusion for beneficiaries previously covered through other insurance.

Practical Nurses Practical nurses, also known as vocational nurses, provide nursing care and treatment of patients under the supervision of a licensed physician or registered nurse. Licensure as a licensed practical nurse (L.P.N.) or in California and Texas as a licensed vocational nurse (L.V.N.), is required.

Pre-existing Condition, Preexisting Condition A medical condition developed prior to issuance of a health insurance policy which may result in the limitation in the contract on coverage or benefits. Some policies exclude coverage of such conditions is often excluded for a period of time or indefinitely. Federally-qualified HMOs cannot limit coverage for pre-existing conditions. New statutes in 1997 and 1998 altered the freedom other health plans have enjoyed in setting preexisting time limits. Certification of prior coverage may mean new insurers would need to waive preexisting clauses for some subscribers.

Preadmission Review, Pre-Admission Certification, Pre-Certification, or Preauthorization Review of “need” for inpatient care or other care before admission. This refers to a decision made by the payer, MCO or insurance company prior to admission. The payer determines whether or not the payer will pay for the service. Most managed care plans require pre-cert. This is a method of controlling and monitoring utilization by evaluating the need for service prior to the service being rendered. The practice of reviewing claims for inpatient admission prior to the patient entering the hospital in order to assure that the admission is medically necessary. A method of monitoring and controlling utilization by evaluating the need for medical service prior to it being performed. The process of notification and approval of elective inpatient admission and identified outpatient services before the service is rendered. An administrative procedure whereby a health provider submits a treatment plan to a third party before treatment is initiated. The third party usually reviews the treatment plan, monitoring one or more of the following: patient’s eligibility, covered service, amounts payable, application of appropriate deductibles, copayment factors and maximums. Under some programs, for instance, predetermination by the third party is required when covered charges are expected to exceed a certain amount. Similar processes: preauthorization, precertification, pre-estimate of cost, pretreatment estimate, prior authorization.

Preferred Provider Organization (PPO) Some combination of hospitals and physicians that agrees to render particular services to a group of people, perhaps under contract with a private insurer. The services may be furnished at discounted rates and the insured population may incur out-of-pocket expenses for covered services received outside the PPO if the outside charge exceeds the PPO payment rate. A PPO can also be a legal entity or it may be a function of an already formed health plan, HMO or PHO. The entity may have a health benefit plan which is also referred to as a PPO. PPOs are a common method of managing care while still paying for services through an indemnity plan. Most PPO plans are point of service plans, in that they will pay a higher percentage for care provided by providers in the network. Many insurers will offer PPOs as well as HMOs. Generally PPOs will offer more choice for the patient and will provide higher reimbursement to the providers. See also point of service.

Premium Amount paid to a carrier for providing coverage under a contract.

Prevailing Charge One of the factors determining a physician’s payment for a service under Medicare, set at a percentile of customary charges of all physicians in the locality.

Prevalence The number of cases of disease, infected persons, or persons with some other attribute, present at a particular time and in relation to the size of the population from which drawn. It can be a measurement of morbidity at a moment in time, e.g., the number of cases of hemophilia in the country as of the first of the year.

Preventive Care Health care which emphasizes prevention, early detection and early treatment, thereby reducing the costs of healthcare in the long run.

Primary Care Basic or general health care usually rendered by general practitioners, family practitioners, internists, obstetricians and pediatricians — who are often referred to as primary care practitioners or PCPs. Professional and related services administered by an internist, family practitioner, obstetrician-gynecologist or pediatrician in an ambulatory setting, with referral to secondary care specialists, as necessary.

Primary Care Physician (PCP) A “generalist” such as a family practitioner, pediatrician, internist, or obstetrician. In a managed care organization, a primary care physician is accountable for the total health services of enrollees including referrals, procedures and hospitalization.

Primary Coverage Plan that pays its expenses without consideration of other plans, under coordination of benefits rules.

Principal Diagnosis The medical condition that is ultimately determined to have caused a patient’s admission to the hospital. The principal diagnosis is used to assign every patient to a diagnosis related group. This diagnosis may differ from the admitting and major diagnoses.

Prior Authorization A formal process requiring a provider obtain approval to provide particular services or procedures before they are done. This is usually required for nonemergency services that are expensive or likely to be abused or overused. A managed care organization will identify those services and procedures that require prior authorization, without which the provider may not be compensated.

Provider Usually refers to a hospital or doctor who “provides” care. A health plan, managed care company or insurance carrier is not a healthcare provider. Those entities are called payers. The lines are blurred sometimes, however, when providers create or manage health plans. At that point, a provider is also a payer. A payer can be provider if the payer owns or manages providers, as with some staff model HMOs.

Quality Can be defined as a measure of the degree to which delivered health services meet established professional standards and judgments of value to the consumer. Quality may also be seen as the degree to which actions taken or not taken maximize the probability of beneficial health outcomes and minimize risk and other untoward outcomes, given the existing state of medical science and art. Quality is frequently described as having three dimensions: quality of input resources; quality of the process of services delivery (the use of appropriate procedures for a given condition); and quality of outcome of service use (actual improvement in condition or reduction of harmful effects). Quality programs are commonly called QA, TQM, QI, CQI and other acronyms, all referring to the process of monitoring quality in systematic ways.

Quality Assurance (QA) Activities and programs intended to assure the quality of care in a defined medical setting. Such programs include peer or utilization review components to identify and remedy deficiencies in quality. The program must have a mechanism for assessing its effectiveness and may measure care against pre-established standards.

Referral The process of sending a patient from one practitioner to another for health care services. Health Plans may require that designated primary care providers authorize a referral for coverage of specialty services.

Referral Services Medical Services arranged for by the physician and provided outside the physician’s office other than Hospital Services.

Registered Nurses (R.N.’s) Registered nurses are responsible for carrying out the physician’s instructions. They supervise practical nurses and other auxiliary personnel who perform routine care and treatment of patients. Registered nurses provide nursing care to patients or perform specialized duties in a variety of settings from hospital and clinics to schools and public health departments. A license to practice nursing is required in all states. For licensure as a registered nurse (R.N.), an applicant must have graduated from a school of nursing approved by the state board for nursing and have passed a state board examination.

Reinsurance A method of limiting the risk that a provider or managed care organization assumes by purchasing insurance that becomes effective after set amount of health care services have been provided. This insurance is intended to protect a provider from the extraordinary health care costs that just a few beneficiaries with extremely extensive health care needs may incur. Insurance purchased by an insurance company or health plan from another insurance company to protect itself against losses. A contract by which an insurer procures a third party to insure it against loss or liability by reason of such original insurance. The practice of an HMO or insurance company of purchasing insurance from another company to protect itself against part or all the losses incurred in the process of honoring the claims of policy-holders. See also stop loss. Also called “risk control” insurance. See risk.

Renewal Continuance of coverage for a new policy term.

Reserves Monies earmarked by health plans to cover anticipated claims and operating expenses A fiscal method of withholding a certain percentage of premium to provide a fund for committed but undelivered health care and such uncertainties as: longer hospital utilization levels than expected, overutilization of referrals, accidental catastrophes and the like. The fiscal method of providing a fund for committed but undelivered health services or other financial liabilities. A percentage of the premiums support this fund. Businesses other than health plans also manage reserves. For example, hospitals document reserves as that portion of the accounts receivables which they hope to collect but have some doubt about its collectability. Rather than book these amounts as income, hospitals will “reserve” these amounts until paid.

Retrospective Rating (Retro) Insurance coverage that provides for premium determination at the end of the coverage period, subject to a minimum and maximum based upon actual experience.

Retrospective Review Process System for analyzing medical necessity and appropriateness of services rendered. A review that is conducted after services are provided to a patient. The review focuses on determining the appropriateness, necessity, quality, and reasonableness of health care services provided. Becoming seen as least desirable method; supplanted by concurrent reviews.

Risk The chance or possibility of loss. For example, physicians may be held at risk if hospitalization rates exceed agreed upon thresholds. Potential financial liability, particularly with respect to who or what is legally responsible for that liability. With insurance, risk is shared by the patient and insurance company but the company’s risk is limited by the policy’s dollar limitations. In HMO’s, the patient is at risk only for copayments and the cost of noncovered services. The HMO, however, with its income fixed, is at risk for whatever volume of care is entailed, however costly it turns out to be. Providers may also bear risk if they are paid a fixed amount (capitation) by the HMO. The sharing of risk is often employed as a utilization control mechanism within the HMO setting. Risk is also defined in insurance terms as the possibility of loss associated with a given population.

Risk Assessment Anticipating the cost of providing health care to groups of enrollees. Actuarial assessments examine utilization history, demographics, health characteristics, environmental attributes, and other sociological, economic and market characteristics. Risk assessment can also include, less commonly, the identification of etiology of health problems.

Risk Contract A risk contract is broadly any contract which results in any party assuming insurance or business risk. Normally this means, in health care, that if either the employer, health plan or provider assumes risk, it is agreeing to cover the expense of increased utilization beyond the projected costs or payment provided. Normally risk is assumed by the health plan or insurance carrier but can be carried by the provider in capitated arrangements or by the employer in selfinsured arrangements.

Risk Factor Any characteristic, behavior, or condition which, based on history, utilization, or theory, is thought to directly influence susceptibility to a specific health problem, increase costs or result in increased utilization.

Risk Load In underwriting, a factor that is multiplied into the rate to offset some adverse parameter of the group.

Risk Measure The expected per capita costs of health care services to a defined group in a specific future period.

Risk Pool A pool of money that is at risk for being used for defined expenses. Commonly, if the pool money that is put at risk is not expended by the end of the year, some or all of it is returned to those managing the risk. Two different definitions are in use: 1) A pool of funds set aside as reserves to be used for defined expenses. Under capitation, if all of the risk pool is not used by the end of the contract year, it is usually disseminated to participating providers, and, 2) Legislatively created programs that group individuals who cannot secure coverage in the private market. Funding comes from government or assessment on insurers.

Risk Selection Occurrence when a disproportionate share of high or low users of care join a health plan. See Adverse Selection.

Routine Care Routine Care is defined as immunizations and medical examinations or tests of any kind not incident or necessary to the treatment of a covered Injury, Illness or pregnancy.

Sanction Reprimand of a provider by a health plan.

Secondary Care Services provided by medical specialists who generally do not have first contact with patients (e.g., cardiologist, urologists, dermatologists). In the U.S. , however, there has been a trend toward self-referral by patients for these services, rather than referral by primary care providers. This is quite different from the practice in England , for example, where all patients must first seek care from primary care providers and are then referred to secondary and/or tertiary providers, as needed.

Secondary Coverage Health plan that pays costs not covered by primary coverage under coordination of benefits rules. Any insurance that supplements Medicare coverage. The three main sources for secondary insurance are employers, privately purchased Medigap plans, and Medicaid.

Self-Funding Employer or organization assume complete responsibility for health care losses of its covered employees. This usually includes setting up a fund against which claim payments are drawn and claims processing is often handled through an administrative services contract with an independent organization. In this case, the employer does not pay premiums to an insurance carrier, but, rather pays administrative costs to the insurance company or health plan, and, in essence, treats them as a third party administrator (TPA) only. However, the employee may not be able to detect any difference because the plan description and membership card may carry the name of the insurance company not the employer. Same as self-insured, see below.

Self-Insurance or Self-Insured This term is usually used to describe the type of insurance which an employer provides. When an employer is self-insured, this means that the payer or managed care company manages the employer’s funds whether than requiring the employer to pay premiums. Many employers choose to self-insure because they are then exempted from certain insurance laws and also think that they will spend less money in the short run. Employers assume the risks involved and also have full rights to all insurance claim information. Typically, the self-insured employer is a large employer. The employees or patients will not be able to discern if their employer is self-insured easily since all paperwork or benefits cards usually contain the name of the insurance company.

Sentinel Event An adverse health event that may have been avoided through appropriate care or alternate interventions. Providers are required to alert JCAHO and often state licensing authorities of all sentinel events, including a review of risk factors, preventative measures and case analysis.

Site-of-Service Differential The difference in the monies paid when the same service is performed in different practice setting or by a different provider. One example would be an examination in an ER versus in a family doctor’s office.

Skilled Nursing Facility (SNF) A licensed institution, as defined by Medicare, which is primarily engaged in the provision of skilled nursing care. SNFs are usually DRG or PPS exempt and are located within hospitals, but, sometimes are located in rehab facilities or nursing homes.

Small-group Market The insurance market for products sold to groups that are smaller than a specified size, typically employer groups. The size of groups included usually depends on state insurance laws and thus varies from state to state, with 50 employees the most common size.

Solo Practice A physician who practices alone or with others but does not pool income or expenses. This form of practice is becoming increasingly less common as physicians band together for contracting, overhead costs and risk sharing.

Specific Stop Loss The form of excess risk coverage that provides protection for the employer against high claim on any one individual. This is protection against abnormal severity of a single claim rather than abnormal frequency of claims in total. Also see Reinsurance and Stop Loss.

Spend Down A term used in Medicaid for persons whose income and assets are above the threshold for the state’s designated medically needy criteria, but are below this threshold when medical expenses are factored in. The amount of expenditures for health care services, relative to income, that qualifies an individual for Medicaid in States that cover categorically eligible, medically indigent individuals. Eligibility is determined on a case-by-case basis.

Stop Loss Insurance Insurance purchased by an insurance company or health plan from another insurance company to protect itself against losses. Reinsurance purchased to protect against the single overly large claim or the excessively high aggregated claim during a set period. Also see Reinsurance and Specific Stop Loss.

Subrogation Procedure where insurance company recovers from a third party when the action resulting in medical expense (e.g. auto accident) was the fault of another person. The recovery of the cost of services and benefits provided to the insured of one health plan when other parties are liable.

Subscriber Person responsible for payment of premiums, or person whose employment is the basis for membership in a health plan.

Subscriber Contract A written agreement that describes the individual’s health care policy. Also called subscribe certificate or member certificate.

Summary Plan Description (SPD) In self-funded plans, a written explanation of the eligibility for and benefits available to employees required by ERISA.

Supplemental Insurance Any private health insurance plan held by a Medicare beneficiary or commercial beneficiary, including Medigap policies and post-retirement health benefits. Supplemental usually pays the deductible or co-pay and sometimes will pay the entire bill when the primary carrier’s benefits are exhausted.

Supplemental Medical Insurance (SMI) Part B of the Medicare program. Part B normally covers the outpatient services, as opposed to Part A which covers inpatient. This voluntary program requires payment of a monthly premium, which covers 25 percent of pro-ram costs. Beneficiaries are responsible for a deductible and coinsurance payments for most covered services. See also Part B.

Supplemental Security Income (SSI) A federal cash assistance program for low-income aged, blind and disabled individuals established by Title XVI of the Social Security Act. States may use SSI income limits to establish Medicaid eligibility.

Supplemental Services Optional services a health plan covers or provides.

Surplus Lines Tax A tax imposed by state law when coverage is placed with an insurer not licensed or admitted to transact business in the state where the risk is located. Unlike premium tax for admitted insurers, the surplus lines tax is not included in the premium and must be collected from the policy holder and remitted to the state.

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) Legislation that created the target rate of increase cost based limits on reimbursements for inpatient operating costs. These limits are considered per Medicare discharges total amounts. A facility’s target amount is derived from costs in its base year (1st full fiscal year of operation with application to HCFA as same) updated to the current fiscal year by the annual allowable rate of increase. Medicare payments for operating costs generally may not exceed the facility’s target amount and still be paid by HCFA. These provisions apply to hospitals and units excluded from PPS and DRG. When cost reports fall short of the TEFRA limit, certain pay backs are provided. If costs exceed TEFRA, facilities can submit an exception report and may or may not be provided additional payment. Many facilities which established TEFRA limits in the early 1980s are finding they consistently exceed their TEFRA limits. Units normally under the TEFRA rules are psychiatric units, rehab units, free standing specialty hospitals, oncology outpatient clinics and others.

Telemedicine The use of telecommunications (i.e., wire, radio, optical or electromagnetic channels transmitting voice, data and video) to facilitate medical diagnosis, patient care, and/or medical learning. Many rural area are finding uses for telemedicine in providing oncology, home health, ER, radiology and psychiatry among others. Medicaid and Medicare provide some limited reimbursement for certain services provided to patients via telecommunication.

Termination Date Date that a group contract expires or an individual is no longer eligible for benefits.

Tertiary Care Services provided by highly specialized providers such as neurosurgeons, thoracic surgeons and intensive care units. These services often require highly sophisticated technology and facilities.

Therapeutic Alternatives Drug products that provide the same pharmacological or chemical effect in equivalent doses. Also see Drug Formulary.

Third Party Administrator (TPA) An independent organization that provides administrative services including claims processing and underwriting for other entities, such as insurance companies or employers. Often insurance companies will contract as TPAs with other insurance companies or health plans. TPAs are not always insurance companies. TPAs are organizations with expertise and capability to administer all or a portion of the claims process. Self-insured employers will often contract with TPAs to handle their insurance functions. Insurance companies will sometimes outsource the claims, UR or membership functions to a TPA. Sometimes TPAs will only manage provider networks, only claims or only UR . Hospitals or provider organizations desiring to set up their own health plans will often outsource certain responsibilities to TPAs. TPAs are prominent players in the managed care industry.

Third-party Payer Any organization, public or private, that pays or insures health or medical expenses on behalf of beneficiaries or recipients. An individual pays a premium for such coverage in all private and in some public programs; the payer organization then pays bills on the individual’s behalf. Such payments are called third-party payments and are distinguished by the separation among the individual receiving the service (the first party), the individual or institution providing it (the second party), and the organization paying for it (third party).

Third-Party Payment Payment by a financial agent such as an HMO, insurance company or government rather than direct payment by the patient for medical care services. The payment for health care when the beneficiary is not making payment, in whole or in part, in his own behalf.

Title XIX (Medicaid) The title of the Social Security Act which contains the principal legislative authority for the Medicaid program and therefore a common name for the program.

Title XVIII (Medicare) The title of the Social Security Act which contains the principal legislative authority for the Medicare program and therefore a common name for the program.

Tort Reform Legislative limits or changes or judicial reform of the rules governing medical malpractice lawsuits and other lawsuits. Tort simply refers to law suit. Reform implies that limits can be placed on individual rights to sue or on the amounts or situations for which they can seek relief. Tort is considered to be by some as the primary cause of the rising costs of health care. Reform, then, would lower health care costs. On the other hand, patient advocates are against tort reform, claiming that the health care industry and managed care industries require monitoring and that law suits keep health care providers and payers in check. Congress debates tort reform each session, but, to date, few restrictions have been placed on tort cases.

Transfer Movement of a patient between hospitals or between units in a given hospital. In Medicare, a full DRG rate is paid only for transferred patients that are defined as discharged. In managed care, transfers are often suggested by UR entities to move patients to lower cost care facilities.

Treatment Episode The period of treatment between admission and discharge from a modality, e.g., inpatient, residential, partial hospitalization, and outpatient, or the period of time between the first procedure and last procedure on an outpatient basis for a given diagnosis. Many healthcare statistics and profiles use this unit as a base for comparisons.

Trending Methods of estimating future costs of health services by reviewing past trends in cost and utilization of these services. Also see Actuarial.

Triage Triage is the act of categorizing patients according to acuity and by determining which need services first. Most commonly occurs in emergency rooms, but, can occur in any healthcare setting. Classification of ill or injured persons by severity of condition. Designed to maximize and create the most efficient use of scarce resources of medical personnel and facilities. Managed care organizations, health plans and provider systems are setting up programs or clinics called “triage centers”. These centers serve as an extension of the utilization review process, as diversions from emergency room care or as case management resources. These triage centers also serve to steer patients away from more costly care (for example, a child with a cold is steered away from an emergency room). Triage can be handled on the telephone and be called a pre-authorization center, crisis center, call center or information line.

Triple Option Plan A plan (usually offered by a single carrier or a joint venture between two or more carriers) which gives subscribers or employees a choice among HMO, PPO and traditional indemnity plans. Also see Cafeteria Plan.

U.S. Per Capita Cost (USPCC) The national average cost per Medicare beneficiary, calculated annually by HCFA’s Office of the Actuary.

UB-92 – Uniform Billing Code of 1992 Bill form used to submit hospital insurance claims for payment by third parties. Similar to HCFA 1500, but reserved for the inpatient component of health services.

Unbundling The practice of providers billing for a package of health care procedures on an individual basis when a single procedure could be used to describe the combined service.

Uncompensated Care Service provided by physicians and hospitals for which no payment is received from the patient or from third-party payers. Some costs for these services may be covered through cost-shifting. Not all uncompensated care results from charity care. It also includes bad debts from persons who are not classified as charity cases but who are unable or unwilling to pay their bill. See cost shifting.

Underinsured People with public or private insurance policies that do not cover all necessary health care services, resulting in out-of-pocket expenses that exceed their ability to pay. See cost shifting.

Underwriting Process of selecting, classifying, analyzing and assuming risk according to insurability. The insurance function bearing the risk of adverse price fluctuations during a particular period. Analysis of a group that is done to determine rates or to determine whether the group should be offered coverage at all.

Uninsured People who lack public or private health insurance.

Universal Access The right and ability to receive a comprehensive, uniform, and affordable set of confidential, appropriate, and effective health services. Universal service is a reality in countries with national medicine programs or socialized healthcare, such as the UK , Canada , France and most countries in the world. Few countries have the private insurance programs as the primary form of healthcare, as in the US . See Universal Coverage.

Universal Coverage A type of government sponsored health plan which would provide healthcare coverage to all citizens. This is an aspect of Clinton ‘s original health plan in the mid 1990s and is an attribute of national health insurance plans similar to those offered in other countries such as the UK or Canada . While government sponsored health care is not likely to be universal, the concept of providing healthcare to all Americans is continuously discussed by politicians in Washington . Expect to see more and more discussion of modified universal coverage ideas in the years to come. See also National Health Insurance.

Urgent Services Benefits covered in an Evidence of Coverage that are required in order to prevent serious deterioration of an insured’s health that results from an unforeseen illness or injury

Usual, Customary and Reasonable (UCR) Commonly charged fees for health services in a certain area. The use of fee screens to determine the lowest value of provider reimbursement based on: (1) the provider’s usual charge for a given procedure, (2) the amount customarily charged for the service by other providers in the area (often defined as a specific percentile of all charges in the community), and (3) the reasonable cost of services for a given patient after medical review of the case. Most health plans provide reimbursement for usual and customary charges, although no universal formula has been established for these rates.

Utilization Use of services and supplies. Utilization is commonly examined in terms of patterns or rates of use of a single service or type of service such as hospital care, physician visits, prescription drugs. Measurement of utilization of all medical services in combination is usually done in terms of dollar expenditures. Use is expressed in rates per unit of population at risk for a given period such as the number of admissions to the hospital per 1,000 persons over age 65 per year, or the number of visits to a physician per person per year for an annual physical. See also UR , UM.

Utilization Review (UR), Utilization Management (UM) Evaluation of the necessity, appropriateness, and efficiency of the use of health care services, procedures, and facilities. In a hospital, this includes review of the appropriateness of admissions, services ordered and provided, length of a stay, and discharge practices, both on a concurrent and retrospective basis. Utilization review can be done by a peer review group, or a public agency. UR is a method of tracking, reviewing and rendering opinions regarding care provided to patients. Usually UR involves the use of protocols, benchmarks or data with which to compare specific cases to an aggregate set of cases. Those cases falling outside the protocols or range of data are reviewed individually. Managed care organizations will sometimes refuse to reimburse or pay for services which do not meet their own sets of UR standards. UR involves the review of patient records and patient bills primarily but may also include telephone conversations with providers. The practices of pre-certification, recertification, retrospective review and concurrent review all describe UR methods. UR is one of the primary tools utilized by IDS, MCO and health plans to control over-utilization, reduce costs and manage care.

Vital Statistics Statistics relating to births (natality), deaths (mortality), marriages, health, and disease (morbidity). Vital statistics for the United States are published by the National Center for Health Statistics. Vital statistics can be obtained from CDC, state health departments, county health departments and other agencies. A individual patient’s vital statistics in a health care setting may also refer simply to blood pressure, temperature, height and weight, etc.

Waiting periods The length of time an individual must wait to become eligible for benefits for a specific condition after overall coverage has begun.

Waiver Approval that the Health Care Financing Administration (HCFA, the federal agency that administers the Medicaid program) may grant to state Medicaid programs to exempt them from specific aspects of Title XIX, the federal Medicaid law. Most federal waivers involve loss of freedom of choice regarding which providers beneficiaries may use, exemption from requirements that all Medicaid programs be operated throughout an entire state, or exemption from requirements that any benefit must be available to all classes of beneficiaries (which enables states to experiment with programs only available to special populations).

Wellness A dynamic state of physical, mental, and social well-being; a way of life which equips the individual to realize the full potential of his/her capabilities and to overcome and compensate for weaknesses; a lifestyle which recognizes the importance of nutrition, physical fitness, stress reduction, and self-responsibility. Wellness has been viewed as the result of four key factors over which an individual has varying degrees of control: human biology, environment, health care organization and lifestyle. Preventive medicine associated with lifestyle and preventive care that can reduce health- care utilization and costs. “Wellness” programs became popular with the advent of managed care in the 1980s, with the philosophy and business idea that health plans needed to emphasize keeping their beneficiaries well. However, there has been a drop off in these programs in the 1990s as health plans recognize the difficulty in assessing efficacy and they found that subscribers tend to change plans regularly, thus reducing benefit of keeping one population “well”.

Workers’ Compensation A state-mandated program providing insurance coverage for work-related injuries and disabilities. Several states have either enacted or are considering changes to the Workers Compensation Laws to allow employers to cover occupational injuries and illnesses within their own existing group medical plans. See also Occupational Health.

X We do not have any terms in the glossary, at present, which begin with the letter “X“.

Y We do not have any terms in the glossary, at present, which begin with the letter “Y“.

Zero-Sum Budgeting A “deficit neutral” budget process in which new expenditures are paid through cuts in existing programs or increases in revenue. The end result is no increase in the federal deficit.

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Glossary | Benefit Plan Administrators

A B C D E F G H I J Q R S T U V W X Y Z K L M N O P Access The patient’s ability to obtain medical care. The ease of access ...

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