NAHU represents licensed health insurance agents, brokers, consultants and benefit professionals who serve the health insurance needs of employers and individuals seeking health insurance coverage.
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Glossary of Terms


List of Terms

Acquisition Cost
Activities of Daily Living (ADLs)
Actual Charge
Acute Care
Adjusted Community Rate (ACR)
Administrative Services Only (ASO)
Adult Day Care
Adverse Selection
Aggregate Amount (limit)
Alternative Care Benefit
Alternate Care Facility
Alzheimer's Disease
Ambulatory Care
Ancillary Services
Approved Amount
Assignment of Benefits
Assisted Living
Attachment Point
Average Length of Stay
Balance Billing
Benefit Increase Options
Benefit Period
Cafeteria Plan
Case Management
Centers of Excellence
Chronic Care
Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)
COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)
Cognitive Impairment
Concurrent Review
Congregate Housing
Coordination of Benefits (COB)
Cost Containment
Cost Sharing
Cost Shifting
Covered Expense(s)
Current Procedural Terminology (CPT)
Custodial Care Facilities
Defensive Medicine
Diagnosis-Related Groups (DRGs)
Discharge Planning
Dual Choice
Durable Power of Attorney
Eligible Expense(s)
Elimination Period Employee Retirement Income Security Act of 1974 (ERISA)
Exclusive Provider Organization (EPO)
Expected Claims
Explanation of Benefits (EOB)
Extended Benefits
Federally Qualified Health Center
Fee-for-Service Reimbursement
Fee Schedule
Fixed Costs
Flexible Spending Accounts
Fully Insured Plan
Gatekeeper Question
Grace Period
Global Fees
Guaranteed Issue
Guaranteed Renewal
Health Insurance Purchasing Cooperatives (HIPCS)
Health Maintenance Organization (HMO)
Home and Community-Based Care Benefits
Home Health Services
Hospital Bill Audit
Hospital Indemnity Insurance
Inability to Perform Activities of Daily Living
Incurred But Not Reported (IBNR)
Indemnity Insurance
Individual or Independent Practice Association (IPA)
Intermediate Care
Joint Commission on Accreditation of Healthcare Organizations (JCAHO)
Lagged Claims
Lifetime Aggregate or Maximum
Long-term Care (LTC)
Long-Term Care Facility
Malpractice Reform
Managed Care
Mandated Benefits
Medical Necessity
Medicare Advantage Plan
Medicare-Approved Amount
Medicare Part A (Hospital Insurance)
Medicare Part B (Medical Insurance)
Medicare Part D (Prescription Drug Coverage)
Medicare-Qualified Providers
Medigap-Medicare Supplement Insurance
Mental Health Services
Multiple Employer Trust (MET)
Multiple Employer Welfare Arrangement (MEWA)
Multiple Provider Arrangement
Multi-specialty Group Practice
National Association of Health Underwriters (NAHU)
National Association of Insurance Commissioners (NAIC)
National Committee on Quality Assurance (NCQA)
Negotiated Fees
Network or Mixed-Model HMO
Network Providers
Non-Forfeiture Benefits
Non-Network Providers
Omnibus Budget Reconciliation Act (OBRA)
Open-Ended HMO
Open Panel
Out-of-Network Care
Out-of-Pocket Expenses
Out-of-Pocket Maximum
Outcome Measurement
Paid Claims
Partial Capitation Risk Contracts
Participating Provider
Per Review
Per Diem
Per Member Per Month (PMPM)
Personal Care Advocate
Physician-Hospital Organization (PHO)
Plan of Care
Point of Service Plans (POS)
Pool (ing)
Practice Guidelines
Pre-existing Condition
Preferred Provider Organization (PPO)
Premium Tax
Prepaid Group Practice
Prevailing Charges
Preventive Medicine
Primary Care
Primary Care Case Management
Primary Care Physician (PCP)
Prospective Review
Qualified Health Plan
Qualified Provider
Quality Assurance
Reasonable and Customary
Referral Pool
Resource-Based Relative Value Scale (RBRVS)
Retrospective Claim Review Rider (Exclusion)
Risk Adjustment
Risk Contract
Risk Sharing
Second Surgical Opinions
Service Area
Skilled Nursing Facilities
Social Security Act
Specialty Managed Care Arrangements
Specialty Physicians
Specified Disease Insurance
Staff Model HMO
Stop-Loss Insurance
Subacute Care
Supplementary Coverage
Third-Party Administrator (TPA)
Tort Reform
Total Disability
Trend Factor
Twenty-four (24-hour) Coverage
Usual, Customary, and Reasonable (UCR) Fees
Utilization Review (UR)
Waiting Period
Waiver of Premium
Withhold Arrangements
Workers Compensation Insurance

Additional Terms

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Access: Right to enter or use healthcare services. This term is often used when considering the availability (or lack of same) of medical services.

Acquisition Cost: The cost to acquire a new customer or new business. In the insurance industry, it includes costs such as underwriting the risk, issuing a new policy, paying commissions and other overhead or office expenses.

Activities of Daily Living (ADLs): Everyday activities for self-care. Whether a person can perform any or all of these activities independently is used as a measure of an individual's ability to function independently. These activities include eating, bathing, dressing, toileting and transferring according to the federal government. Some authorities add continence and ambulating to the list of ADLs. ADLs are used to define the disability in long-term care insurance. The loss of some number of ADLs is an insuring or triggering event in all long-term care policies. ADLs and the loss necessary to trigger benefits may vary from state to state.

Actual Charge: The amount a physician or supplier actually bills for a particular medical service or supply.

Actuary: A professional who mathematically analyzes and determines the price of the risk associated with providing insurance coverage. An actuary may also determine the anticipated cost of providing future benefits. Factors considered in an actuarial study include the projection of future claims experience, administrative expenses and anticipated investment return.

Acute Care: Care for illness or injury that develops rapidly, has pronounced symptoms and is finite in length.

Adjusted Community Rate (ACR): An insurance rating methodology that allows insurers to vary premiums using certain risk factors such as age and geography.

Administrative Services Only (ASO): A type of contract with an insurance company or a third-party administrator that provides an employer with administrative services such as claim payment. It does not provide coverage for the risk of insurance protection. The usual expenses covered include claims processing, plan design advice and printing benefit booklets. These contracts are usually entered into by larger employers who can afford the risk of providing insurance protection with their own money.

Administrator: A person who is designated to be responsible for the proper operation and administration of a plan. When the plan sponsor does not designate a person for this duty, ERISA considers the plan sponsor to be the plan administrator.

Adult Day Care: Social, recreational and/or rehabilitative services provided for persons, usually senior citizens, who benefit from daytime supervision or activities.

Adverse Selection: This is an economic term to describe what happens when a person makes a decision that will have adverse results. In health insurance, it describes what happens when a person makes a decision based on his/her diminished health condition or frequency of needed treatment and is, therefore considered a poorer claims risk than most others in the group.

Agent: This term is used interchangeably with broker when discussing insurance. An agent is licensed by the state, performs many of the functions for sole proprietors and small businesses that Human Resource Departments do for larger businesses, gathers census data, prepares proposals, makes presentations to businesses, explains benefits to employers and employees, delivers policies and certificates, assists in handling claims, and performs other related tasks required by the individual, employer or sole proprietor.

Aggregate Amount (limit): Maximum amount of total losses for which a plan sponsor (employer) is liable for any one-plan year. Aggregate insurance is often purchased by self-funded employers as a financial back-stop to cap their total claims costs in a year.

Ageism: Prejudice against people because of their age.

Alternative Care Benefit: payment for a special arrangement of services specifically designed to allow the person to reside in a setting other than a nursing facility (i.e. services to provide assistance, capital improvements such as a ramp, and/or durable medical equipment.

Alternate Care Facility: (1) A hospice; or (2) a place that provides ongoing care to inpatients in one location and which (a) provides 24-hour care and services sufficient to support needs resulting from inability to perform activities of daily living or cognitive impairment; (b) has a trained and ready-to-respond employee to provide such care; (c) provides three meals a day and accommodates special dietary needs; (d) is appropriately licensed or accredited; (e) has formal arrangements for the services of a physician or nurse to provide emergency medical care; and (f) has appropriate procedures for handling administering drugs.

Alzheimer's Disease: A form of organic dementia resulting in premature mental deterioration, first described in 1906 by German neurologist, Alois Alzheimer. Alzheimer's disease is considered a cognitive impairment, thus triggering benefits under long-term care insurance policies.

Ambulatory Care: Medical services provided on an outpatient (non-hospitalized) basis. Services may include diagnosis, treatment, surgery, and rehabilitation.

Ancillary Services: Healthcare services conducted by providers other than physicians and surgeons. These will usually include such services as physical therapy and home healthcare.

Approved Amount: Under Original Medicare, it is the amount Medicare determines is reasonable for a service covered under Medicare Part B. It is the amount that the doctor or supplier that accepts Medicare assignment can be paid. It may be less than the actual charge.

Assessment: A determination of physical and/or medical status by a health professional based on established medical guidelines. The assessment is a central component in home care coverages and the payment of home care claims. Upon the triggering of benefits, due either to the loss of some number of activities of daily living or a cognitive impairment, an assessment is performed by a multidisciplinary team. This "team" usually spearheaded by the insured's physician, determines the level of functional incapacity and develops a plan of care that will be followed in assisting the insured in the performing the ADLs and IADLs (instrumental activities of daily living).

Assignment: An arrangement whereby a physician or medical supplier agrees to accept the amount approved by Medicare as full payment for services and supplies under Part B. Medicare usually pays 80% of the approved amount directly to the physician or supplier after the beneficiary meets the annual Part B deductible. The beneficiary pays the other 20 percent.

Assignment of Benefits: When the insured authorizes the insurer or claims payer to pay benefits directly to the medical care provider.

Assisted Living: A non-medical institution providing room, board, laundry, some form of personal care and usually recreational and social services. While anyone needing these services can access them, they are typically used by senior citizens. Licensed by state departments of social services, these facilities exist under several names, including domiciliary care facility, sheltered house, board and care, community-based residential care facilities and alternate care facilities.

ASO: A type of contract with an insurance company or a third-party administrator that provides an employer with Administrative Services Only (ASO). It can include coverage for a certain amount of claims risk. The usual administrative expenses include claims processing, plan design advice and printing benefit booklets. Large employers who can afford the risk of providing insurance protection with their own money usually enter into these contracts.

Attachment Point: For aggregate stop-loss insurance, it is the point at which the stop-loss insurance carriers begin to reimburse the employer based upon the cumulative total of claims paid within a policy year. Attachment points are usually set at a level that exceeds expected claims in a plan year (e.g. 125% of expected claims).

Authorizations: Consent or endorsement by a primary care physician for patient referral to ancillary services and specialists.

Average Length of Stay: One measure of use of health facilities, reported as an average number of inpatient days spent in a hospital or other healthcare facility per admission or discharge. It is calculated as follows: total number of days in the facility for all admissions during a particular period divided by the number of admissions during the same period. Average lengths of stay vary and are measured by age, specific diagnosis, or sources of payment.

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Balance Billing: The practice of medical care providers (such as doctors, hospital, or other medical practitioner) billing the insurer for full costs, then billing the insured (patient) for the portion of the bill that was not paid by the insurer. Many health plans prohibit the use of balance billing and may use sanctions against providers who balance bill.

Benchmark: Point of comparison between desired clinical outcome and actual practice.

Beneficiary: The person entitled to receive benefits under a plan, including the covered employee and his or her dependents.

Benefit: Amount an insurance company pays to a claimant, assignee, or beneficiary when the insured suffers a loss covered by the policy.

Benefit Increase Options: Also known as automatic benefit increase option, automatic increase benefit, and cost of living adjustment benefit. Benefit increase options are most common in long-term care policies.

Benefit Period: A benefit period is a way of measuring a beneficiary's use of hospital and skilled nursing facility (SNF) services covered by Original Medicare. A benefit period begins the day the beneficiary is admitted as an inpatient in a hospital or SNF. It ends after the beneficiary has been out of the hospital or other facility that primarily provides skilled nursing for rehabilitation services (or, if in the latter type of facility, has not received skilled care there) for 60 days in a row. If the beneficiary is hospitalized after 60 days, a new benefit period begins, most Medicare Part A benefits are renewed, and the beneficiary must pay a new inpatient hospital deductible. There is no limit to the number of benefit periods a beneficiary can have.

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Cafeteria Plan: A plan which offers a choice between two or more benefits, or a choice between cash and one or more qualified benefits, and which complies with Section 125 of the Internal Revenue Code. (Also known as flexible benefit plans or "flex" plans).

Capitation: Method of compensation, used primarily by HMOs, to pay providers a fixed amount for each enrollee regardless of the actual number or nature of services provided to each person.

Carve-Out: Term used to describe certain services not included in capitated benefits that are paid for separately on a predetermined fee-for-service basis.

Case Management: Planned approach to manage service or treatment to an individual with a serious medical problem. Its dual goal is to contain costs and promote more effective intervention to meet patient needs. Often referred to as large case management.

Centers of Excellence: Providers who are selected to perform certain specialized procedures because of their expertise.

Chronic Care: Care for illness continuing over a long period of time or recurring frequently. Chronic conditions often begin inconspicuously and symptoms are less pronounced than acute conditions. Long term care insurance is designed to assist people who have a loss of capacity due to chronic illnesses.

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS): Federal program providing cost-sharing health benefits for dependents and survivors of active duty personnel and for retirees and their dependents and survivors.

Claim: Demand to the insurer by an insured person for the payment of benefits under a policy.

Coalitions: An association of healthcare plan sponsors who pool their resources to negotiate with insurers or other healthcare payers and providers. A coalition may also be a group of individuals or others who cooperate and join forces around a specific agenda or purpose.

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985): A federal law that requires most employers to allow eligible employees and their beneficiaries to continue to self-pay for their coverage after it normally terminates for up to 18, 24, 29 or 36 months.

Cognitive Impairment: Deterioration in intellectual capacity which (1) requires regular supervision to protect patients and others; (2) must be determined by clinical diagnosis or test; and (3) may be the result of Alzheimer's disease, senile dementia, or other nervous or mental disorders of organic origin.

Co-insurance: An agreement between the insured and the insurance company where payment is shared for all claims by the policy. A typical arrangement is 80%/20% up to $5,000. The insurance company pays 80% of the first $5,000 and the insured pays 20%. Usually after 80% of $5,000, the insurance company then pays 100% of covered expenses during the remainder of the calendar year up to any limits of the policy.

Commission: An embedded part of an insurance premium, which is paid by an insurance company to an agent or broker for procuring and servicing the business for the insurance company/client.

Community-Rated: Method of developing group-specific capitation rates by a health plan that generally does not account for unique characteristics of the group. The rate is based on the total experience of a given geographic area or "community."

Community-Rating: A rating method that determines a single average premium based on the characteristics and claims experience of an entire defined population. Age, lifestyle, industry, health factors and gender are not used to determine rates.

Concurrent Review: Method of utilization review that takes place on-site when a patient is confined to a hospital.

Congregate Housing: Apartment houses or group accommodations that provide healthcare and other support services to functionally impaired older persons who do not need routine nursing care.

Coordination of Benefits (COB): A contractual provision to prevent an insured from receiving benefits under more than one health insurance plan so that the insured's benefits from all sources do not exceed allowable medical expenses or eliminate appropriate patient incentives to contain cost.

Co-payment: A small charge paid at the time a medical service is received.

Cost Containment: Efforts or activities designed to reduce or slow down the cost increases of medical care services.

Cost Sharing: The sharing of costs between the payment of premium cost and medical expenses by the healthcare plan and its insured through employee contributions, deductibles, co-insurance and co-payments.

Cost Shifting: The increased cost of medical care to other patients that makes up for losses incurred by medical providers in providing care to patients who are under-insured or who have no coverage.

Coverage: The different types of options selected and the benefits paid under a plan or insurance contract.

Covered Expense(s): An expense that will be reimbursed according to the terms of the plan or insurance contract.

Current Procedural Terminology (CPT): Set of five-digit codes describing medical services that are used for billing by professional providers.

Custodial Care Facilities: A licensed facility that provides personal assistance to persons who are unable to care for themselves due to age, illness, physical or mental infirmity, but who do not require daily nursing care.

Customer: User of healthcare services, such as patients getting care or providers getting support services from laboratories; payer of service, such as individuals, employers, or the government; or the general public.

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Deductible: The amount of covered expenses that the insured must pay before a plan or insurance contract starts to reimburse for eligible expenses.

Defensive Medicine: Extensive use of laboratory testing, treatment, increased hospital admissions, and extended hospital stays that are not medically necessary for the treatment of the patient; the sole purpose of such services is to reduce the possibility of malpractice suits by the patient or providing a good legal defense in the event of such lawsuits.

Dementia: The severe impairment of cognitive functions (thinking, memory and personality). Of the elderly population in the U.S., 5 to 6 percent have dementia. Alzheimer's disease causes approximately one-half of these causes, vascular disorders (multiple strokes) case one-fourth and the other dementia's are caused by alcoholism, heart disease, infections, toxic reaction to medication and other rarer conditions. While impairment from Alzheimer's disease and vascular disorders is permanent, dementia caused by other conditions can usually be corrected.

Diagnosis-Related Groups (DRGs): System of determining specific reimbursement fees based on the medical diagnosis of a patient.

Discharge Planning: Assessment of an inpatient's medical condition for the purpose of arranging for appropriate continuing care upon leaving the facility. This planning includes how long the patient will be in the hospital, the expected outcome, and whether there are special needs or requirements on discharge.

Divestment: In reference to eligibility for Medicaid, the disposal of resources at less than fair market value in order to qualify for benefits.

Dual Choice: An arrangement where an employer will offer an alternative in addition to its original health plan.

Durable Power of Attorney: An individual's appointment of a representative to act on his or her behalf via a legal document that remains in effect of incapacity of the grantor.

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Eligible Expense(s): The portion of the medical care provider's services that are covered for payment under the terms of the health plan or insurance contract.

Elimination Period: The number of days in which you receive covered care or services before benefits are payable.

Employee Retirement Income Security Act of 1974 (ERISA): A federal law that originally set minimum standards for funding, vesting and termination of employer-sponsored pension plans. ERISA also contains provisions to protect the interests of participants and beneficiaries in welfare plans. Welfare plans must be in written form, describe the benefits and name the persons responsible for the operation of the plan.

Enrollee: health plan participant, member, or eligible individual in a health plan.

Exclusion: Specific conditions or services that are not covered by the terms of the plan or insurance contract.

Exclusive Provider Organization (EPO): Arrangement consisting of a group of providers who have a contract with an insurer, employer, third-party administrator, or other sponsoring group. Criteria for provider participation may be the same as those in PPOs but have more restrictive provider selection and credentialing process or otherwise forfeit reimbursement altogether.

Expected Claims: A dollar amount, which represents the expected claims, which will be paid during any plan or contract period.

Experience: Refers to the history of actual claims paid for the contract period (see Paid Claims) or can refer to the history of claims incurred during a contract period.

Experience-Rated: Determination of premium or capitation rates for a group risk based wholly or partly on that group's previous cost and claim utilization experience.

Explanation of Benefits (EOB): A document sent to an insured when the plan or insurance company processes a claim. The document explains how reimbursement was made, or why the claim was not paid, and if any additional information is needed to have the claim reconsidered. The appeals procedure should be outlined to advise the insured of his/her rights if there is dissatisfaction with the decision.

Extended Benefits: Benefits which continue, or become payable, after the termination of coverage from a plan or insurance contract, for example a hospitalization which continues after coverage would normally cease.

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Federally Qualified Health Center (FQHC): These centers provide comprehensive care to underserved communities.

Fee-for-Service Reimbursement: Payment for services based on each visit or service rendered.

Fee Schedule: Maximum dollar or unit allowances for health services that apply under a specific contract.

Fiduciary: Under ERISA, any person who exercises discretionary authority or control over a plan or plan assets.

Fixed Costs: Refers to those costs which are payable monthly and which do not relate to actual claims paid or incurred, for example, premium and administration costs.

Flexible Spending Accounts: Special accounts typically funded by an employee's voluntary salary reduction to help pay certain expenses not covered by the employer's plan or insurance contract. The advantage of these accounts is that after-tax dollars are converted to before-tax dollars, thereby reducing the actual cost of expenses.

Formulary: List of preferred pharmaceutical products to be used by a health plan. Formularies are based on evaluations of the efficacy, safety, and cost effectiveness of prescription drugs.

Fraud: Fraud in the healthcare system may include areas such as offering free tests or services and billing the insurer or plan, or for charging for services no rendered.

Fully Insured Plan: The employer pays a premium and, in return, transfers all of the risk and responsibility for claims payments to the insurance company.

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Gatekeeper: (Primary Care Physician) A health professional within a managed-care environment who determines the patient's access to further treatment and specialists.

Gatekeeper Question: A qualifying question asked by an insurance company at the time of application to help identify risk(s). Example: "Have you ever been treated for a heart attack or heart condition?"

Geriatrics: The study of physical and mental changes in persons as they age - including the diagnostic, treatment and prevention of disorders.

Grace Period: Time period that follows the premium due date when the coverage and policy remain in force. If a late premium is paid before the end of the grace period, coverage continues as if the premium had been paid timely.

Global Fees: Negotiated fees that are all-inclusive (one fee is paid for the entire range of services provided for a specific episode or episode of care.)

Guaranteed Issue: A requirement that health plans must permit you to enroll regardless of health status, age, gender, or other factors that might predict the use of health services. Except in some states, guaranteed issue doesn't limit how much you can be charged if you enroll.

Guaranteed Renewal: The insured's right to continue an in-force policy by the timely payment of premiums.

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Health Insurance Purchasing Cooperatives (HIPCS): Variations of cooperatives have been around for many years. But, they are seeing a resurgence due to PPACA. PPACA provides loans for consumer operated and originated health plans. They are expected to be nonprofit integrated care and delivery systems that will be sold through the state health exchanges.

Health Maintenance Organization (HMO): An organization that provides a wide range of comprehensive healthcare services for a specified group of enrollees for a fixed, pre-paid premium. There are several models of HMOs: Group Model, Individual Practice Association (IPA), Staff Model and Network Model.

Home and Community-Based Care Benefits: To be eligible for long-term care insurance Home and Community-Based Care Benefits, you must require covered services while your policy is in force that are due to (1) medical necessity, or (2) your inability to perform two or more activities of daily living, or (3) cognitive impairment.

Home Health Services: Comprehensive medically necessary services provided by a recognized provider to a patient in the home.

Hospice: Care provided to terminally ill patients and their families that emphasize emotional needs and coping with pain and death.

Hospital Bill Audit: Independent examination of hospital bills by a third party to determine if services and supplies charged to the patient were actually delivered, and if the price charged was correct.

Hospital Indemnity Insurance: Hospital indemnity coverage is insurance that pays a fixed cash amount for each day you are hospitalized up to a designated number of days. Some coverage may have added benefits such as surgical benefits or skilled nursing home confinement benefits. Some policies have a maximum number of days or a maximum payment amount.

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Inability to Perform Activities of Daily Living: Dependence on someone else because of need, due to injury, sickness, or frailty of age, for regular human assistance or supervision in performing normal activities of daily living. Activities of Daily Living are commonly referred to as ADLs.

Incontestability: Provision in a life insurance policy which allows an insurance company to contest the validity of a claim after the policy has been in force for a certain period, usually two or three years.

Incurred But Not Reported (IBNR): Claims which have been incurred by the insured but have not been submitted to the plan or insurance company for reimbursement (also known as lagged claims).

Indemnity Insurance: Healthcare insurance plan providing benefits in a predetermined amount for covered services. Traditionally, the insurer pays on a fee-for-service basis with no involvement in the actual delivery of healthcare services.

Individual or Independent Practice Association (IPA): Association of individual physicians that provides services on a negotiated per capita rate, flat retainer fee, or negotiated fee-for-service basis. It is one model of HMO managed care. IPAs may also serve non-HMO patients.

Institutionalization: Admission of an individual to an institution, such as a nursing home.

Insurability: The health status of an insurance applicant, which makes him/her acceptable to an insurance company, i.e. health, financial condition, occupation.

Intermediate Care: Care that may, but does not necessarily need to be delivered by a skilled professional.

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Joint Commission on Accreditation of Healthcare Organizations (JCAHO): Also referred to as “The Joint Commission.” Private voluntary accrediting organization for all types of healthcare organizations. Its focus is the outcome, process, and excellence in healthcare.

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Lagged Claims: The time between when service is incurred and when a claim for the service is submitted and processed for payment.

Lapse: Termination of insurance coverage for failure to pay premiums.

Lifetime Aggregate or Maximum: The maximum benefit payment provided under a plan or insurance contract.

Long-term Care (LTC): Continuum of maintenance, custodial, and health services to the chronically ill, disabled, or mentally impaired over a lengthy period of time. Services may be provided in long-term care or on an outpatient basis (subacute care, rehabilitation facility, nursing home, mental hospital, outpatient, or at-home basis).

Long-Term Care Facility: A place which is (1) licensed by the state; (2) provides skilled, intermediate, or custodial nursing care on an inpatient basis under the supervision of a physician; (3) keeps a daily medical record of each patient.

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Malpractice: Unprofessional, incompetent, or inappropriate medical care.

Malpractice Reform: Proposed changes to laws meant to redress malpractice, may include limits on pain and suffering awards, required arbitration and limits to the amount of attorney's fees as well as a host of other requirements.

Managed Care: Term used to describe the coordination of financing and provision of healthcare to produce high-quality healthcare for the lowest possible cost. A system that imposes control on the utilization of medical services and on the providers who renders the care. Managed care is provided through managed indemnity plans; Preferred Provider Organizations (PPOs), Exclusive Provider Organizations (EPOs), Health Maintenance Organizations (HMOs), or any other cost management environment.

Mandate: A specific procedure or coverage that a plan or insurance contract must offer dictated by state or federal law.

Mandated Benefits: Healthcare coverage required by state and federal law to be included in health insurance contracts. Each state has its own mandated benefits that vary from state-to-state.

Medicaid: State programs with federal matching funds for public health assistance to persons, regardless of age, whose income and resources are insufficient to pay for healthcare.

Medical Necessity: Term used by insurers to describe medical treatment that is appropriate and in accordance with generally accepted standards of medical practice.

Medicare: Federally sponsored program under the Social Security Act that provides hospital benefits, supplementary medical care, and catastrophic coverage to persons 65 years of age and older and to some younger persons who are covered under Social Security benefits.

Medicare Advantage Plan: This is another Medicare health plan choice. These are sometimes called “Part C” or “MA Plans.” A Medicare Advantage Plan provides Part A and Part B coverage. They typically also include additional coverage such as vision, hearing, dental or wellness programs. They generally provide Part D, prescription drug coverage, as well.

Medicare-Approved Amount: Medicare has a fee schedule that lists the dollar amount that Medicare considers to be the reasonable charge for the services provided by a doctor that Medicare approves for a covered service provided by a doctor is the lesser of the Medicare fee schedule amount for a particular service or the amount charged by the doctor.

Medicare Part A (Hospital Insurance): Helps pay for medically necessary inpatient care in a hospital, skilled nursing facility or psychiatric hospital, and for hospice and home healthcare.

Medicare Part B (Medical Insurance): Helps pay for medically necessary physician services and many other medical services and supplies not covered by Part A.

Medicare Part D (Prescription Drug Coverage): Helps pay for prescription drugs out of the hospital. Part D plans are provided through private insurers for a monthly premium.

Medicare-Qualified Providers: Providers who have been approved by Medicare.

Medigap-Medicare Supplement Insurance: Medigap insurance is specifically designed to supplement Medicare's benefits and is regulated by federal and state law. It must be clearly identified as Medicare supplemental insurance and it must provide specific benefits that help fill the gaps in your Medicare coverage. Other kinds of insurance may help you with out-of- pocket healthcare costs but they do not qualify as Medigap plans.

Mental Health Services: Behavioral healthcare services that may be provided on an inpatient, outpatient, or partial hospitalization basis.

Multiple Employer Trust (MET): A trust established by a sponsor that allows small employers in the same or related industries to provide medical insurance under a trust arrangement.

Multiple Employer Welfare Arrangement (MEWA): An employee welfare arrangement designed to provide benefits to employees of two or more employers. These plans have often been poorly regulated – states are limited in their ability to regulate them and the federal government through the United State Department of Labor and ERISA, has not made regulation of MEWAs a priority.

Multiple Provider Arrangement: Managed care plan consisting of group, staff, or IPA structures in combination.

Multi-specialty Group Practice: Independent physicians' group that is organized to contract with a managed care plan to provide medical services to enrollees. The physicians are not employees of the HMO, but are employed by the group practice.

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National Association of Health Underwriters (NAHU): A professional organization founded in 1929. NAHU represents more than 100,000 licensed health insurance agents, brokers, consultants and benefit professionals who serve the health insurance needs of employers and individuals seeking health insurance coverage.

National Association of Insurance Commissioners (NAIC): The National Association of Insurance Commissioners (NAIC) is the U.S. standard-setting and regulatory support organization created and governed by the chief insurance regulators from the 50 states, the District of Columbia and five U.S. territories. Its initiatives assist state insurance departments and help draft models laws.

National Committee on Quality Assurance (NCQA): Private, voluntary organization for accrediting managed care. It assesses quality, credentialing utilization management, customer rights, preventive health services, and medical records.

Negotiated Fees: Managed care plans and providers mutually agree on set fees for each service. This negotiated rate is usually based on services defined by the Current Procedural Terminology (CPT) codes, generally at a discount from what the provider would usually charge. Providers cannot charge more than this fee.

Network or Mixed-Model HMO: Provider arrangements that contract with a number of Independent Practice Associations or group practices to provide physician services to HMO enrollees in return for higher patient volume. This model is a multiple provider arrangement that can be either an open or closed panel.

Network Providers: Limited grouping or panels of providers in a managed care arrangement with several delivery points. Enrollees may be required to use only network providers or may have greater liability for costs when using non-network providers for medical services.

Non-Forfeiture Benefits: A guarantee for a refund of all of the life insurance premiums paid in one of two ways; (1) to a named beneficiary at the death of the insured, or, (2) as an "extended term" type benefit for as long as all premiums accrued will last with the balance (if any) left to a named beneficiary. See Return of Premium

Non-Network Providers: Non-contracted or unapproved health providers who are outside a managed care arrangement or contracted network of providers.

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Omnibus Budget Reconciliation Act (OBRA): Term given by Congress to many of its annual tax and budget reconciliation acts. Most of these tax and budget acts have language or provisions related to healthcare and managed care, particularly in relation to Medicare.

Open-Ended HMO: Hybrid HMO product that allows members to use physicians outside the plan in exchange for additional financial liability in the form of a deductible, coinsurance, or co-payment.

Open Panel: A right included in an HMO which allows the covered person to obtain non-emergency covered services from a specialist without a referral from the primary care physician or gatekeeper.

Out-of-Network Care: Medical services obtained by managed care plan members from unaffiliated or non-contracted healthcare providers. In many plans, such care will not be reimbursed or be reimbursed at a reduced rate.

Out-of-Pocket Expenses: Those healthcare costs that must be borne by the insured.

Out-of-Pocket Maximum: The maximum amount that an insured is required to pay under a plan or insurance contract for out-of-pocket expenses.

Outcome Measurement: A program that tracks a physician's treatment patterns for the purposes of evaluating efficiency.

Overutilization: Inappropriate or excessive use of medical services that add to healthcare costs.

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Paid Claims: The total claims payment made by the plan or insurance company. It does not include any employee cost sharing or provider discounts.

Partial Capitation Risk Contracts: State Medicaid contracts with HMOs or similar managed care organizations that accept risk for a defined set of services (for example, physician services and laboratory, x-ray, or clinic services). Other services are reimbursed on a fee-for-services basis.

Participating Provider: A provider who has agreed to contract with a managed care program to provide eligible services to covered persons at an agreed rate of reimbursement.

Peer Review: Traditional quality assurance program to monitor standard processes of care or adverse outcomes of provider practice by other professional peers. The goal of peer review is to find and correct medical practices that do not conform to the professional standards of care.

Per Diem: Literally, per day. Term that is applied to determining costs for one day of care. It is an average cost and does not reflect true cost for each patient. Some contracts with hospitals may call for insurer payments on a per diem basis as an all-encompassing contractual payment arrangement.

Per Member Per Month (PMPM): Computational designation for each enrollee in a managed care program.

Personal Care Advocate: A representative of the nursing facility resident who reviews care, address concerns, and provides advocacy support for a patient and his or her family.

Physician-Hospital Organization (PHO): Group practice arrangement that occurs when hospitals and physicians organize for purposes of contracting with managed care organizations. These relationships are formally organized, contractual, or corporate in character and include physicians outside the boundaries of a hospital's medical staff.

Plan of Care: Also known as Home Care Plan. It is the result of an assessment; a program for providing home care services. In most policies, a physician and the multi-disciplinary team will prepare such a program. It will be appropriate for the level of care needed for the physician's diagnosis. All long term care policies qualifying under California Senate Bill 1943 require plans of care.

Point of Service Plans (POS): Combination of HMO and PPO features. They provide a comprehensive set of health benefits and offer a full range of health services much the same as the HMO. However, the member does not have to choose how or where to receive services until they need them. The member can then opt to use the defined managed care program, or can go out-of-plan for services but pay the difference for non-plan benefits (e.g. 100 percent coverage for managed care vs. 80 percent coverage out-of-plan).

Pool (ing): Used by insurance companies to combine all premiums, claims and expenses in order to spread the risk of insurance coverage. This process ensures that small employers will not be singled out and unfairly assessed with a large rate increase due to unanticipated medical catastrophic claims of insured employee(s). Pooling is used to level out premium fluctuations that would otherwise occur when you have individuals or small groups where one or a few large claims would exceed premiums paid by that individual or group in one year.

Portability: Provides access to continuous health insurance coverage so the insured does not lose coverage due to any change in health or personal status (such as employment, marriage, or divorce).

Practice Guidelines: Specific, professionally agreed upon recommendation for medical practice used within healthcare organizations to standardize the practice to achieve consistent quality outcomes. Practice guidelines may be instituted when triggered by specific clinical indicators.

Pre-authorization: Previous approval required for referral to a specialist or non-emergency healthcare services. This practice is not as common as it once was, but may still be applicable in certain settings or for certain services.

Pre-certification: Utilization management program that requires the individual or provider to notify the insurer before a medical or dental procedure. Notification allows the insurer to authorize payment and to recommend alternate courses of action. This practice is not as common as it once was, but may still be applicable in certain settings or for certain services.

Pre-existing Condition: A condition or diagnosis which existed (or for which treatment was received) before coverage began under a current plan or insurance contract.

Preferred Provider Organization (PPO): Managed care arrangement consisting of a group of hospitals, physicians, and other providers who have contracts with an insurer, employer, third-party administrator, or other sponsoring group to provide healthcare services to covered persons in exchange for prompt payment and increased patient volume.

Premiums: Periodic payment, usually monthly, to keep an insurance policy in force.

Premium Tax: A state tax on insurance premiums.

Prepaid Group Practice: A type of HMO plan where participating providers render specific services to the insured in exchange for an advance fixed patient.

Prevailing Charges: Amounts charged by healthcare providers that are consistent with charges from similar providers for identical or similar services in a given locale.

Preventive Medicine: Wellness and health promotion services that are part of the basic benefits package of a managed healthcare plan. The list of preventive services that must be covered by health plans as a result of PPACA is comprehensive. A list of these covered services is available on

Primary Care: Non-specialist, basic routine medical care provided by family physician.

Primary Care Case Management: Single provider is responsible for coordinating, arranging, and monitoring all patient care, even for those patients with no serious medical conditions.

Primary Care Physician (PCP): Primary deliverers and managers of healthcare, central to controlling costs and utilization. The PCP provides basic care to the enrollee, initiates referrals to a specialist, and provides follow-up care. Usually defined as a physician practicing in such areas as internal medicine, family practice, and pediatrics.

Profiling: Systematic method of collecting, collating, and analyzing patient data to develop provider-specific information about medical practice.

Prospective Review: Data-gathering technique that uses projected figures or current data to determine future costs or services.

Protocol: Tool for enhancing quality in a healthcare organization by developing customary methods for medical interventions. Treatment protocols are developed for clinical areas of medicine where diagnostic or therapeutic approaches are defined. Technology assessment and quality studies are used to establish decision protocols for particular diseases or treatments.

Providers: Term used to describe medical professionals and services organizations that provide healthcare services.

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Qualified Health Plan: A QHP is a health plan certified as meeting the requirements to participate in a state’s health insurance exchange.

Qualified Provider: Healthcare provider who has been contracted with or authorized to provide reimbursable healthcare services from an insurer or payer.

Quality Assurance: Set of activities that measures the characteristics of healthcare services and may include corrective measures.

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Readmission: Patient admission to a hospital for the same or similar diagnosis as a previous, recent admission. Often used as a quality of care measure measuring whether there was an inappropriate discharge or treatment from the first admission.

Reasonable and Customary: The maximum amount a plan or insurance contract will consider eligible for reimbursement, based upon prevailing fees in a geographic area.

Rebating: The practice (illegal in most states) of giving an insurance applicant anything of value as an inducement to purchase or renew an insurance policy.

Referral: Primary care physician-directed transfer of a patient to a specialty physician or specialty care.

Referral Pool: Capitation set-aside for referrals or inpatient medical services. If utilization targets are met at the end of the year, primary care physicians may share what is left in the pool.

Rehabilitation: Process and goal of restoring a disabled insured person to maximum physical, mental, and vocational independence and productivity commensurate with their limitations.

Reinsurance: The transfer of part of the insurance risk to another insurer or insurers--self-funded plans generally buy specific and/or aggregate stop-loss coverage to cover losses in excess of certain limits (also known as excess loss coverage). (See Attachment Point)

Reserves: A specific amount of money pre-funded and set aside to assure adequate funds to cover future claims. Both insurance companies and self-insured employers must "reserve" in order to preserve cash flow and protect solvency.

Resource-Based Relative Value Scale (RBRVS): This is the basis used to determine the payment for medical providers for Medicare. The RBRVS is determined using three factors: physician work, practice expense and malpractice expense.

Retention: The portion of the insurance premium which is allocated for expenses, administration, commissions, risk charges and profit.

Retrospective Claim Review: Examination of claim data after completion of medical services to assess appropriateness of care or reimbursement for services.

Rider (Exclusion): An amendment to insurance contracts limiting or excluding an existing coverage for certain conditions.

Risk: Chance of incurring financial loss by an insurer or provider.

Risk Adjustment: Correction of capitation or fee rates based upon factors that can cause an increase in medical costs such as age or sex. It is also, more broadly, a means of leveling the playing field to adjust for uneven exposure to risk by transferring the higher than expected costs from one entity to another with lower than expected costs. This may be accomplished by using a reinsurance mechanism.

Risk Contract: See Medicare Risk Contact.

Risk Sharing: Apportionment of chance of incurring financial loss by insurers, managed care organization, and healthcare providers.

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Second Surgical Opinions: Method to determine appropriateness of surgery by a second provider source.

Self-Insurers: Also referred to as self-funding – see below. Employers, businesses, and other entities that choose to assume the responsibilities of an insurance company to insure their beneficiaries. Functions include: collection of employee premium contributions; establishment of plan of benefits; claim payment; appeals for claims, etc. Coverage provided by a self-insured entity may not need to comply with state insurance laws.

Self-Funding: An arrangement under which all or some of the risk associated with providing coverage is not covered by an insurance contract.

Self-Referral: Choice by the insured or patient of medical specialists or specialty services without need for primary care physician or health plan controls.

Service Area: A geographic area of operation for a medical provider or managed care entity.

Skilled Nursing Facilities: Institution providing the degree of medical care required from, or under the supervision of, a registered nurse or a physician.

Social Security Act: Law under which the federal government operates the Old Age, Survivors, Disability, and Health Insurance Program (OASDHI).

Specialty Managed Care Arrangements: Those group practices and organizations of providers who contract with managed care organizations to provide non primary-care medical services.

Specialty Physicians: Those physicians practicing in areas other than internal medicine, family practice, or pediatrics.

Specified Disease Insurance: Specified disease insurance, which is not available in some states, provides benefits for only a single disease, such as cancer, or for a group of specified diseases. The value of such coverage depends on the chance you will get the specific disease or diseases covered. Benefits are usually limited to payment of a fixed amount for each type of treatment. This coverage is often provided on a voluntary basis in an employer-based plan.

Staff Model HMO: HMO that owns the clinical facilities used by patients enrolled in the HMO. The HMO directly employs the physicians providing service and they provide service only to patients enrolled in the HMO plan.

Stakeholders: Those with a stake in the cost and quality of healthcare services, including patients, employers, providers, and government.

Stop-Loss Insurance: Protection purchased by self-insured and some managed care arrangements against the risk of large losses or severe adverse claim experience.

Subacute Care: Healthcare services that are less intense than hospital care but more intense than skilled nursing home services.

Supplementary Coverage: Insurance to help cover those parts of Medicare that are non-reimbursable or covered by Medicare.

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Third-Party Administrator (TPA): Method by which an outside person or firm, not a party to a contract, provides specific administrative duties (including premium accounting, claims review and payment, arranges for utilization review and stop-loss coverage) for a self- funded plan. Entity may also handle payment of claims.

Tort Reform: The purpose of reform is to reduce overall healthcare costs by reforming the medical malpractice arena. Tort reform often contemplates eliminating unnecessary practices and testing, which are performed defensively by a physician with little or no value to the person seeking treatment. It may also include reasonable limits placed on non-economic damages paid to a patient or beneficiary.

Total Disability: Generally, a disability that prevents an insured from performing all occupational duties. Contract language may be more or less restrictive in insurance policies and should be reviewed as necessary.

Trend Factor: The percentage of increase used by an insurance company or plan to reflect the projected rise in healthcare costs. Calculation factors also include inflation, utilization, technology and geographic area.

Twenty-four (24-hour) Coverage: Any combination of traditional health insurance and workers' compensation insurance that attempts to dissolve the occupational and non-occupational boundaries between the two coverages.

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Unbundled: Health services or benefits that are a stand-alone or carved-out benefit under a separate contract or bill.

Unbundling: This is a billing practice to increase the reimbursement paid by a plan or insurance contract, each medical procedure is billed under a separate code as a separate item, instead of part of one overall procedure.

Underwriters: Insurance professionals who determine if and on what basis an insurer will accept an application for insurance and the premium to be charged commensurate with the assessed risk.

Usual, Customary, and Reasonable (UCR) Fees: Charges of healthcare providers that are consistent with charges from similar providers for identical or similar services in a given locale.

Utilization: Patterns of usage for a single medical service or type of service (hospital care, prescription drugs, physician visits). Measurement of utilization of all medical services in combination usually is 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 annual admissions to a hospital per 1,000 persons in the plan.

Utilization Review (UR): Programs designed to reduce unnecessary or inappropriate medical services, both inpatient and outpatient. Utilization reviews may be prospective, retrospective, concurrent, or in relation to discharge planning.

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Vendors: Term describing a person, persons, groups, and organizations providing healthcare services for reimbursement.

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Waiting Period: The period of time that a newly hired employee must wait before they are considered eligible for the employer’s plan.

Waivers: Term usually associated with the Medicare or Medicaid programs by which the government waives certain regulations or rules for a managed care or insurance program to operate in a certain geographic area. Can also relate to exclusions in life and disability insurance (reference "Rider").

Waiver of Premium: A provision in a plan or insurance contract, which relieves the insured of paying premiums while totally disabled.

Withhold Arrangements: Portion of a provider's salary, fees, or capitation that is held back until performance in relation to quality and utilization are examined at the end of each year. If performance was at least satisfactory, withholds are released to the provider.

Workers’ Compensation Insurance: Programs mandated by the states to provide benefits for workers who are injured on the job or killed on the job. Benefits for work related injuries include payment for medical care and lost salary.

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