Acquisition Cost: The cost to an insurer to acquire new business. It includes costs such as underwriting the risk, issuing a new policy, paying commissions and overhead or office expenses.

Activities of Daily Living (ADLs): Everyday activities which are used to measure an individual's ability to function independently. ADLs 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. In California, Senate Bill 1943 established seven standard activities of daily living (eating, bathing, dressing, toileting, continence, transferring, ambulating) for any LTC policy that purports to cover home care in it's provisions. A loss of 2 to 7 of the ADLs will qualify an insured for benefits. There are LTC programs in California that do not comply with S.B.1943 (California Partnership and CALPERS). These programs have more stringent insuring clauses. ADLs and the loss necessary to trigger benefits may vary from state to state. Additionally, despite standardization, companies choose to define the inability to perform an ADL differently. The NAIC is working to set national standards for ADL definitions.

Actual Charge: The amount a physician or supplier actually bills for a particular medical services 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 the 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 ad is finite in length. Traditional medical insurance, Medicare and Medicare supplements are designed to provide coverage for acute illness.

Adjusted Average Per Capita Cost (AAPCC): Health Care Financing Administration (HCFA) basis of payment to HMOs and CMPs.

Adjusted Community Rate (ACR): Uniform capitation rate that is charged to all enrollees in a plan based on adjustments for risk factors such as age and sex.

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

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

Adult Day Care: Social, recreational and/or rehabilitative services provided for persons who benefit from daytime supervision. An alternative between care in the home or in a institution.

Adverse Selection: A tendency which occurs when a person makes a decision based on his/her diminished health condition or frequency of needed treatment and is, therefore considered a poorer claims risk than most others in the group.

Aid to Families with Dependent Children (AFDC): Public assistance program that provides payment to families with children 18 years of age and under who have an income below a defined poverty line.

Agent: Licensed by the state, performs the functions for sole proprietors and small businesses that Human Resource Departments do for larger businesses, gathers census data, prepares proposals, makes presentations to businesses, explains benefits to employers, and employees, does field underwriting when required, delivers policies and certificates, assists in handling claims, performs other related tasks required by the 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.

Ageism: Prejudice against people because of their age.

Alternate 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 support.

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. In California, as well as most of the rest of the United States, Alzheimer's Disease is considered a cognitive impairment, thus triggering benefits under long term care insurance policy.

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

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

Annual Benefit Cap: Maximum amount paid for specific medical services or total medical services.

Approved Amount: The amount Medicare determines is reasonable for a service covered under Medicare Part B. It may be less than the actual charge. For many services, including physician services, the approved amount is taken from a fee schedule that assigns a dollar value to all Medicare-covered services that are paid under that fee schedule.

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 coverage's and the payment of home care claims. Upon the triggering of benefits, due either to the loss of some number or 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 of $100. 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. 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 service. 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.

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 health care 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.

B

Balance Billing: Specific deductible is the point at which the stop-loss insurance carrier begins to reimburse the employer based upon the individual's total of claims paid within a policy year. Also, the practice of medical care providers (such as doctors, hospital, or other medical practitioner) billing the insurer for full costs, then billing the insured for the portion of the bill which was not paid. Many Managed Care plans prohibit the use of balanced billing and may use sanctions against providers who balance the 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. These are optional benefits that provide for annual increases in the benefit amount to offset the effects of inflation. Benefit increase options are paid for at the time of issue and either increases the daily policy benefits by a 5% compounded or simple interest factor. A key element to remember is that the increases begin at the second policy anniversary and continue for the duration of the policy, except where the insurance carrier "caps" the increase at some predetermined amount. These increase options are not to be mistaken with future insurability options.

Benefit Period: A benefit period is a way of measuring a beneficiary's use of hospital and skilled nursing facility services covered by Medicare. A benefit period begins the day the beneficiary is hospitalized. 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 begins period begins, most Medicare Part A benefits are renewed, and the beneficiary must pay a new impatient hospital deductible. There is no limit to the number of benefit periods a beneficiary can have.

C

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 and willingness to provide discounts.

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.

Closed Panel: Managed care plan that contracts with physicians on an exclusive basis that requires the insured to use a list of certain providers. The primary provider is responsible for all health care needs and refers to a specialty physician or hospitalization only when medically needed.

Coalitions: An association of health care plan sponsors who pool their resources to negotiate with insurers or other health care payers and providers.

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

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. This is also referred to as co-payment.

Commission: 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. Depending upon the size of the group being insured, these commissions average between three and ten percent of the premium paid by the employer.

Community-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 membership such as an HMO or an insurance pool. Age, lifestyle, industry, health factors and gender are not used to determine rates (See Adverse Selection).

Competitive Medical Plans (CMPS): Health care organization that meets specific government criteria for Medicare risks contracting but is not necessarily a HMO.

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 health care and other support services to functionally impaired older persons who do not need routine nursing care.

Conversion Privilege: A contractual right given to an insured person whose group coverage terminates so that person is able to convert to an individual policy without providing evidence of insurability.

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. It does not accumulate towards a plan's deductible or out-of-pocket maximum and is designed to discharge utilization. (See Co-insurance)

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 health care plan and its insured through employee contributions, deductibles, co-insurance and co-payments.

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

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

Covered Expense(s): An expense that will be reimbursed according to the terms of the plan or insurance contract. Credentialing Review and documentation of professional providers including licensure, malpractice history, analysis of practice patterns, and certification.

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 health care 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.

D

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

Defense 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 reducing 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 our elderly population, 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.

E

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 managed Care program.

Evidence of Insurability: A procedure used to review factors concerning a person's physical condition and medical history. From this information, the plan or insurance company evaluates whether the risk of the individual will be accepted and if they will offer coverage.

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 utilization experience.

Explanation of Benefits (EOB): A document sent to an insured when the plan or insurance company handles a claim. The document explains how reimbursement was made, or why the claim was not paid, and if any additional information is needed. 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.

F

Federally Qualified: Voluntary federal certification for HMOs.

Federally Qualified Health Center: Another way to limit your health care costs is to go to a federally qualified health center (FQHC) for the type of care generally provided in a doctor's office.

Fee-for-Service Reimbursement: Payment for services based on each visit or service rendered. Under this arrangement Plans or Insurers have not established contracted or capitated rates of payments with providers prior to the insured claim occurrence.

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 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 managed care plan's network physicians. Formularies are based on evaluations of the efficacy, safety, and cost effectiveness.

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

Freestanding Plan: Unbundled or separate health care benefits apart from the basic health care plan, usually dental or vision care. Employees are allowed either to select the separate benefit or decline it for other alternatives. This choice of freestanding plans is often referred to as "cafeteria-type" benefits.

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

G

Gatekeeper: (Primary Care Physician) A health professional within a managed-care environment who determines the patient's access to treatment. The primary care physician treats the patient and determines necessity of 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.

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.)

Group-Model HMO: HMO staffing that occurs by contracting with multi-speiciality medical groups to care for plan members. Physicians are not employees of the HMO but are considered as a closed panel.

Guaranteed Issue Underwriting: The applicant is guaranteed coverage up to an agreed amount or level without evidence of insurability (see Evidence of Insurability).

Guaranteed Renewable: The insured's right to continue an in-force policy by the timely payment of premiums. The insurance company cannot change the coverage or refuse to renew the coverage for other than non-payment of premiums (includes health conditions and/or marital or employment status).

H

Health Alliances: Health Alliances or Health Insurance Purchasing Cooperatives (HIPCs) are groups or entities whose primary purpose is to negotiate with health plans to provide coverage at competitive prices to members of the alliance.

Health Insurance Purchasing Cooperatives (HIPCS): See Health Alliances

Health Care Financing Administration (HCFA): Branch of the U.S Department of Health and Human Services charged with oversight and financial management of government-related health care programs such as Medicare and Medicaid.

Health Care Prepayment Plan (HCPP): HCFA program allowing managed care groups that organize, finance, and deliver Medicare Part B services be reimbursed for such services on a reasonable cost basis.

Health Insurance Purchasing Cooperatives (HIPCS): See Health Alliances

Health Maintenance Organization (HMO): An organization that provides a wide range of comprehensive health care 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 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.

I

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.

Incontestability: Provision in a 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: Health care 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 health care 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.

Instrumental Activities of Daily Living (IADLs): The more complex tasks associated with independent living. California State Bill 1943 stipulates that any long term care insurance policy that purports to cover home care, must provide benefits for the IADLs. The IADLs include lighthouse keeping, taking medications, using the telephone, meal preparation, moving about outside, and shopping for essentials. IADLs define the services covered by policies covering home care.

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

Integrated Coverage: Combinations of HMOs, indemnity plans, or PPO's into one health care plan.

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

J

Joint Commission on Accreditation of Healthcare Organizations (JCAHO): Private voluntary accrediting organization for all types of health care organizations. Its focus is the outcome, process, and excellence in health care.

L

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

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

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

Long-term Care (LTC): 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.

M

Malpractice: Unprofessional, incompetent, or inappropriate medical care.

Malpractice Reform: Proposed changes may include required arbitration and limits to the amount of attorney's fees.

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

Managed Competition: Proposed system in which the government restricts the consumer to purchasing insurance from government-approved carriers.

Managed Indemnity: Use of utilization controls in traditional fee-for-service health insurance plans in order to reduce cost and inappropriate care.

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

Mandated Benefits: Health care coverage required by state and federal law to be included in health insurance contracts.

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

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

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

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

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

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

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

Medicare Risk Plan: A type of Medicare supplement coverage where the Medicare recipient "assigns" his/her benefits to an HMO. The HMO contracts with the Federal Government to provide medical services to the Medicare recipient at a discounted rate to the government.

Medicare Select: Federal programs designed to introduce Medicare beneficiaries to managed care plans through Preferred Provider Organization supplemental (MedSup) health insurance.

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

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

Military Health Services System (MHSS): Federal health benefits program for active duty military personnel, retirees, their dependents, and survivors.

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.

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.

N

National Association of Health Underwriters (NAHU): A professional organization founded in 1929, of more than 14,800 men and women in the health insurance industry representing more than 119 million consumers. NAHU promotes excellence in the insurance industry through legislative advocacy, education, participation and quality leadership.

National Association of Insurance Commissioners (NAIC): An organization that assists state insurance departments and helps draft models laws.

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

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

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

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

Non-Forfeiture Benefits: A guarantee for a refund of all of the premiums paid in one of two way; (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.

O

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

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

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

Out-of-Network Care: Medical services obtained by managed care plan members from unaffiliated or non-contracted health care providers. In many plans, such care will not be reimbursed unless previous authorization is obtained.

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

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

Outcome Measurement: A document 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 health care costs.

P

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.

Per 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 standard processes 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.

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.

Play or Pay: A concept that would require employers to provide health insurance to their employees and dependents (play) or pay a tax or premium toward a publicly provided system that covers people without private insurance (pay).

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

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).

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 health care 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 health care services.

Pre-certification: Utilization management program that requires the individual or provider to notify the insurer before hospitalization or surgical procedure. Notification allows the insurer to authorize payment and to recommend alternate courses of action.

Pre-existing Condition: A condition or diagnosis which existed (or for which treatment was received) before coverage began under a current plan or insurance contract, and for which benefits are not available or are limited.

Pre-existing Condition Clause: A clause in an insurance contract or plan that specifies if benefits will or will not be paid for a pre-existing condition. (Example: "the insured must be covered by the plan for a certain period of time or have gone a certain amount of time without any treatment.") Additionally, the clause may limit the benefit payable for treatment of pre existing conditions until a certain time period of coverage has elapsed, usually six months to a year.

Preferred Provider Organization (PPO): Managed care arrangement 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 health care services to covered persons in exchange for prompt payment and increased patient volume.

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

Premium Tax: A state tax on insurance premiums.

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

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

Preventive Medicine: Wellness and health promotion services that are part of the basic benefits package of a managed health care plan.

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 health care, central to controlling costs and utilization. The PCP provides basic care to the enrollee, initiates referrals to a specialist, and provides follow-up care. Refers exclusively to other contracted providers and admits patients only to contracted hospitals. 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 health care 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 health care services.

Q

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

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

R

Readmission: Patient admission to a hospital for the same or similar diagnosis as a previous, recent admission. Often used as a measure of 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): Developed by the Health Care Financing Administration (HCFA) of the federal government to redistribute physician payments more adequately to encourage the use of PCP services. The amount of resources devoted to produce a health care service serve as the basis for the fee that is paid.

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. For example, a rider to a policy may exclude coverage for treatment to an applicant's knee.

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.

Risk Contract: See Medicare Risk Contact.

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

S

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

Self-Insurers: Employers, businesses, and other entities that chose to assume the responsibilities of an insurance company to insure their beneficiaries.

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

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

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

Set Aside: See Withdrawal Arrangements

Seventy-five/twenty-five (75/25) Rule: HMOs participating in the Medicaid program are required to limit Medicaid and Medicare recipients to no more that 75 percent of enrollees and to draw at least 25 percent of their enrollees from the private sector. This "75/25" is imposed to ensure that care provided to Medicaid enrollees is comparable to that provided to enrollees with private insurance.

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.

Specified Low-Income Medicare Beneficiary (SLMB): Persons entitled to Medicare Part A whose incomes are slightly higher than the National Poverty Level. Your income cannot exceed the National Poverty Level by more than 20 percent.

Spend Down: See Divestment

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 health care 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: Health care 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 Part B that are non-reimbursable.

T

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 eliminate 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 insureds from performing all occupational duties.

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

Triggers: Data point or indicator that suggests further study or review. Also refers to the assessments conducted by a licensed health care practitioner to determine eligibility for private long term care insurance benefits.

Triple Option Plan: An employer plan that usually offers an insured an opportunity to choose between an indemnity HMO or PPO level of benefits at time of claim.

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.

U

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

Unbundling: To increase the reimbursement paid by a plan 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.

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

Utilization: Patterns of usage for 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 number of annual admissions to a hospital per 1,000 persons over age 65.

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

V

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

W

Waiting Period: Date of hire and the employees eligibility to qualify for a plan of insurance or if already insured that time period before one is eligible for benefits (i.e. elimination period).

Waivers: Term 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 or also when receiving care for nursing home benefit and sometimes HHC.

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, which requires employers to provide liability insurance coverage and pay benefits to dependents of employees killed to compensate for work related injuries or disabilities.

Wrap-Around Coverage: Programs of HMOs that, in some states, were prevented by state law from taking on financial risk for out-of-plan care and joined with insurers to cover the out-of-plan portion of care. Such programs led to the development of point-of-service (POS) plans.