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Glossary of Terms

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Accumulation Period A period that calls for an insured individual to incur eligible medical expenses that are equal to a deductible. This sets forth a benefits period under a major medical expense or comprehensive medical plan.

Activities of daily living Those activities performed as part of an individual’s daily self-care routine. These include bathing, dressing, eating, transference and toileting. Commonly used as a gauge for disability benefits.

Adjusted Annual Per Capita Cost (AAPCC) The basis of payment for Medicare-risk HMOs, the AAPCC is a yearly projection of program spending in Medicare's fee-for-service program. Medicare pays HMOs 95% of the AAPCC for each enrolled Medicare beneficiary, adjusted for such factors as geographic cost differences (by county), age, sex and disability status.

Adjusted Community Rating A rating that sets health insurance premiums with group-specific demographics in mind.

Administrative services only (ASO) Services provided by a third-party health care vendor that are limited to administrative services for an employer group, absent of any risk-sharing arrangement for the cost of health care. Frequently sought when an employer self-insures health care benefits but does not wish to perform administrative functions.

Adverse selection Situation in which in insurance carrier enrolls members who are disproportionally higher risk than the average member of a group as a whole.

Affiliated Service Group An arrangement that consists of two or more related organizations operating in independent units but looked upon as a single employer for plan qualification reasons.

Allowable costs Those charges for services or supplies rendered by a health provider that qualify as covered expenses.

Alternative Delivery System (ADS) Health care services, such as HMOs and PPOs, that are delivered in a system that is distinct from traditional inpatient hospitals.

Ambulatory Care Benefits In contrast to services received in a hospital, this provides for coverage of outpatient health care.

Area Agency on Aging (AAA) Under the Older Americans Act (OAA), the federal government distributes funds for various aging programs through State Units on Aging (SUA) which, in turn, fund local AAAs ("triple As"). These funds are used by local AAAs to support a wide variety of programs that assist older people.

Assignment of benefits An arrangement under which claimants request that their benefit payments be made directly to a designated person or facility, such as a doctor or hospital.

Average length of stay A health care service measure indicating the average number of days a patient spends in the hospital for each admission. Hospitals and employers commonly use this average as one factor in assessing quality of care relative to other institutions.

Average wholesale price The standardized cost of a prescription drug arrived at by averaging the cost of a nondiscounted pharmaceutical charged to a pharmacy provider by a large group of wholesalers.

Backloading When an employee has reached a certain age or attained a specific number of years of service, this provides for a faster rate of benefit accrual. This practice is limited under ERISA.

Balance billing Submitting an invoice to a patient for the difference between the original charge for health care services and the amount paid by Medicare.

Bed disability days The days when an individual is kept in bed either all or most of the day due to illness or injury. Includes those work-loss and school-loss days actually spent in bed.

Benefit Under an employee benefit plan, a benefit is any form of payment (pension, medical or otherwise) that is due to a plan participant or beneficiary.

Blanket Contract Provision of a health insurance contract that provides benefits to those members of a class not individually identified. This could be used, for example, as an employee travel policy.

Board certified Indicates a physician who has passed an examination given by a medical specialty board and who has been certified as a specialist in that field of practice.

Cafeteria plan A plan in which participants may choose among two or more benefits containing taxable or nontaxable compensation elements, i.e. cash or “qualified benefits.” Participants may choose qualified benefits by electing not to receive taxable cash compensation or currently taxable benefits treated as cash.

Capitation Financial arrangement between an employer and a health care provider in which the former pays a fixed, usually monthly amount for all services rendered to a beneficiary and the latter assumes risk for service costs in excess of those amounts.

Carve-Out This entails those health benefit plan features that provide a distinct type of care. Such services would include mental health and substance abuse.

Case management The process through which covered persons with specific health needs are identified and counseled to achieve the most appropriate levels of service utilization and optimum treatment outcomes.

Certified Home Health Agency (CHHA) A public or private organization specializes in providing skilled nursing services, therapeutic services as physical therapy, and home health aide services. A patient must receive from a certified home health agency in order for Medicare or aid to cover payment for them. To be certified, a home health agency meet certain Medicaid and Medicare conditions of participation before receive payment from these programs. Among other conditions, certification requires an agency's compliance with patients' rights and with state and federal law.

CHAMPUS The Civilian Health and Medical Program of the Uniformed Services. Provides insurance coverage for armed forces personnel who are receiving care from a nonmilitary facility.

Claim A statement of health care services for a patient that is submitted to a benefits plan for payment.

Closed Panel This is utilized when patients eligible for health services can receive those services only through a limited number of providers.

COBRA Consolidated Omnibus Budget Reconciliation Act. 1985 law that requires employers to offer continued health insurance coverage to terminated employees and their beneficiaries, restricted the definition of insured termination for purposes of the Pension Benefit Guaranty Corp. and raised the employer’ s annual PBGC premium rate.

Coinsurance A form of cost-sharing in which the insured individual is responsible for a fixed percentage of losses covered by the policy. Hence, the insured individual and the insurer share expenses.

Community Rating Used by most HMOs, this is a practice of billing for insurance costs on the basis of the average claims experience for the general population instead of a particular employer.

Comprehensive Major Medical Coverage A plan that brings together the protection of a basic policy with a major medical policy, usually with a low deductible, coinsurance and excessive maximum benefits.

Concurrent Review A procedure by which hospital admissions for elective and emergency treatment are certified at the time of service and by which continued stays are confirmed for medical necessity and level of care.

Continued Stay Review (CSR) A utilization review that determines the necessity of continuation of a patient's stay at a hospital.

Continuing Care Retirement Community ( CCRC) This type of housing alternative sometimes called a life care community, generally requires that individuals be able to live independently upon becoming a resident of the unity. As a resident begins to need more assistance, specific additional es are made available. Most CCRCs offer three basic levels of housing as-needed basis: fully independent living, assisted living (personal care services), and skilled nursing care. Generally, a CCRC will charge an entrance fee as well as a monthly payment for its services

Conversion Privilege An individual’s right to transfer a group health or life insurance policy to an individual policy if the individual is no longer a member of the group.

Coordination of benefits Occurs when an individual is covered by more than one group medical program and payments must be coordinated to avoid duplication of benefits.

Copayments A fixed cost-sharing method of payment for charges from hospitals, physicians and pharmacy providers.

Core Benefits - The basic components of a health care plan, typically major medical and hospitalization benefits. Traditional non-core benefits such as dental and vision may complement the core benefits..

Cost Sharing This calls for employees to pay a portion of the cost of health services, sharing costs with employers. Forms of cost sharing include deductibles, copayments and coinsurance.

Covered Employee An individual who actively participates in an employer-sponsored health plan.

Covered Expenses Hospital, medical and associated costs incurred by insured participants that are eligible for reimbursement.

CPT codes Current procedural terminology. List of medical services assigned five-digit codes that have become the standard reference for billing and reporting.

Creditable Coverage With respect to HIPAA guidelines, this is health care coverage used to condense preexisting condition exclusion periods.

Credited Service A length of employment prior to or subsequent to the effective plan date that is recognized as service for plan purposes. This would include such issues as determination of benefit amounts, benefits entitlement and/or vesting.

Current Procedural Terminology (CPT) List of medical services assigned five-digit codes that have become the standard reference for billing and reporting.

Deductible Fixed amount for insured medical services that must be paid by the beneficiary prior to any claims reimbursement by the benefit plan.

Diagnosis Related Group (DRG) This is a prospective payment system used by Medicare to reimburse acute care hospitals. Under this system, a standard flat rate per hospital admission is prospectively established by and paid for by Medicare regardless of the hospital's cost of providing that care. Patients' illnesses or injuries are classified according to a list of 490 DRGs. Each DRG is assigned a numerical value, such as a stated dollar amount for a stroke.

Disability A condition, such as sickness or injury, that results in an insured person being unable to perform his or her normal job duties.

Disability Income Insurance Health insurance that includes intermittent payments of a percentage of income lost due to an insured individual’s inability to work. Disease management An information-based process involving the continuous improvement of value in all aspects of care (prevention, treatment and management) throughout the continuum of health care delivery.

Do Not Resuscitate order (DNR) An order by an attending physician, patient consent (or possibly, by surrogate consent) that directs hospital personnel not to revive the patient if cardiopulmonary arrest occurs.

Drug Formulary A list of prescription drugs covered under a benefit plan, which are permitted for use for certain treatments and distributed via pharmacies to plan members.

Drug utilization review A system for analyzing physician prescribing patterns or targeted drug use intended to determine and influence appropriate treatment.

Duplication of Benefits This occurs through the overlapping of two or more health plans for the same insured individual, typically as the result of contracts with insurance companies, service organizations or prepayment plans.

Durable Medical Equipment(DME) The rental or purchase of durable medical equipment for use in a patient's home is paid for under Medicare Part B, subject to a 20-percent coinsurance payment by the patient.

End Stage Renal Disease (ESRD) Kidney disease that is severe enough to require lifetime dialysis or a kidney transplant. ESRD patients are eligible for Medicare and may be eligible for Social Security payments if found to be disabled.

Exclusive provider organization A health care plan that covers only the services of designated providers.

Exclusive Provider Organization (EPO) An EPO is a variant type of an HMO and provides an exclusive hospital and physician network from which a member must obtain health care services. A member who selects a hospital or physician from outside the network bears the entire cost of such services.

Experience rating A health insurance plan that bases premiums on the past cost experience of the enrolled group.

Explanation of Medicare Benefits (EOMB) A notice from the Medicare insurance carrier informing the patient how much it has paid for a service covered by Medicare Part B, the services covered and charges approved. For services for which a doctor or other provider has taken assignment, the carrier pays the doctor or other provider directly. For unassigned services, the carrier pays the patient, and he or she is responsible for paying the provider.

Fee-for-service A traditional reimbursement in which a health care provider receives a payment equal to their billed charge for each unit of service.

Firewall protections Safeguards established to protect pricing information of pharmacy benefit management companies from their competitors or from drug manufacturers. Also, computer software protections against data access by unauthorized persons.

Flexible benefit plan Sometimes referred to as a “cafeteria” plan, a qualified arrangement that lets beneficiaries choose from among a combination of taxable and non-taxed forms of compensation, such as health insurance, 401(k) plan contributions, dependent care or vacation days.

Gatekeeper Typically in an HMO or similar managed care plan, a primary care provider who serves as the patient’ s entry point to the system and often controls patient access to physician specialists.

Generic drug A prescription drug that is chemically equivalent to a brand-name product with an expired patent, dispensed under its generic chemical name. Generally less expensive than branded products, pharmacy benefit plans often measure the success of cost-cutting techniques by monitoring substitution of generics for brand names ("generic fill rate").

HCFA Health Care Financing Administration. The federal agency, within the Department of Health and Human Services, that administers Medicare and oversees state administration of Medicaid.

Health Insuring Organization (HIO). HI0s are Medicaid managed care organizations that pay for the services of subcontracting providers and assume all financial risk in exchange for a premium.

HMO - Health Maintenance Organization A prepaid managed medical plan that arranges to provide specified services to enrolled members through designated hospitals and doctors for a fixed premium per person. Model types such as group, network, staff and independent practice association refer to the contractual relationship between the plan and its providers.

Hospice A program or facility that provides palliative care and support for the terminally ill.

Indemnity plan A health insurance program that provides specific cash reimbursements for covered services. Payments may be made directly to the patient or assigned to a provider.

Independent Practice Association (IPA). One of three models into which traditional HMOs are classified. In contrast to staff and group models, this model is an HMO with which an organization of physicians, or an IPA, contracts for only a portion of their practices. Physicians in the IPA provide care for the HMO's enrollees at a capitated rate or fee-for-service rate paid to the IPA, which in turn pays the participating physicians. The physicians work in their own settings

Instrumental Activity of Daily Living (IADL) These are activities ancillary to activities of daily living. The term includes light housework, preparing meals, shopping, using the telephone, keeping track of money or bills, and the taking of medicines. Services to assist with these activities are not covered by Medicare.

Intermediate Care Facility (ICF). A medical facility previously recognized under the Medicaid program and licensed under state law to provide, on a regular basis, health care services to residents who do not require the degree of care provided by a hospital or a skilled nursing facility (SNF), but who do require health services beyond just board and lodging that can be made available through an institutional facility.

Large case management Management of catastrophic illnesses.

Length of stay Number of days a plan member spends as a hospital inpatient. LOS is often mentioned as an indicator or quality and/or cost efficiency when assessing how a facility treats patients with a given condition.

Long term care (LTC) Assistance and care for persons with chronic, often deteriorating health conditions and those having difficulty with activities of daily living.

Long term disability Disability preventing an individual from continuing in an occupation for which he/she was trained or educated, generally of two years or more in duration.

Long-Term Care Insurance (LTCI) In order to help people protect against the high cost of long-term care either in a nursing home or at home, the insurance industry in the 1980s began to offer long-term care insurance. Since neither Medicare, Medicare supplemental insurance, nor private health insurance are intended to cover chronic conditions or long-term care, especially custodial care, LTCI policies were created to fill this gap. Federal legislation allows a portion of LTCI premiums to be tax deductible.In order to help people protect against the high cost of long-term care either in a nursing home or at home, the insurance industry in the 1980s began to offer long-term care insurance. Since neither Medicare, Medicare supplemental insurance, nor private health insurance are intended to cover chronic conditions or long-term care, especially custodial care, LTCI policies were created to fill this gap. Federal legislation allows a portion of LTCI premiums to be tax deductible.

Management Services Organization (MSO) An MSO links one or more medical groups or physicians together with a hospital which is usually a wholly owned for-profit subsidiary of a hospital/physician joint venture. Through utilization of an MSO, many individual physicians or small physician groups re able to access managed care plans.

Medical Savings Account (MSA) The general concept of a medical savings account is for an employer, or the government in the case of Medicare, to enable an insured individual to obtain and pay for a high deductible catastrophic health insurance policy. The employer or the government would pay a fixed premium to the catastrophic insurance company, and the insured individual would share the cost of the premium. The difference between what the employer or government would customarily pay for traditional coverage, and the premium of the catastrophic health insurance coverage would be put into an individual's MSA for his or her qualified medical expenses.The Health Insurance Portability and Accountability Act of 1996 created a four-year experimental MSA program, effective January 1, 1997, allowing a maximum of 750,000 individuals in businesses with fifty or fewer employees as well as self-employed and uninsured individuals to receive favorable tax treatment for the MSA.

Medically necessary Health care service or treatment ordered by a provider that can not be omitted without harming the patient’ s health status, as judged against generally accepted standards of medical practice.

Morbidity Incidence and severity of illness in a given population.

Outcomes measurement Processes used to track a patient’ s clinical progress and responses to various treatments, for purposes of identifying those treatment pathways to lead to the most desirable outcome as measured by morbidity and functional status.

Participating provider A hospital, physician, pharmacy or other provider to agrees to serve plan members under terms of a sponsoring network such as an HMO or PPO.

Pharmacy and Therapeutics committee (P&T) Panel of doctors from various medical specialties who advise a health plan on use of prescription drugs. Typically a focal point of decisions about which drugs will be included on an open or closed formulary and covered by reimbursement.

Pharmacy benefit manager (PBM) Service vendors that contract to manage an employer’ s prescription drug benefit. Services typically include development of formularies and drug utilization review.

POS Point of service plan. A health plan that allows members to choose to receive services from a participating or nonparticipating network provider, usually with a financial disincentive for going outside the network. More of a product than an organization, POS can be offered by HMOs, PPOs or self-insured employers.

PPO Preferred Provider Organization. A managed health care plan in which a network of providers agrees to serve a group of employees in a fee-for-service arrangement, usually at discounted rates based on volume purchasing power.

Prospective payment system Medicare reimbursement system established in 1983 which sets hospital rates before delivery of service. Payments are based on costs occurring within statistical norms around treatment of categories of illness, knows as diagnosis related groups (DRGs).

Reinsurance Also commonly known as stop-loss, reinsurance is coverage purchased by a self-funded employer, at-risk managed care plan, or another insurance company to protect against a payout of claims in excess of a designated limit such as $25,000 or $50,000.

Secondary payer In a coordination of benefits, an insurer whose coverage is subordinate to that of another company, plan or program which is rightfully the primary payer. Often mentioned in the context of Medicare’ s efforts to recoup payments made as primary payer when other primary, duplicate coverage existed.

Self-funding/Self insurance A health care benefit financing technique in which an employer pays claims out of an internally funded pool, as permitted under ERISA. Self-funded companies might or might not also be self-administered, meaning they perform the administrative tasks associated with the benefit as opposed to purchasing such services from an outside firm.

Short-term disability (STD) Period of disability precluding normal occupational duties, generally defined as lasting less than two years.

Subrogation The ability of an insurance company to recover from a third party all or part of benefits paid to an insured.

Upcoding Practice of health care providers who seek to maximize reimbursement by coding a treated illness as more serious than presented.

Workers’ compensation State-mandated benefits to workers disabled by an occupational accident or illness. Components include first-dollar coverage for medical services and wage replacement.