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ARTICLE Health Insurance Terms

Common Medical and Insurance Terms

Do you ever feel like people in health care speak a different language? Well, in a lot of ways they do. A few basic definitions can help with navigating your insurance plan and finding the best ways to meet your health care needs.

A-E | F-J | K-O | P-T | U-Z

Ambulatory care

Health services delivered on an outpatient basis. A patient's treatment at a doctor's office or a surgical center without an overnight stay is considered ambulatory care; in-home treatment is not.

Authorization

The approval of care, such as hospitalization, from a health insurance company. Pre-authorization may be required before a patient is admitted or before a health insurance company will agree to pay for care given by a non-HMO provider.

Cafeteria plan

A flexible benefits plan offered by employers that generally includes a choice of two or more qualified benefits or the option of cash.

Capitation

A per-member monthly payment to a health care provider that covers contracted services. The amount is based on anticipated costs to the provider. This is an alternative to the fee-for-service arrangement.

Case management

When health care professionals, who are employed by a health insurance company, monitor and manage treatment and suggests alternatives to lengthy hospital stays. Case managers usually help patients with catastrophic disorders or who receive mental health services.

COBRA

COBRA refers to the Consolidated Omnibus Budget Reconciliation Act, which is Federal legislation that lets plan members who leave their jobs (voluntarily or involuntarily) continue to purchase health insurance through their employers for up to 18 months. It only applies for people who worked at a company with 20 or more employees.

Coinsurance

Coinsurance is a predetermined percentage of the total cost you pay as a health plan member for medical services, such as office visits, lab work and emergency room care.

Community rating

The rating methodology required of federally qualified HMOs. The HMO must obtain the same amount of money per member for all plan members. Community rating does, however, allow for variability by allowing the HMO to factor in differences for age, sex and industry factors, although they are not all necessarily allowed under state law.

Concurrent review

When hospitalization can't wait, a health insurance company reviews a patient's case within 24 hours of admission. The patient's condition is continually monitored to help determine if hospitalization is the best option.

Copayment

Copayment is the fee that you are responsible for paying as a member of a health insurance plan for health care services, such as office visits, emergency room care and lab work.

Coordination of benefits (COB)

When an individual has health insurance coverage from two or more sources, the National Association of Insurance Commissioners has established an agreement that determines which organization has primary responsibility for payment and which has secondary responsibility. This prevents double payment for the same service.

Cost sharing

There are several ways that a health care plans and its members share in paying the costs of health care. This may include the amount an employee pays into an employer's plan, annual deductibles and/or coinsurance.

Credentialing

The process of determining if physicians and other health care providers have the education and experience required to earn permission to provide care at a hospital or managed care organization.

Current Procedural Terminology (CPT)

A coding system developed by the American Medical Association to categorize different medical procedures, each represented by a five-digit code. The system is used frequently for billing purposes.

Deductible

A deductible is the fixed amount you pay out of pocket before a health insurance plan begins to cover health care costs.

Dual choice

A requirement that certain employers must offer a federally qualified HMO as an alternative to its traditional indemnity insurance plan.

Employee assistance program (EAP)

Employers often make EAPs available to employees who may need counseling or other forms of assistance to overcome and manage alcoholism, substance abuse, emotional or family problems.

Evidence-based medicine (EBM)

Evidence-based medicine means that doctors use experience with other patients and reputable clinical research to determine the most effective tests and treatments for their patients.

Exclusive provider organization (EPO)

A more rigid type of preferred provider organization (PPO) that requires members to use only designated providers or else they must relinquish reimbursement altogether. PPOs, in contrast, encourage members to use "preferred" providers by offering more generous reimbursement, but the plan still reimburses for non-preferred providers.

Experience rating

A method of determining premiums that adjusts a group's rate based on the demographic characteristics and utilization experience of that particular group as opposed to using averaged data for multiple groups.

Fee-for-service (FFS)

The traditional way to reimburse health care providers. Commonly used by conventional indemnity insurers. The physician is reimbursed according to the service performed and the patient is responsible for a pre-determined percentage of the fee, typically 20%.

Flexible spending accounts (FSAs)

With an FSA or transit account sponsored by your employer, you can set aside pre-tax dollars from your paycheck each year to pay for medical expenses, dependent care or commuter expenses. Unused funds do not carry over, so it's important to plan carefully. The IRS determines what expenses are covered. You can check out what expenses are covered by visiting the IRS website.

Formulary

The panel of drugs chosen by a hospital or managed care organization to treat patients. Drugs outside the formulary are not used except in specified circumstances.

Gatekeeper

An physician in the HMO network who coordinates a patient's care and who effectively controls costs by minimizing unnecessary services. Also called a primary care physician.

Group coverage

Group coverage can be part of a health and wellness plan. It is offered by an employer or other entity, such as a retiree association, to its members, such as employees, employees' families and retirees.

HIPAA

HIPAA refers to The Health Insurance Portability and Accountability Act of 1996, a piece of Federal legislation that allows people to qualify immediately for comparable health insurance coverage when they change their employment or relationships. It also protects the security and privacy of patients by restricting the use of medical information.

Health maintenance organization (HMO)

An organization that provides its voluntarily enrolled membership with access to comprehensive health care services for a prepaid fee. Health reimbursement accounts (HRAs)

Some employers set up HRAs and contribute to them to help you cover medical expenses you would normally cover yourself. Employers decide whether to let the remaining balance carry over to the next year.

Health savings accounts (HSAs)

An HSA, when paired with a high-deductible health plan, allows you to contribute pre-tax dollars from your paycheck to pay for current medical expenses, save for future medical expenses and grow your retirement savings. And the account is yours to keep even if you change employers or benefits.

High-deductible health plan

The IRS sets the guidelines for high-deductible health plans. For 2009 a high-deductible health plan is one that has:

  • A deductible of $1,150 for individuals and $2,300 for families
  • A maximum out-of-pocket cost of $5,800 for individuals and $11,600 for families

In-network

In-network refers to doctors or other health care providers that have agreed to provide services to a health plan's members at a negotiated rate. Plan members usually pay less when using an in-network provider because the cost to the health plan is lower.

Lifetime maximum benefit

The lifetime maximum benefit is the total amount a health plan will pay for your health care costs during your lifetime.

Member

Any individual or dependent who is enrolled in and covered by a managed health care plan.

Medicare Part A

The Medicare portion that covers expenses incurred in hospitals, extended care facilities, hospices, etc.

Medicare Part B

The Medicare portion that covers physicians' services and other types of care not covered under Part A.

Open enrollment

Open enrollment is the time period when employees or other eligible individuals can choose (or modify) employer-sponsored health care for the next calendar year. It usually occurs sometime between October and December each year, but can happen at any time of the year.

Out-of-pocket

Out-of-pocket refers to the amount of money you are required to pay for health care services. Some plans have out-of-pocket maximums, after which the plan pays 100% of a member's health care costs. Deductibles and copayments are examples of out-of-pocket costs.

Preferred provider organization (PPO)

When a group of medical care providers agrees to furnish services at negotiated fees in return for prompt payment and a guaranteed patient volume through a third-party. PPOs control costs by keeping fees down and curbing excessive services through utilization control.

Premium

A premium is the amount you pay each month to have health insurance plan coverage. If you get health coverage through your employer, the premium is usually deducted from your paycheck.

Primary care physician

A primary care physician is the doctor or other provider, such as a nurse practitioner, who is responsible for monitoring an individual's overall health care needs. Managed care plans often require that a member choose a primary care physician who refers them to specialists and other providers as needed.

Qualifying event

A qualifying event is when health plan members experience a major change in their life, such as a marriage, divorce, adoption or birth of a child. Such events make them eligible to change their employer-sponsored insurance coverage outside of the normal enrollment period.

Respite care

Temporary care provided in a patient's home to give the primary caregiver, usually a family member, time off from a demanding job.

Skilled nursing facility (SNF)

A facility, either part of a hospital or a separate nursing home, that provides inpatient services for persons requiring skilled nursing care.

Stop-loss insurance

Insurance that reimburses a plan, plan sponsor, or medical group/IPA for losses that exceed a certain limit. The limit is usually expressed as a percentage of expected claims or as a specified dollar amount.

Tertiary care

Specialized health care in a hospital setting for illnesses or conditions that often require costly investigation and treatment. Examples include cancer care, neurosurgery (brain surgery) and burn care.

Third-party administrator

A person or organization that provides certain administrative services to group benefits plans, such as an employer. Services may include processing premium payments, reviewing claims to ensure payment and proper utilization of health care services, maintaining employee eligibility records and negotiating with insurers that provide stop-loss insurance.

Triage

A term that originated on the battlefield, triage is the evaluation of the urgency and seriousness of a patient's condition. Evaluations help establish priorities for treating several patients who are in need of care.

Usual, customary and reasonable (UCR)

The maximum reimbursement a health insurance company will pay to a provider. The maximum is based on historical fee patterns. Also referred to as U&C.

Utilization review

A cost-control method used by some insurers and employers to evaluate the appropriateness, necessity and quality of health care services. For hospital stays a utilization review can include pre-admission certification, concurrent review with discharge, planning and retrospective review.