Glossary Of Terms

Activities of Daily Living (ADL): A list of activities, normally including mobility, dressing, bathing, toileting, transferring, and eating which are used to assess degree of impairment and determine eligibility for some types of insurance benefits.

Adverse Selection: The tendency of an individual to recognize his or her health status in selecting the option under an insurance plan that tends to be most favorable to him or her (and more costly to the plan.) In insurance usage, a person with an impaired heath status or with expected medical care needs applies for insurance coverage financially favorable to himself or herself and detrimental to the insurance company.

Attachment Point: The dollar amount of loss where an insurance company begins to provide coverage.

Cafeteria Plan: Generic term for an employee benefit plan that allows to employees to select among the various group life, medical expense, disability, dental, and other plans that best meet their specific needs.

Capitation: A method of payment for health services in which a physician or hospital is paid a fixed, per capita amount for each person served regardless of the actual number of services provided to each person.

COBRA: Federal law requiring that workers who end employment for specified reasons have the option of purchasing group insurance through the employer for a limited period of coverage (usually 18 months, but in some cases, 29 or 36 months).

Coinsurance: A policy provision frequently found in medical insurance, by which the insured person and the insurer share the covered losses under a policy in a specified ration, i.e., 80 percent paid by the insurer and 20 percent by the insured.

Contributory: A group of insurance plan issued to an employer under which both the employer and the employee contribute to the cost of the plan. Generally 75 percent of the eligible employees must be insured.

Coordination of Benefits (COB): Provisions and procedures used by insurers to avoid duplicate payments when a person is covered by more than one policy.

Co-payment: A type of cost sharing where insured persons pay a specific flat amount per incident of service.

Deductible: An amount the insured person must pay before the insurance payments for covered services begin.

Disability Income Insurance: A form of health insurance that provides periodic payments to replace income when an insured person is unable to work as a result of illness or accident.

Exclusion: A procedure or condition, which an insurance policy does not cover.

Experience: A term used to describe the relationship, usually expressed as a percent or ratio, of the premium to claims for a plan, coverage, or benefits for a stated time period.

Explanation of Benefits (EOB): A statement from an insurance company showing which payments have been made on a claim.

Fee for Service: Method of billing for health services under which a health provider charges separately for each service rendered.

Grace Period: A specified period after a premium is due on an insurance policy during which the policyholder may still make a payment (commonly 30 days.) The policy remains in effect during the grace period.

Health Insurance Portability & Accountability Act (HIPAA): Federal law that guarantees health care plan eligibility for people who change jobs, if the new employer offers group insurance.

Health Maintenance Organization (HMO):Managed care health plan that uses an established network of healthcare providers- doctors, specialists, hospitals, laboratories, and pharmacies in which provider network participants have agreed with the insurance carrier to provide healthcare services for a negotiated price.

Generally, the only out-of-pocket expense for the patient is small co-payment made at the time the service is received. In an HMO, the patient must choose a Primary Care Physician (PCP) who provides most services and must authorize the use of other services, such as hospitalization, referrals to specialists, and testing.

Health Savings Account (HSA): An individually owned savings account, similar to an IRA or 401(k) retirement plan, except that funds are used to pay for healthcare costs. Typically an underlying High Deductible Health Plan is used in conjunction with an HSA.

Health Reimbursement Account (HRA): An employer owned savings account similar to an HSA except that the employer funds and controls the account which is used to pay for healthcare costs.

Lapse: Termination of a policy upon the policyholder’s failure to pay the premium within the time required.

Long Term Care (LTC): The medical and social care given to one who has severe chronic impairment over a long period of time. Designed to provide reimbursement for the loss of two “Activities of Daily Living”.

Loss Ratio: The dollar amount an insurer pays in claims compared to the amount it collects in premiums. Loss ratio is usually shown as a percentage of claims for every dollar collected.

Managed Care: Control of utilization, quality and claims using a variety of current cost containment methods. The goal is to deliver cost effective healthcare without sacrificing quality or access.

Medically Necessary: Treatments or services an insurance policy will pay for as defined in the contract.

Medical Savings Account (MSA): A special kind of account that is eligible for a tax credit when combined with catastrophic care insurance that has high deductibles.

Open Access Point of Service (POS): Similar plan design to a Point of Services (See POS) with the exception that employees have direct access on a non-referred basis to all specialists within the network.

Point of Service (POS): As in an HMO plan, the patient must select a primary care physician (PCP.) However, the covered person may choose at the time he or she seeks medical services whether to use a network or non-network provider. Network providers accept pre-negotiated fees from insurance carriers as payment for various services, with patient responsibilities for a co-payment at the time the service is provided. If the patient uses a non-network provider, he or she must satisfy the deductible and coinsurance requirements and therefore assume a larger portion of the cost.

Pre-Existing Conditions (Pre-Ex): Health conditions or problems that existed before health insurance was purchased.

Preferred Provider Organization (PPO): A PPO incorporates a network of participating healthcare providers. However, there is no primary care physician (PCP) to coordinate care, and patients may seek care from any provider in the network without a referral. Network providers accept pre-negotiated fees from insurance carriers as payment for various services, with the patient responsible for either a co-payment, or deductible and coinsurance, depending upon the plan design. If the patient chooses a non-network provider, he or she will assume a larger portion of the cost.

Pre-Certification: A requirement that you obtain the insurance company’s approval before a medical service is provided. If you fail to follow the pre-certification procedures, the company may reduce or deny claim payment.

Traditional Health Plan: Medical plan with deductibles and coinsurance and no managed care network. Typically used by public sector employers. There are no primary care physicians to select, or referrals required as benefits are adjusted in accordance with Usual and Customary Rates (UCR).

Underwriting: The process by which an insurer establishes and assumes risk. An insurance company is underwriting when it agrees to insure you because you are healthy or rejects your application because you have a history of health problems.

Usual, Customary, and Reasonable (UCR):The dollar amount a company determines to be appropriate for services reimbursed under a policy or plan, generally, payment for health care services.  Each company develops its own UCR.