NASE News

Key Health Insurance Terms and Definitions

Accreditation – The stamp of approval for a health plan or hospital that meets predetermined standards. Two organizations that accredit managed care plans are the National Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation of Health Care Organizations (JCAHO). JCAHO also accredits hospitals and clinics. While NCQA accredits HMO-based health plans, the Utilization Review Accreditation Commission, or URAC, is the leading organization that accredits PPO-based plans. (See Health Insurance Basics for Micro-Businesses.)

Activities of Daily Living (ADL) – Your daily habits such as bathing, dressing, and eating. ADLs are used as an assessment tool to determine whether you can function at home after a hospitalization for a serious injury or illness.

Acute Care – Treatment for an immediate and severe illness, for the subsequent treatment of injuries related to an accident or other trauma, or recovery from surgery. You receive acute care for only a short time, usually in a hospital.

Ambulatory Care – Health services provided to you outside of the hospital, also known as “outpatient care.” Ambulatory care centers, hospital outpatient departments, physicians' offices, and home health care services all fall under this heading, provided that you don’t stay overnight while receiving treatment.

Ancillary Services – Supplemental services, including laboratory, radiology, physical therapy, and inhalation therapy that are provided to you along with medical or hospital care.

Appeal – When you ask your health insurer to reconsider a decision, such as a claim or treatment denial. (See Where to Go When You Need Help.)

Balance Billing – The practice of billing you for the fee amount remaining after your health insurer’s payment.

Behavioral Health – Includes mental health, psychiatric, marriage and family counseling, addictions treatment, and substance abuse. Services can be provided by a wide variety of providers, including social workers, counselors, psychiatrist, psychologists, neurologists and family practice physicians.

Benefit Limitations – Any provision which restricts coverage, regardless of medical necessity. Limitations are often expressed in terms of dollar amounts, length of stay, diagnosis, or treatment descriptions. Make sure you receive and read the fine print in your Evidence of Coverage or Summary Plan Description that comes with your policy.

Benefit Package – The services available to you through your health plan. The package will detail costs, limitations on the amounts of services, and annual or lifetime spending limits.

Birthday Rule – A method of determining which parent’s medical coverage will be primary for dependent children: the parent whose birthday falls earliest in the year will be considered as having the primary plan.

Board Certified – A physician who has passed a written and oral examination given by a medical specialty board and who has been certified as a specialist in that area.

Board Eligible – A physician who has graduated from an approved medical school and is eligible to take the specialty board examination. Some HMOs accept board eligibility as equivalent to board certification.

Cafeteria Plan – An arrangement under which you may select your own benefits. Sometimes you are offered varying benefit plans or add-ons provided through the same insurer, other times this refers to plans offered by different insurers.

Carrier – Any licensed organization, which underwrites or administers your life, health, or other insurance programs.

Carve Out – A health care delivery and financing arrangement in which certain services are administered and funded separately from the general health care services. Common carve outs include such services as psychiatric, rehabilitation, chemical dependency, and ambulatory services. HMOs and insurers use this strategy when they don’t have in-house expertise related to the service that they have "carved out."

Case Management – Method designed to monitor and coordinate your treatment when you have a specific diagnosis, such as diabetes or coronary artery disease, or if you require high-cost services. Case management aims to ensure that you receive the appropriate level of services delivered in the most cost-effective manner in order to achieve the best outcome.

Case Manager – A nurse or social worker who works with you, your doctor, and your insurer to coordinate health care services and provide you with a plan of necessary and appropriate care.

Catastrophic Health Insurance – Health insurance that protects you against the high cost of treating severe injuries or lengthy illnesses. These policies usually cover some, if not all, of your medical expenses above an amount that is the responsibility of another insurance policy up to a maximum limit of liability.

Centers for Medicare and Medicaid Services (CMS) – The Centers for Medicare & Medicaid Services (CMS) is a Federal agency within the U.S. Department of Health and Human Services. CMS adminsters Medicare, Medicaid, and the State Children's Health Insurance Program (SCHIP).

Certificate of Coverage (COC) – Outlines the terms of your coverage and benefits.

Centers of Excellence – Hospitals that specialize in treating particular illnesses or performing certain procedures, such as cancer or organ transplants.

Charges – The published prices of services supplied by a provider or facility. There is often a wide disparity between the amount your doctor or hospital charges you and the amount your insurer actually pays. This is because your insurance company has negotiated a lower rate with the provider or facility which is often 40 percent to 60 percent lower than the published rate. This is why you’re at such a huge disadvantage if you’re trying to pay for health care out of your own pocket.

Chronic Care – Long term care of persistent diseases or conditions such as asthma or low back pain. Chronic care promotes self-care to improve your state of health and prevent further loss of function.

Claim – Your request (or your provider’s) submitted to your insurer to pay for health care services.

Claims Review – The process used by insurers to determine whether the services you’ve received are covered under your policy.

Closed Access – A “gatekeeper” health plan that requires you to seek treatment only from providers contracted with that plan.

Closed Panel – Medical services delivered in an HMO-owned health center or satellite clinic by physicians who belong to a specially formed, but legally separate, medical group that only serves the HMO.

Coding – A mechanism for consistently identifying and defining health care services in order to ease billing procedures and prevent fraud. The International Classification of Diseases (ICD) is the official system of assigning codes to diagnoses and procedures associated with inpatient hospital stays, while Current Procedural Terminology (CPT) codes identify outpatient services.

Coinsurance – The amount shared by you and your insurer for covered services after you have met your deductible. This is expressed in a ratio, typically 80/20 (80 percent paid by your insurer and 20 percent paid by you.)

Comorbid Condition – A medical condition that exists side-by-side with a principal diagnosis at the time of a hospital admission that is expected to increase your length of stay by at least one day.

Comprehensive Major Medical Insurance – A policy which provides you with a high level of protection against routine and major medical expenses. It is generally characterized by a low deductible, co-insurance, and a plan fairly “rich” in benefits.

Concurrent Review – Review of a procedure or hospital admission done by health care professional (usually a nurse) other than the one providing your care. Concurrent review is conducted during a hospital stay to determine the appropriateness of the confinement and the medical necessity for a continued stay.

Confidentiality – The protection of your personal information as required by state or federal law or by policy of your health care provider.

Consolidated Omnibus Budget Reconciliation Act (COBRA) – Federal law that continues your employer-sponsored health care coverage for a certain amount of time after you lose your job.

Conversion – In group health insurance, the opportunity given to you and any of your covered dependents to change group insurance to some form of individual insurance, without medical examination upon the loss of your group insurance.

Coordination of Benefits (COB) – A method used by insurers to avoid duplicate payments under more than one insurance policy. A coordination of benefits clause in either policy prevents double payment by making one insurer the primary payer, and assuring that not more than 100 percent of the cost is covered.

Copay – Unlike co-insurance, which is based on a percentage of the cost, a copay is a flat fee paid for a specific service, such as $15 for an office visit. This cost-sharing arrangement is typical of an HMO-based plan. (See Health Insurance Basics for Micro-Businesses.)

Cosmetic Procedure – Treatment, such as a facelift, which improve your appearance but is not medically necessary.

Cost Sharing – When you must pay some of your health care costs out of your own pocket in order to receive care. This includes deductibles, coinsurance, and copayments, but not your premium.

Covered Benefit – A medically necessary service that is specifically provided for under the provisions of your health plan’s Evidence of Coverage. A covered benefit must always be medically necessary, but not every medically necessary service is a covered benefit. Always check the fine print in your health insurance policy.

Credentialing – Process by which a potential or existing provider must meet certain standards in order to begin or continue participation in a health care plan or in a hospital medical staff organization. Credentialing helps determine the quality of personnel by providing standards for evaluating education, training, and competency.

Deductible – The amount you must pay before your health insurance benefits kick in. You must meet your deductible each year.

Dependent – Someone other than yourself who is covered under your health plan. This may be a spouse, child, unmarried partner, or, in rare instances, a parent.

Disallowance – When an insurer declines to pay for all or part of your claim.

Discharge Planning – When after-care services are determined for discharge from the hospital.

Durable Medical Equipment (DME) – Medical equipment, such as a walker, that you own or rent to assist in your home treatment or rehabilitation.

Electronic Medical Record (EMR) – A computer-based record containing your personal health care information. This technology, when fully developed, will meet provider needs for real-time data access and evaluation in medical care.

Elimination Period – The waiting period in a health insurance policy.

Emergency Medical Treatment and Labor Act (EMTALA) – This legislation requires hospitals to provide you with emergency treatment, regardless of your insurance status or ability to pay.

Employee Assistance Program (EAP) – A service, plan or set of benefits that are designed for personal or family problems, including mental health, substance abuse, gambling addiction, marital problems, parenting problems, emotional problems, or financial pressures. EAP began with a primary drug and alcohol focus with an emphasis on rehabilitating valued employees rather than terminating them for their substance abuse problems.

Employee Retirement Income Security Act of 1974 (ERISA) – This legislation regulates the majority of private pension and welfare group benefit plans in the U.S. ERISA exempts most large self-funded plans from State regulation and, hence, from any reform activities undertaken at the state level.

Evidence or Explanation of Coverage (EOC) – The booklet provided to you by your insurer which summarizes the benefits available to you under your plan.

Evidence of Insurability – Proof of a person's physical condition that affects acceptability for insurance or a health care contract.

Exclusions – Conditions or situations not covered under your health plan. Some common exclusions include cosmetic surgery, dental expenses, and infertility treatment.

Explanation of Benefits (EOB) – The statement sent to you that explains the services provided, the amount you or your insurer was billed, any payments that were made, and the amount you owe.

First Dollar Coverage – Insurance coverage with no “front-end” deductible. Your coverage begins immediately for any covered benefit. It is common for many plans to provide first dollar coverage for preventive care such as annual physical exams and immunizations for children.

Flexible Spending Account (FSA) – An IRS-sanctioned plan that allows you to use pre-tax dollars set aside from your salary to pay for any unreimbursed health care or dependent care services.

Formulary – List of prescription drugs approved by a health plan. Formularies are either "closed," including only certain drugs, or "open," including all drugs. Both types typically impose a cost scale requiring you to pay more for brand name drugs, rather than generic.

Gatekeeper – Usually refers to your primary care physician (PCP) who oversees and coordinates all aspects of your health care. In many managed care plans, your PCP must preauthorize a visit to a specialist, unless there is an emergency.

Guaranteed Issue – Requirement that health plans offer coverage to all businesses during some period each year.

Grace Period – Period past the due date of a premium during which your coverage may not be cancelled.

Grievance Procedures – The process by which you can air complaints and/or appeal a treatment denial.

Group Insurance – A single contract issued by your employer, or other group entity, that covers many individuals.

Health Employer Data and Information Set (HEDIS) – A set of HMO performance measures that are maintained by the National Committee for Quality Assurance. HEDIS data is collected annually and provides an informational resource for consumers on issues of health plan quality.

Health Insurance Portability and Accountability Act of 1996 (HIPAA) – Primarily affecting the small group and individual health insurance markets, this legislation was designed to allow the portability of health insurance between jobs. In addition, it required the creation of a federal law to protect personally identifiable health information.

Hold Harmless Clause – A clause frequently found in managed care contracts whereby the parties agree to indemnify each other for malpractice or corporate malfeasance if either is found to be liable. It may also refer to language that prohibits your doctor from billing you if your managed care company goes bankrupt.

Hospice – Facility or program providing care for the terminally ill.

Identification Card – A card given to you and your dependents which identifies benefit eligibility.

Informed Consent – Refers to requirements that health care providers and researchers explain the purposes, risks, benefits, confidentiality protections, and other relevant aspects of medical care, a specific procedure, or participation in medical research. Informed consent is also required for the authorization of release or disclosure of individually identifiable health care information under HIPAA.

Inpatient Care – Care given to a registered bed patient in a hospital, nursing home, or other medical institution.

Lifetime Limit – A cap on the benefits paid under a policy. Many policies have a lifetime limit of $1 million, which means that the insurer agrees to cover up to $1 million in covered services over the life of the policy.

Mandated Benefits – Benefits that health plans are required by law to provide.

Medical Information Bureau (MIB) – A data pool service that stores information on the health histories of persons who have applied for insurance in the past. Most Life and Health insurers subscribe to this bureau to get more complete underwriting information on health insurance applicants.

Medically Necessary – Services or supplies which are necessary for the symptoms, diagnosis, or treatment of a medical condition. They meet the standards of appropriate medical practice within the medical community in your service area and are not primarily carried out for your convenience or your doctor’s.

Mental Health Parity – Legislation designed to make sure that insurers provide the same level of coverage for mental health treatment as that offered for medical and surgical treatments.

National Practitioner Data Bank (NPBD) – The federal government maintains this computerized data bank which contains information on physicians against whom malpractice claims have been paid or disciplinary actions have been taken. Many regulatory agencies require hospitals to use the NPDB prior to credentialing physicians at their facilities.

Network – An affiliation of providers through formal and informal contracts and agreements.

Open Access – Open access means that you can visit any participating network provider without a referral.

Open Enrollment Period – The period during which you may elect to enroll in, or transfer between, available programs providing health care coverage, without evidence of insurability or waiting periods. Under an open enrollment requirement, a plan must accept all who apply during a specific period each year.

Out-of-Network Benefits – Under most HMO-based plans, you are not reimbursed for any services provided by a hospital or doctor who does not participate in the plan’s network. With PPO-based plans, there may be a provision for reimbursement of "out-of-network" providers, but this usually involves higher copays and/or lower reimbursements.

Out-of-Network Provider – A health care provider with whom an insurer does not have a contract. You must pay either part or all of the costs of care from an out-of-network provider, depending on the provisions of your health plan.

Out-of-Pocket Expenses – Your portion of health care costs that are not reimbursed by the insurer, including deductibles, co-payments, and co-insurance.

Out-of-Pocket Limit – A cap placed on your out-of-pocket costs, after which benefits increase to provide full coverage for the rest of the year. It is a stated dollar amount set by your insurer, in addition to regular premiums.

Outpatient Care – Care given to a person who is not hospitalized. Many surgeries and treatments are now provided on an outpatient basis and don’t require an overnight stay.

Participating Physician – A physician in the insurer’s service area who has entered into a contract.

Plan Document – The document that contains all of the provisions, conditions, and terms of a pension, health, or welfare plan. This document may be written in technical terms and is different from a summary plan description (SPD) that, under ERISA, must be written in language that can be understood the average plan participant. (See ERISA above.)

Portability – A requirement that health plans must guarantee you continuous coverage without waiting periods if you’re moving between plans. Your old health plan must give you a certificate of prior coverage that you pass along to your new plan to guarantee that the new plan cannot exclude any of your pre-existing conditions. (See HIPAA above.)

Pre-Certification (Pre-authorization) – Review of “need” for care before admission. This review determines whether or not your insurer will pay for the service.

Pre-existing Condition – A medical condition that you developed prior to applying for, or receiving, a health insurance policy that may trigger a limitation of your benefits. Some policies can exclude coverage of such conditions, often indefinitely. New statutes in 1997 and 1998 altered the freedom other health plans have enjoyed in setting pre-existing time limits. (See HIPAA above.)

Preventive Care – Health care that emphasizes prevention, early detection, and early treatment, thereby ultimately reducing health care costs. Health care that focuses on keeping you well in addition to helping you when you are sick.

Primary Care – Basic or general health care given by general practitioners, family practitioners, internists, obstetricians, and pediatricians with referral to secondary care specialists, as necessary.

Protected Health Information – Under HIPAA, this refers to individually identifiable health information transmitted or maintained in any form. (See HIPAA above.)

Reasonable and Customary Charges – These charges are those which are most often made by a provider for services rendered in a particular geographic area.

Referral – Permission from your doctor to consult with another physician or hospital.

Report Card – An accounting of the quality of services, compared among providers over time. You can use report cards to choose a health plan or doctor, or check up on the overall program effectiveness of your current plan or provider.

Risk Pool – Legislatively created programs that group individuals together who cannot secure coverage in the private sector.

Second Surgical Opinion – A cost containment technique to help you and your insurer determine whether a recommended procedure is necessary, or whether an alternative method of treatment could accomplish the same result. Some health policies require a second surgical opinion before specific procedures will be covered.

Section 125 Plan – A plan which provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars. (See Flexible Spending Accounts above.)

Self-Funded Plan – Plan that is funded by the employer rather than an insurer.

State Children's Health Insurance Program (SCHIP) – Created in 1997 by the Balanced Budget Act, SCHIP gave each state permission to offer health insurance for children, up to age 19, who are not already insured. SCHIP is a state-administered program and each state sets its own guidelines regarding eligibility and services.

Third Party Administrator (TPA) - An independent organization that provides administrative services including claims processing and underwriting for other entities, such as insurance companies or employers.

Triage - The act of categorizing patients according to the severity of their health. Triage, most commonly used in emergency rooms, is designed to maximize the most efficient use of medical resources and personnel.

Utilization Review – A cost control mechanism by which the appropriateness, necessity, and quality of health care is monitored by both insurers and employers.

Waiting Periods – The length of time an individual must wait to become eligible for benefits for a specific condition after overall coverage has begun.

Wellness – In health care, wellness refers to preventive medicine and the associated lifestyle that promotes general well-being and reduces health care usage and costs.