Glossary Of Terms

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Access: Right to enter or use health care services.

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.

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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.

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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.

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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.

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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.

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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.

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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).

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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

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American Compensation Service, Insurance Services, San Ramon, CA