Glossary of Terms
This list of words that are in common usage in discussions of healthcare topics is presented as an aid to understanding. It is limited by a number of factors:
- We can’t cover everything.
- The definitions are presented generally as the term applies to health insurance.
- It is said that a word never means the same thing twice; every context is different.
- In the insurance industry there is no agreement on the meaning of terms — what United Healthcare means when they use the word “deductible” may not be the same as what is meant by Blue Cross Blue Shield.
- Our sense of symmetry requires that every letter of the alphabet be represented so we added some non-insurance terms to fulfill this need.
Access: The relative ease or difficulty a patient encounters in seeking medical care. Access is increased by such factors as low co-pays, co-pays instead of deductibles, absence of a primary care gatekeeper and a large or unlimited selection of providers.
AFLAC: Originally known as American Family Life Assurance Company, this large international insurer pioneered and specializes in “Voluntary Products” or “Worksite Marketing”-supplemental insurance benefits usually paid for by the employee.
Agent: An authorized representative of an insurance company who sells and services insurance contracts. An agent must be licensed by the state and have a certificate of authority from an insurance company which he represents.
Broker: A broker is an insurance agent who works on behalf of the client and may be authorized to place business with a number of different insurers. The Templar Agency is a brokerage agency.
Blue Cross Blue Shield plans: Blue Cross Blue Shield plans were originally organized as non-profit healthcare service plans based on contracts between providers and the BCBS plan. As such, they were innovators who pioneered the concept of networks, rudimentary managed care and cost control through efficiency and tax savings. There was never a single nationwide BCBS plan, rather the system was licensed to various entities in many different locales. The modern BCBS companies more closely resemble other healthcare organizations; some are owned by for-profit corporations.
Claim: A claim is a contractual (policy) obligation on the part of an insurance company or healthcare company to cover the expense of medical services or supplies received by the insured.
COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985. While the COBRA law addresses several aspects of healthcare delivery, it is known primarily for its requirement that employees be allowed a period of extended coverage in the event of termination of employment. The length of the continuation period varies from 18 months to 3 years depending on the circumstances of loss of coverage.
Coinsurance: A fee based on a percentage of charge paid by the insured in addition to deductible and co-pays. Traditionally, the insured paid 20% of eligible charges after deductible. Modern plans may require the insured to pay 10% to 50% of charges depending on the design of the plan.
Consumer Directed Health Plan: An evolving concept in healthcare plan design wherein the employee is able to select from a number of different medical plans usually featuring a high (e.g., $2,000) deductible combined with a medical expense reimbursement account funded by employee and/or employer contributions. The high deductible reduces the premium cost of the plan and the medical reimbursement account gives the employee some control over small and routine expenses.
Contributory Plan: A healthcare plan sponsored by an employer, which requires the employee to pay some portion of the premium cost. If the employee pays none of the premium, the plan is called a “non-contributory” plan.
Continuing Education Requirement: A requirement imposed on licensed insurance agents by the state as a condition of renewal and continuation of the insurance license. Such requirements help to ensure some basic level of knowledge on the part of the agent. In addition, agents have available a large number of professional education courses and curriculums to enhance their expertise and professionalism.
Coordination of Benefits (COB): A set of conventions developed by the insurance industry designed to eliminate or reduce the opportunity for an insured to be reimbursed more than 100% of expenses due to double or triple coverage.
Co-payment (co-pay): A small payment made by the patient to the provider at the time of service in lieu of a deductible. Since receipt of the service (e.g., an office visit) is not contingent upon meeting the entire plan deductible, greater access to basic medical services is promoted. Whereas co-pays first applied only to office visits, they are now required for other services such as prescriptions, ambulance service and emergency room visits.
Deductible: A fixed amount (e.g., $500) that the insured must pay before the plan begins to pay for covered services. Deductibles are almost always paid on a calendar year basis-each new year requires a new deductible. Insureds with families usually face a multiple deductible of 2 or 3 times the individual deductible. Deductibles help defray the cost of the plan and create greater efficiency by protecting the insurer against the administrative expense of many small claims.
Dependent: A family member or member of household covered under a health insurance plan by virtue of the member’s insured status. Those eligible to be considered “dependent” varies from plan to plan but will usually include spouse, children, step children and adopted children up to age 18, 21 or older.
Disability Insurance: A type of insurance designed to protect the insured against the loss of income due to disability. Coverage is available in either group or individual forms. Features differ from plan to plan as to the maximum amount of reimbursement, duration of the benefit, definition of disability, etc.
Eligibility: The qualifications created by the insurer to define who is permitted to apply for coverage under the plan. For example, eligibility may be defined as “all full-time employees of the employer” or “all members in good standing of the Association of A’s, B’s and C’s”.
Eligibility Waiting Period: A period of time usually imposed by the employer or the insurer before an employee becomes eligible to apply for coverage.
Employee Assistance Plan (EAP): A support service offered by some employers that seeks to help members with personal problems or challenges through telephone counseling or professional therapy. Such services are highly confidential and are “walled-off” from the employer.
Enrollment: The process of becoming a member or covered person under a group insurance plan usually involving completing an enrollment application and, in some cases, qualifying with respect to health status.
ECG: A process for monitoring or diagnosing of heart function through electronic means.
EEG: A process for monitoring or diagnosing of brain function through electronic means.
EGG A crusty, calcified white ovoid deposited in a nest by a chicken or other bird.
ERISA: Employee Retirement Income Security Act of 1974. This voluminous law created an extensive set of requirements for plan sponsors and insurers related to plan discrimination, communication, record-keeping and disclosure, among others. At inception is was controversial because it appeared to compromise the traditional role of the states as the regulators of the insurance industry. While the name implies that it applies to retirement programs, its requirements extend far beyond that limited realm. For example, before ERISA it was possible for employee to be fired for having a serious illness, plan booklets or certificates often used vague or confusing descriptions of benefits and higher level employees routinely received better benefits than did rank and file employees.
Exclusion: A medical service, supply or benefit not covered by the plan. Exclusions must be clearly stated in the policy.
Explanation of Benefit (EOB): A claim-related form provided to the insured detailing the charges and disposition of charges for medical services.
Formulary: A feature of pharmacy plans or benefits which specifies certain compounds or drugs that must be used to the exclusion of other similar pharmaceuticals. The purpose is to ensure that the most efficacious medicine be used.
H.D.H.P (High Deductible Health Plan): A medical plan with specific parameters defined by law designed to operate with Health Savings Accounts to produce low- cost medical insurance.
Health Maintenance Organization (HMO): A managed care plan featuring a limited network of providers, emphasis on preventive practices and treatments, a primary care physician who must approve all medical care, and a plan design based on high levels of reimbursement or coverage.
HIPAA: The Health Insurance Portability and Accountability Act of 1996. A complex and extensive regulation of the insurance industry most often thought to address pre-existing conditions exclusions and coverage of newly acquired dependents. Also, known as the Kennedy-Kassebaum Act, the law is being implemented in phases due to its comprehensive nature. In general the various phases include Portability (enhanced by the limits on pre-existing conditions exclusions), Disclosure and Confidentiality.
H.S.A. (Health Savings Account): A tax-favored account which, when paired with an H.D.H.P., allows the holder to pay for minor medical expenses on a tax-free basis.
Indemnity Plan: The traditional pre-managed care medical plan nostalgically remembered as the “comprehensive major medical plan” which, before the improvements wrought by managed care, featured a simple annual deductible, 80/20 coinsurance and a maximum annual benefit expense to the employee of $1,000-no network, no gatekeeper, no pre-admission certification, no formulary, no thick plan booklet, no list of “preferred providers”-it’s hard to believe this thing actually worked, isn’t it?
Inpatient: A person who has been admitted to a medical care facility. Or, alternatively, the services provided to an admitted patient within a medical care facility.
Insurance: A system for transferring risk by diluting it among a large population of insured units. Claims made by a few are funded by the premiums paid by all participants.
Insured: The term is used here to identify the person or persons covered under a health insurance policy. This would ordinarily be the employee of a business that sponsors a health insurance plan. Technically, the employer, as holder of the policy, is the insured and the employee is the “third-party beneficiary” but applying such technically correct terminology in this glossary is considered counter-productive.
Just Enough: Not too much but not too little, either.
Kilt: A plaid skirt worn by Scottish men.
Lifetime Limit: A maximum benefit limit placed by carriers on a health plan. Typical lifetime limits are $1,000,000 to $5,000,000; some plans have no lifetime limit.
Long-Term Care Insurance: A type of insurance plan designed to defray the cost of nursing home care and related expenses.
Managed Care: A system for transferring control of patient medical services from doctors to healthcare organizations. The rationale for this alteration of the traditional doctor/patient relationship is to reduce unnecessary treatment, eliminate fraud, and reduce cost through system-wide efficiency. Under managed care, the cost of medical care continues to skyrocket.
Medical Reimbursement Account (MRA): A tax-favored account used by the employee for medical expenses, distinguished from a Medical Spending Account in that balances in the account at the end of the year can be carried forward.
Medical Spending Account (MSA): A tax-favored account used by the employee for medical expenses. MSA’s operate under a “use-it-or-lose-it” condition that causes balances not used by the end of the year to be forfeited.
Medi-gap: A type of medical plan for retirees designed to cover those medical expenses not covered by Medicare. The benefits of such plans are regulated by law and are grouped into a series of plan designated by letter-“A” through “J”.
Network: A panel of doctors, hospitals and other medical providers selected by an insurance company or other healthcare organization to serve the needs of its members. Originally developed to allow healthcare organizations to “drive” more patients into a limited number of providers and thereby extract discounts from the providers, the goals of network operations have become myriad and muddled.
Non-network: Not related to a network as described above.
Out-of-Pocket Limit: An annual limit of financial exposure for the insured built into most medical plans. The limit is commonly made up of deductibles and coinsurance paid by the insured and may be set at from $500 to $5,000.
Outpatient: A patient receiving medical services in a setting other than as an admitted patient at a hospital-most commonly, in a doctor’s office or a clinic.
Point of Service Plan (POS): A variation on the HMO design that allows the insured to seek medical services from providers other than those of the HMO. The decision to seek services “outside the plan” entails greater cost for the insured.
Pre-admission Certification: A feature of many managed care plans whereby the insured or the attending physician must secure approval or acknowledgement of the need for a hospital admission before the patient enters the hospital.
Pre-admission Testing: Tests performed on an outpatient basis in anticipation of a subsequent hospitalization.
Pre-existing Condition: A pre-existing condition is a medical condition which existed prior to the coverage date of an insured. The specific definition of a pre-existing condition varies from plan to plan but usually refers to on for which the insured received medical treatment or advice or should have known such treatment or advice was needed within the 6-month period immediately preceding the coverage date. Such conditions were routinely excluded in the past; however, HIPAA severely limited a carrier’s ability to do so.
Preferred Provider Organization (PPO): A network as described above and or the organization that develops and manages such a network.
Primary Care Physician: The doctor selected by a member of a managed care organization to be his/her primary source of routine medical care. The “PCP” has the additional responsibility of coordinating other medical care the member may receive such as approving referrals to specialists.
Professional Employer Organization (PEO): Sometimes known as an “employee leasing” firm, PEO’s provide employee services such as payroll, employee benefits, recruitment, and ongoing evaluation on an “outsourcing” basis. Such arrangements are often attractive to small employers that do not wish to acquire the personnel and expertise to perform these functions themselves. Economies of scale can reduce costs.
Provider: A provider of medical services, e.g., a physician, nurse, clinic, hospital, laboratory or counselor.
Quandry: A state of confusion or ignorance.
Reasonable and Customary: A criterion used by healthcare plans to determine whether a claim should be paid or at what level. Generally, a charge is reasonable and customary if it is consistent with charges by other similar providers for the same or similar services in a given geographic area.
Self-funded Medical Plan: A system sometimes used by large employers to reduce the cost of a medical plan. The employer assumes financial responsibility for all claims up to a certain limit on any one individual and up to an aggregate limit for all charges in a plan year. Claims in excess of these levels are paid under a fully-insured “stop-loss” policy purchased from an insurance company. Administrative operations such as premium collection and claims adjudication and payment are usually provided by a “Third-party administrator”.
TPA: A third-party administrator. (See Self-funded Medical Plan.)
Uxorious: Excessively fond of or submissive to a wife.
Voluntary Products: An array of supplemental benefits plans created by insurers for use in the worksite marketing arena. The plans are designed to respond to the specific insurance needs of individual members of the workforce. The cost of such plans is usually borne by the employee and premiums are collected by payroll deduction. The benefits may mirror others available on a true group basis (e.g., life insurance, disability insurance, dental insurance, cancer insurance) but serve to augment other coverages or to fill gaps in the overall benefits agenda.
WHCRA: Women’s Health and Cancer Rights Act. Don’t forget that you need to advise your employees of the requirements of this Act every year.
Worksite Marketing: A method of delivering supplemental benefits to employees without the financial participation of the employer but with the endorsement of the employer.
Xenon: An inert odorless gas.
Yeah Boy: An enthusiastically affirmative answer to a question or situation.
Zebra: A black and white striped donkey not suitable for riding or pulling a farm implement.