Health Insurance Glossary of Terms

8/3/2019 Health Insurance Glossary of Terms

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Health Insurance - Glossary of Terms

GLOSSARY OF TERMSAccidental Death and DismembermentA policy or a provision in a policy which pays benefits if the insured dies, loses his or her sight, or loses twolimbs as the result of an accident. A lesser amount, usually half, is payable for the loss of one eye, arm, leg,hand, or foot. Generally companion coverage to group term life insurance, LHSIC offers this as a benefit in itsindividual health insurance policies.

AccreditationA designation indicating that an insurer’s networks or a managed care organization has been evaluated and hasmet the standards of a certifying body, such as the National Committee for Quality Assurance (NCQA) or theUtilization Review Accreditation Commission (URAC). The designation can help purchasers, regulators, andconsumers assess managed care plans.

AccrualAn accounting term to describe the practice of recognizing an expense or revenue that has been realized buthas not yet been recorded.

ACR (Adjusted Community Rate)The equivalent of the premium that an HMO organization would have charged to Medicare+Choice enrolleesindependently of HCFA payments for Medicare covered services, using as a basis the same rates it charges toits non-Medicare enrollees and adjusting for Medicare enrollees’ utilization.

Actively-at-workA provision in most group health insurance policies that if an employee is not actively at work on the day thepolicy goes into effect, the coverage will not begin until the employee does return to work. Under HIPAA, theemployee is eligible to enroll even though he is not at work, but he may not be eligible for benefits.

Activities of Daily Living (ADL)A term usually used in disability or long term care policies. Everyday living functions and activities performed byindividuals without assistance. These functions would include mobility, dressing, personal hygiene and eating.

Activities of Daily Living (ADL) StandardsUsed to assess the ability of an individual to live independently, measured by the ability to perform unaided suchactivities as eating, bathing, toiletry, dressing, and walking. ADL standards are sometimes discussed as a way

to measure or define eligibility for long term care.

Actual ChargeThe actual amount charged by a provider for medical services rendered. Sometimes referred to as “BilledCharge.”

Acute CareSkilled, medically necessary care provided by medical and nursing personnel in order to restore a person togood health.

Additional Monthly BenefitRiders added to disability income policies to provide additional benefits during the first year of a claim while theinsured is waiting for Social Security benefits to begin.

Accelerated Life BenefitBenefits of a life insurance policy paid in advance of death to an insured in certain specific circumstances suchas contracting cancer or AIDS or suffering a heart attack or a stroke.

Adjusted Average Per Capita Cost (AAPCC)The estimated average cost of Medicare benefits established on a per county basis -factors include age, sex,Medicaid, institutional status, disability, and end stage renal disease status and working aged. Used todetermine payments to cost contractors for Medicare benefits.

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Administrative ExpenseA company’s operating costs, fees for medical examinations and inspection reports, underwriting, printing costs,commissions, advertising, agency expenses, premium taxes, salaries, rent, etc. Such costs are a component of premium. See also Retention.

Administrative Services Only (ASO)A contract under which a third party will deliver administrative services to an employer for its health benefitsplan. Usually the plan is self-insured (the employer is at risk for the cost of health care services). Sometimes

referred to as Administrative Service Contracts (ASCs).

Admissions/1,000The number of hospital admissions for each 1,000 members of the health plan.

AdmitsThe number of admissions to facilities, including outpatient and inpatient facilities.

Adverse SelectionA situation in which a carrier enrolls a poorer risk than the average risk of the group.

Age ChangeThe date on which a person’s age, for insurance purposes, changes. For products that are rated specific to a

person’s age, changes in rates due to age are based on the age of the person at his last birth date. Ratingstructures may vary to use age bands (such as 1, 5 or 10 year age bands) and use age at last birthday, age atnearer birthday, or age at next birthday in placing persons within age bands. Generally, rates for individualproducts are based on a person’s specific age while rates for group products are based on a compositing of theage for all members and adjusting rates accordingly.

Age/Sex Factor Compares the age and sex risk of medical costs of one group relative to another. An age/sex factor above 1.00indicates higher than average risk of medical costs due to that factor. Conversely, a factor below 1.00 indicatesa lower than average risk.

Aggregate IndemnityA maximum dollar amount that may be collected by the claimant for any disability, for any period of disability, or

under the policy as a whole.

Allied Health ProfessionalUnder LHSIC policies, Allied Health Professionals are health care providers other than hospitals or Doctors of Medicine or Osteopathy, such as dentists, nurses, optometrists, etc.

Allowable ChargeUnder Medicare, this term is the lesser of the actual charge, the customary charge and the prevailing charge. Itis the amount on which Medicare will base its Part B payment. Under LHSIC and HMOLA policies, the AllowableCharge is the lesser of the billed charge or an amount set by the Company as reasonable for the service.

Alternative Delivery SystemsSystems, which cover health, care costs, other than on the usual fee-for-service basis. Could include HMOs,IPAs, PPOs, etc.

Alternative MedicineNontraditional health care treatments, such as chiropractic services and acupuncture.

Ambulatory CareCare that does not require hospitalization.

Ambulatory SettingInstitutions such as surgery centers, clinics, or other outpatient facilities which provide health care on anoutpatient basis.

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Ancillary ServicesAdditional services provided by a facility (other than room and board charges) such as X-rays, anesthesia, labwork, etc.

Approved ChargeAmounts paid under Medicare as the maximum fee for a covered service.

AssignmentAn authorization to pay benefits directly to the provider. Under Medicare, payments may be assigned toparticipating providers only. Under LHSIC policies, assignment of benefits is prohibited. Louisiana law requireshonoring assignments to hospitals; this law may be preempted by federal law (ERISA) for group plans other than church and governmental plans and for the federal employees benefit plan (FEP).

Average Cost Per ClaimThe total cost of administrative and/or medical services divided by the number of units of exposure such ascosts divided by number of admissions, or cost divided by number of outpatient claims, etc.

Average Length of Stay (ALOS)The average number of days in a hospital for each admission. The formula for this measure is a follows: totalpatient days incurred, divided by the number of admissions and discharges during the period.

Average Wholesale Price (AWP)A term usually applicable to prescription drugs. It is the average of prices charged by manufacturers for aparticular drug.

Balanced Budget Act of 1997 (BBA)Federal legislation that established Medicare+Choice, which broadens the array of health plans available toMedicare recipients. This Act established a new Medicare Part C, allowing Medicare beneficiaries the option of choosing the Medicare fee-for-service (FFS) program (Parts A and B) or to enroll in Medicare+Choice plans,effective January 1, 1999.

Bed Days/1,000The number of inpatient hospital days per 1,000 members of the health plan.

Benefit PeriodA period of time during which benefits may be provided or limited. Usually a calendar year, but may be shorter for certain benefits (ex. a quarter for prescription drugs).

Birthday RuleUsed when coordinating benefits for a person covered by more than one policy. This method determines whichparent’s medical coverage will be primary for dependent children: the parent whose birthday falls earliest in theyear will be considered as having the primary plan. See Coordination of Benefits.

Capitation (CAP)A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver the healthservices agreed upon to any covered person.

Carrier Usually a commercial insurer contracted by the Department of Health and Human Services to process MedicarePart B claims payments. BCBS Arkansas is the Medicare Part B carrier for Louisiana.

Carry Over ProvisionIn major medical policies, these provisions allow an insured who has submitted no claims during the year toapply any medical expenses incurred in the last three months of the year toward the new calendar year’sdeductible. Many LHSIC health policies carry this provision.

Carve-Outs

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Type of service separately designed and contracted to an exclusive, independent provider. For example, mentalhealth care, drug and vision coverage are often carve-out services.

Case ManagementThe assessment of a person’s long term care needs and the appropriate recommendations for care, monitoringand follow-up as to the extent and quality of services to be provided.

Case Manager

A person, usually an experienced professional, who coordinates the services necessary under the casemanagement approach.

Case MixThe relative frequency and intensity of hospital admissions or services, which reflects the different needs anduses of hospital resources. Case mix can be measured based on patients’ diagnoses or the severity of their illnesses, the utilization of services, and the characteristics of a hospital.

Case RateFlat fee paid for patients’ treatment based on their diagnosis and/or presenting problem. For this fee, theprovider covers all of the services the patient requires for a specific period of time.

Centers of Excellence

In the insurance industry, this term refers to a network of health care facilities selected for specific services anddetermined to be exemplary based on criteria such as experience, outcomes, and effectiveness. BCBSA hasdesignated Centers of Excellence for organ transplant procedures (also known as Blue Quality Centers for Transplant (BCCT)).

Certificate of Authority (COA)A license issued by the state Department of Insurance (in Louisiana) to operate an insurer or HMO (HealthMaintenance Organization).

Chronic Case ManagementThe coordination of care by a health care professional for an individual whose illness or condition ischaracterized by slow progression and/or long continuance such that care is required on an ongoing basis.

Civilian Health and Medical Program of the Uniformed Services (CHAMPUS)Part of the Uniformed Services Health Benefits Program which supplements the medical care available for families of active, deceased, and retired military personnel.

Claims AdjudicationThe processing and payment of claims.

Closed AccessA benefit structure under which covered insureds must select a primary care physician. That physician is theonly one allowed to refer the patient to other health care providers within the plan. Also called Closed Panel or Gatekeeper model.

CoinsuranceThe portion of the cost for care received for which an individual is financially responsible. Usually this isdetermined by a fixed percentage, as in major medical coverage. Often co-insurance applies after a specificdeductible has been met and may be subject to an individual out-of-pocket limit.

Community RatingUnder this rating system, the charge for insurance to all insured’s depends on the medical and hospital costs inthe community or area to be covered. Individual characteristics of the insured’s are not considered at all.Louisiana law imposes modified community rating for groups under 35 in size and for individual coverage.

Composite RateOne rate for all members of the group regardless of their status as single or members of a family.

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Comprehensive Major MedicalA plan of insurance which has a low deductible, high maximum benefits, and a coinsurance feature. It is acombination of basic coverage and major medical coverage which has virtually replaced separate hospital,surgical and medical policies with each having its own deductible requirements.

Concurrent ReviewA case management technique which allows insurers to monitor an insured’s hospital stay and to know in

advance if there are any changes in the expected period of confinement and the planned release date.

Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986Federal legislation applicable to groups of 20 or more, providing for a continuation of group health care benefitsunder the group plan for a period of time when benefits would otherwise terminate due to loss of employment or eligibility as a dependent. Coverage may be continued for up to 18, 36, or 54 months, depending on thecircumstances of the loss of coverage.

ContinuationAllows continuation of group health insurance coverage under certain conditions. Louisiana law provides for continuation for employees losing employment, if not eligible for COBRA, and for surviving spouses age 55 andover, as well as for their dependents.

ConversionThe right to receive an individual policy after group coverage ends. Once mandatory under Louisiana law, nowpersons entitled to conversion are covered under the Louisiana Health Plan’s “HIPAA” pool. BCBSA requiresBlue Plans to issue conversion policies to persons covered by a sister Blue Plan when they move to the BluePlan’s service area.

Coordination of Benefits (COB)A policy provision which helps determine the primary carrier in situations where an insured is covered by morethan one policy. This provision prevents an insured from receiving more than 100% coverage. Traditionallyappears only in group policies but trend is moving toward allowing COB between group and individual policies.See also Birthday Rule.

Copayment

This is a cost sharing arrangement where the covered person pays a specified amount for various services andthe health care provider pays the remainder. The covered person usually must pay his or her share when theservice is rendered. Similar to coinsurance, except that coinsurance is usually a percentage of certain chargeswhere the co-payment is a dollar amount.

Cost of Living BenefitAn optional disability benefit where the monthly benefit will be increased annually once the insured is on claimfor 12 months.

Covered ExpensesHealth care expenses incurred by an insured or covered person that qualifies for reimbursement under theterms of a policy.

Covered PersonA person for whom premiums are paid and who also meets eligibility requirements.

CredentialingThe process of approving a provider, based on certain criteria, to provide health care services or participate in ahealth plan.

Current Procedural Terminology (CPT)This terminology includes medical services and procedures performed by physicians and other providers of health care. The health care industry uses it as a standard for describing services and procedures.

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Custodial CareCare that is primarily for meeting personal needs such as help in bathing, dressing, eating or taking medicine. Itcan be provided by someone without professional medical skills or training but must be according to doctor’sorders.

Date of ServiceFor professional claims, the date of service is the date that the health service was provided. For hospital claims,this is the date of admission.

Death SpiralThe potentially destructive cycle that occurs when the health status of a pool of insured lives declines as a resultof: (1) HMO’s penetrating an indemnity plan, pulling off healthier employees and causing the indemnity plan’scosts to significantly increase as measured on a per member basis; (2) The discontinued enrollment of new,healthy members into a block of business; or (3) The election of healthier small group members of anassociation to seek coverage elsewhere (outside the association) by shopping rates. Since rates are establishedbased on the pool of individuals covered and the health status of those individuals significantly deteriorates, therates for the pool will increase, causing the selection to continue to occur.

DeductibleThe amount a policyholder must pay for health care, as established under the terms of his or her contract,before insurance benefits begin.

Dependent CoverageInsurance coverage on the head of a family that is extended to his or her dependents, including only the lawfulspouse and unmarried children who are full time students or are mentally or physically impaired and incapableof self support. “Children” may be step, foster, and adopted, as well as natural and, under the Louisiana law,grandchildren who are in the legal custody of, and residing with, the grandparent. The age limit in Louisiana is24, but coverage is not limited by age if the child is impaired and incapable of self-support. LHSIC policiesextend the age limit to 25.

Diagnosis Related Groups (DRGs)Set reimbursement for a hospital stay based on a given diagnosis, regardless of the length of stay or the level of services provided. Adjustments may be made for inordinately short or long stays as compared to the norm.Used by Medicare as well as other insurers.

Disability Income InsuranceA form of health insurance that provides periodic payments to replace income, actually or presumptively lost,when the insured is unable to work as a result of sickness or injury.

Discharge PlanningDetermining what the patient’s medical needs will be after discharge from a hospital or other inpatient treatment.

Disease ManagementA comprehensive integrated approach to care designed to influence the progression of disease within selectpatient populations. In disease management, the emphasis is on prevention, proactive case management,patient education, and population-based interventions.

Dread (or Specified) Disease PolicyCoverage for medical expenses arising out of diseases named in the contract. LHSIC offers a Cancer andSerious Disease (CSD) policy offering three benefit options, which covers cancer, poliomyelitis, leukemia,diphtheria, tetanus, spinal meningitis, encephalitis, rabies, and sickle cell anemia.

Drug Utilization Review (DUR)A method for evaluating or reviewing the use of drugs in order to determine the appropriateness of the drugtherapy.

Durable Medical Equipment (DME)

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Reusable medical equipment, such as hospital beds and wheelchairs, which can be used by patients either in ahospital or a home setting.

Eligible ExpensesExpenses as defined in the health plan as being eligible for coverage. This could involve specified healthservices fees or customary and reasonable or allowable charges.

Eligibility Date

The date that a person is eligible for benefits.

Eligibility Period(1) The period of time during which potential members of a Group Life or Health program may enroll withoutproviding evidence of insurability. Sometimes called “Open Enrollment.” (2) The period of time under a Major Medical policy during which reimbursable expenses may be accrued.

Employee Retirement Income Security Act of 1974 (ERISA)Federal law governing administration of employee benefit plans and the rights of beneficiaries of the plans.These include the right to receive information on benefits and disposition of claims for benefit appeal rights.ERISA preempts all state laws relating to such plans except those regulating the business of insurance.

Encounter

Each occasion on which a person meets with a health care provider to receive services.

Encounters Per Member Per Year The total number of encounters per year divided by the total number of members per year.

EnrolleeAn eligible individual who is enrolled in a health plan.

EnrollmentUsed to describe the total number of enrollees in a health plan. It may also be used to refer to the process of enrolling people in a health plan.

Episode of Care

Treatment rendered in a defined time frame for a specific disease. Episodes provide a useful basis for analyzingquality, cost, and utilization patterns.

Evidence of InsurabilityThe statement of information needed for the underwriting of an insurance policy. This could be an applicationcontaining health questions or an Attending Physicians Statement (APS).

Exclusive Provider Organization (EPO)A type of preferred provider organization where individual members use particular preferred providers rather than having a choice of a variety of preferred providers.

Expected ClaimsThe estimated claims for a person or group for a contract year based usually on actuarial statistics.

Expected MorbidityThe expected incidence of sickness or injury within a given group during a given period of time as shown on amorbidity table.

Experience RatingThe process of setting rates based partially or in whole on previous claims experience and projected requiredrevenues for a future policy year for a specific group or pool of groups.

Experimental or Investigational Procedures

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Any health care services, supplies, procedures, therapies, or devices that the health plan determines to beeither (1) not proven by scientific evidence to be effective, or (2) not accepted by health care professionals asbeing effective.

Explanation of Benefits (EOB)The statement sent to a participant in a health plan listing services, amounts paid by the plan, and total amountowed by the patient.

Extended Care FacilityA facility such as a nursing home which is licensed to provide 24-hour nursing care service in accordance withstate and local laws. Three levels of care may be provided-skilled, intermediate, custodial, or any combination.

Extended CoverageA provision in health policies to allow the insured to receive benefits for specified losses sustained after thetermination of coverage, such a maternity expense benefits incurred for a pregnancy in progress at the time of the termination. Sometimes referred to as “continuation of care” or “continuity of care.”

Extension of BenefitsA provision in the insurance policy which allows coverage to continue beyond the expiration date of the policy inthe case of insureds who are hospital confined on that date.

FASBThe Financial Accounting Standards Board, which is a nongovernmental group that sets standards for generallyaccepted accounting principles (GAAP).

Family and Medical Leave Act (FMLA)A federal law passed in 1993 that requires companies to provide eligible workers with up to 12 weeks of job-protected unpaid leave each year for certain medical and family situations, such as the birth of a child or thecare of an aged parent. Employees are eligible to take FMLA leave if they’ve worked for the employer for atleast 12 months, have worked for at least 1,250 hours over the previous 12 months, and work at a locationwhere the employer has at least 50 workers within 75 miles.

Fee-for-Service (FFS)The traditional health insurance reimbursement method in which a set fee (e.g., reasonable and customary or

allowable charge) is established for each health care service performed. Services are paid for as rendered.

Field UnderwritingThe initial screening of prospective buyers of health insurance, performed by sales personnel “in the field.” Mayalso include quoting of premium rates.

Fiscal IntermediaryA commercial insurer contracted by the Department of Health and Human Services for the purpose of processing and administering Part A Medicare claims. Blue Cross Blue Shield of Mississippi is the FiscalIntermediary for Medicare Part A claims incurred in Louisiana.

Flexible Spending AccountA spending arrangement that allows employers and employees to use pretax dollars to pay for certain healthcare or dependent care expenses not otherwise covered by insurance. Health care FSAs can be used to financehealth care expenses, including deductibles and copayments.

FormularyA listing of prescription medications that are preferred for use by the health plan and that will be dispensedthrough participating pharmacies to covered persons. This list is subject to periodic review and modification bythe health plan. A plan that has adopted an “open or voluntary” formulary allows coverage for both formulary andnonformulary medications. A plan that has adopted a “closed, select, or mandatory” formulary limits coverage tothose drugs in the formulary.

Franchise Insurance

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A plan for covering groups of persons with individual policies having uniform provisions, although they may differ in coinsurance and deductible levels. The individual policies are issued to each person with individualunderwriting. Solicitation usually takes place among an employer’s work force with his consent. Premiums arepayroll deducted. No employer premium contributions are allowed. LHSIC uses the term “list bill” for this type of plan.

Gatekeeper ModelUnder this model a primary care physician (the gatekeeper) is the initial contact for the patient for medical care

and for referrals. This is also called a closed access or closed panel. Gatekeepers are typical in HMOs, EPOs,and the in-network portion of a POS.

Generic DrugA drug which is exactly the same as a brand name drug and which is allowed to be produced after the brandname drug’s patent has expired. It is also called a “generic equivalent.”

Grievance ProcedureA procedure which allows a member of a health plan or a provider of benefits to express complaints and seekremedies.

GroupCoverage of a number of individuals under one contract. The most common “group” is employees of the same

employer.

Group CertificateThe document provided to each member of a group plan. It shows the benefits provided under the groupcontract issued to the employer or association. This is called an “Evidence of Coverage” in HMOs.

Group ContractA contract of insurance made with an employer or other entity that covers a group of persons identified byreference to their relationship to the entity buying the contract. The group contractual arrangement is generallyused to cover employees of a common employer, members of a trade association, members of a welfare or employee benefit association, members of a labor union, or members of a professional or other association notformed only for the purpose of obtaining insurance.

Guaranty FundSee Louisiana Life and Health Insurance Guaranty Association (LLHIGA).

Guaranteed IssueRequired issuance of an insurance policy without any medical underwriting. Under group insurance, all groupparticipants are covered regardless of health history. Guaranteed issue is required under HIPAA for groupsunder 51. There is no guaranteed issuance of individual policies under state or federal law, except for personslosing group coverage. (See “Conversion”)

Guaranteed RenewabilityA right to continue a contract of insurance in force by payment of premiums. The insurer has no right to makeany change in any provision of the contract except, in the case of group contracts, on the anniversary date of thecontract, and except, in the case of individual contracts, changes made to the contracts of all policyholdersuniformly.

HCFA 1500A form developed by HCFA and used by providers of health services to bill their fees to health carriers.

Health Care Financing Administration (HCFA)Part of the Department of Health and Human Services, responsible for administration of the Medicare andMedicaid programs.

Health Insurance (HI)

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Insurance against loss by sickness or bodily injury. The generic form for those forms of insurance that providelump sum or periodic payments in the event of loss occasioned by bodily injury, sickness or disease, andmedical expense. The term Health Insurance is now used to replace such terms as Accident Insurance,Sickness Insurance, Medical Expense Insurance, Accidental Death Insurance, and Dismemberment Insurance.The form is sometimes called Accident and Health, Accident and Sickness, Accident, or Disability IncomeInsurance. Dental insurance, disability insurance, and accidental death and dismemberment insurance is alsoconsidered health insurance.

Health Insurance Portability and Accountability Act of 1996 (HIPAA)A federal law designed to provide portability of health coverage by limiting what may be considered pre-existingconditions and exclusions for pre-existing conditions in health plans. HIPAA also requires guaranteed issuanceof coverage in the small group market, guaranteed issuance of individual coverage upon loss of group coverage,and guaranteed renewability of coverage in the group and individual markets. Under its AdministrativeSimplification provisions, HIPAA requires use of unique identifiers, standard data sets, and ensures privacy andsecurity of an individual’s identifiable health information.

HIPAA PoolA legislatively created insurance pool providing coverage to individuals losing group health coverage. Funded byassessments of health insurers. See Louisiana Health Plan and Conversion.

Health Insurance Purchasing Cooperatives (HIPCS)

Purchasing agents for health insurance consumers under a managed-competition system, also called healthinsurance purchasing groups, health plan purchasing cooperatives, and health insurance purchasingcorporations.

Health Maintenance Organization (HMO)An HMO is a prepaid medical service plan that provides services to plan members either through employed staff or medical providers who contract with the HMO. Members must use contracted providers to receive benefitsexcept in certain circumstances, such as emergencies.

HealthMartsCollectives of small businesses joined together to purchase health insurance.

Health Plan Employer Data and Information Set (HEDIS)

Standard performance measures collected by the National Committee for Quality Assurance and published inthe form of a report card to help employers evaluate plan performance.

High Risk PoolA legislatively established health plan for uninsurable Louisiana residents. Funded by service charges of $2.00/day for inpatient stays and $1.00 for ambulatory surgical care admissions. Louisiana insurers are requiredto cover these charges.

Home Health CareCare received at home as part-time skilled nursing care, speech therapy, physical or occupational therapy, part-time services of home health aides or help from homemakers or choreworkers.

HospiceAn organization which is primarily designed to provide pain relief, symptom management and supportiveservices for the terminally ill and their families.

Hospital Income or Indemnity InsuranceA form of insurance that provides a stated weekly or monthly payment while the insured is hospitalized,regardless of expenses incurred and regardless of whether or not other insurance is in force. The insured canuse the weekly or monthly benefit as he chooses, for hospital or other expenses. LHSIC sells a form of thisinsurance called the “Variable Income Plan” or “VIP policy,” which pays a per diem.

In-Area ServicesServices which are provided within the “authorized” service area as designated in the plan.

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Incurred but Not Reported (IBNR)Costs associated with a medical services that has been provided, but for which a claim has not yet beenreceived by the insurer. IBNR reserves are recorded by the insurer to account for estimated liability, based onstudies of prior lags in claim submissions.

Incurred ClaimsThe actual insurer liability for a special period, including all claims with dates of service within a specified period

(usually called the experience period). Given the time lag between dates of service and the dates of claimspayments, adjustments must be made to any paid claims data to determine incurred claims.

IndemnityA health care insurance plan that reimburses policyholders for covered services. There is usually a deductiblewhich must be met before payment starts and a maximum benefit, either annual or lifetime, that the insurer willpay.

Individual ContractA contract made with an individual that covers that individual and perhaps also specified members of his familyfor benefits as described in the policy.

Individual Practice Association (IPA) Model HMO

A situation where an individual practice association is contracted with to provide health care services. Theindividual practice association contracts with individual physicians or groups of physicians for their services.

Inflation Factor A premium loading to provide for future increases in medical costs and loss payments resulting from inflation.

In-Force BusinessLife or Health Insurance for which premiums are being paid or for which premiums have been fully paid. Theterm refers to the total face amount of a Life insurer’s portfolio of business. In Health Insurance it refers to thetotal premium volume of an insurer’s portfolio of business.

Inside LimitsLimits placed on benefits which modify benefits from the overall maximums listed in the policy. An inside limit

when applied to room and board, limits the benefit to not only a maximum amount payable, but also limits thenumber of days the benefit will be paid. A prescription drug inside limit limits the benefit to a specific dollar amount in benefits that will be paid in a particular time period.

Intermediate CareA level of care associated with a skilled nursing facility which provides nursing care under the supervision of physicians or a registered nurse. The care provided is a step down from the degree of care described as skillednursing care.

Large Claim PoolingA technique that helps stabilize premium fluctuations. Large claims (those over a stated amount, sometimescalled “shock claims”) are charged to a pool contributed to by many small groups. The pooling level depends onthe number of groups in the pool.

Legend DrugA drug which has on its label “caution: federal law prohibits dispensing without a prescription.”

Length of Stay (LOS)The total number of days a participant stays in a facility such as a hospital.Long Term Care (LTC)Care which is provided for persons with chronic diseases or disabilities. The term includes a wide range of health and social services provided under the supervision of medical professionals.

Long-Term Disability Insurance

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A group or individual policy which provides coverage for longer than a short term, often until the insured reachesage 65 in the case of illness and for the remainder of his lifetime in the case of accident. See also Short-TermDisability Insurance.

Loss-Of-Income BenefitsBenefits paid for inability to work for remuneration because of disability resulting from accidental bodily injury or sickness. The loss of income may be real or presumptive.

Louisiana Health PlanA legislatively created plan consisting of the High Risk Pool, the HIPAA Pool, and a non-operating smallemployer insurance account.

Louisiana Life and Health Insurance Guaranty Association (LLHIGA)A legislatively created guaranty association created to cover claims of persons whose insurers are significantlyfinancially impaired or insolvent. Does not cover HMOs. Funded by assessments on insurers. See GuarantyFund.

Major Medical InsuranceA type of Health Insurance that provides benefits up to a high limit for most types of medical expenses incurred,subject to a large deductible. Such contracts may contain limits on specific types of charges, like room andboard, and a percentage participation clause sometimes called a coinsurance clause. These policies usually pay

covered expenses whether an individual is in or out of the hospital.

Managed CareA system of health care where the goal is a system that delivers quality, cost effective health care throughmedical management, the monitoring and recommending of utilization of services, and through contracting for cost of services.

Managed Care Organization (MCO)Health care plan that emphasizes cost-efficiency in providing care to enrolled members through an organizedprovider network.

Managed Health Care PlanA plan which involves financing, managing, and delivery of health care services. Typically, it involves a group of

providers who share the financial risk of the plan or who have an incentive to deliver cost effective, but quality,service.

Mandated BenefitsBenefits required by state or federal law.

Mandated ProvidersTypes of providers of medical care whose services must be included by state or federal law.

Manual RatesRates based on average claims data for a large number of groups. These rates are then adjusted for specificgroups based on that group’s characteristics, such as the type of industry, changes in benefits from thestandard, etc.

Maximum Allowable Cost (MAC)A pricing of generic drugs developed due to the wide variation of different manufacturer costs for identicalgeneric drugs. The MAC is the highest amount that will be paid for the drug regardless of its actual cost.Medical Expense TrendThe rate at which medical costs are increasing or decreasing, influenced by, for example, utilization, newtechnology, and billed charges.

Medical Loss Ratio (MLR)The cost ratio of health benefits used, compared with revenue received. The MLR is calculated as follows: totalmedical expenses divided by premium revenue.

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Medical Savings Accounts (MSA) (also called Medical IRAs and Medisave Accounts)A health care financing arrangement that allows regular, pre-tax deposits to personal medical accounts that canbe used to pay for medical expenditures or health insurance premiums. These accounts work in conjunction withhigh deductible health insurance policies.

Medical Necessity Review Organization (MNRO)An organization of physicians that reviews services to determine if they are medically necessary. Louisiana law

was enacted in 1999 regulating MNROs and providing immunity from liability if a licensed MNRO is used toreview plan medical necessity determinations.

Medically NecessaryServices, treatments, procedures, etc., required to identify or treat a member’s illness or injury, that areconsistent with the member’s symptoms or diagnosis and treatment and the most appropriate supply or level of care which can safely be provided to the member.

Medicare Part AThe component of Medicare benefits covering inpatient hospital stays, skilled nursing facilities, home healthservices and hospice care. Medicare Part A is premium-free for anyone automatically eligible for Medicare.Those not automatically eligible may purchase Medicare Part A coverage for a monthly premium.

Medicare Part BThe optional part of Medicare that can be purchased for a monthly premium. Part B covers outpatient costs,such as the cost of physician services, outpatient hospital services, medical equipment, and medical supplies.

Medicare Supplement InsurancePrivate insurance coverage sold on an individual or group basis which helps to fill the gaps in the protectionprovided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare,but may pay part or all of Medicare’s deductibles and copayments, and may cover some services and expensesnot covered by Medicare.Medicare+Choice (Also known as Medicare Part C)Medicare+Choice is an expansion of Medicare health planchoices created as part of the Balanced Budget Act of 1997 providing an HMO option.

Medicare Select

A type of Medicare supplemental health insurance policy that requires policyholders to use specific hospitals,and in some cases specific doctors, except in an emergency, in order to be eligible for full benefits.

Member MonthThe total number of participants who are members for each month.

Member Touchpoint Measures (MTM)Refers to the methodology being implemented by the Association to define how well the various plans perform inrelationship to the brand identification by their market area. This performance is measured by a series of customer surveys and the utilization of specified metrics reported in the NMIS method.

Minimum PremiumA cost plus arrangement whereby the employer pays the insurer only a portion of the premium which is to beused for administration costs. The remainder is placed in a “bank account” which is then used by the insurer topay claims.

MorbidityThe relative incidence of disease.Morbidity RateThe ratio of the incidence of sickness to the number of well persons in a given group of people over a givenperiod of time. It may be the incidence of the number of new cases in the given time or the total number of casesof a given disease or disorder.

Morbidity Table

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A table showing the incidence of sickness at specified ages in the same fashion that a mortality table shows theincidence of death at specified ages.

Multiple Employer Trust (MET)A trust consisting of multiple small employers in the same industry, which is formed for the purpose of purchasing group health insurance or establishing a self-funded plan at a lower cost than would be available tothe employers individually. LHSIC uses the term “MET” to describe groups ranging in size from 2-19, eventhough the trust itself has been dissolved.

Multiple Employer Welfare ArrangementsEmployer funds and trusts providing health care benefits to individuals.

Multiple Option PlanUnder this plan, employees can optionally choose from an HMO, POS, a PPO or a traditional major medicalplan.

National Committee for Quality Assurance (NCQA)A nonprofit, Washington, D.C.-based organization, the NCQA is dedicated to assessing, measuring, andreporting on the quality of care provided by the national’s managed care plans. The NCQA manages theevolution of the Health Plan Employer Data and Information Set (HEDIS), a managed care performancemeasurement tool, issuing accreditation in six categories: quality improvement, physician credentials, members’

rights and responsibilities, preventive health services, utilization management, and medical costs.

National Drug Code (NDC)A system for identifying drugs.

National Management Information System (NMIS)Refers to the methodology of the various BCBS plans reporting upon defined standardized metrics relating tobusiness functions performed by the plans. These various plan reports are accumulated and reported by theAssociation in a quarterly format with the metrics used to rank the plans by peer group and as a member of thewhole of the Association

Nonparticipating Provider (1) A provider who has not signed a contract with a health plan. (2) A medical or health care provider who is not

certified to participate in the Medicare program.

Occupational DiseaseImpairment of health caused by continued exposure to conditions inherent in a person’s occupation or a diseasecaused by an employment or resulting from the nature of an employment.

Open AccessAllows a participant to see another participating provider of services without a referral. Also called open panel.

Outcomes MeasurementAssessments that gauge the effect or results of treatment for a particular disease or condition. Outcomemeasures include the patient’s perception of restoration of function, quality of life, and functional status, as wellas objective measures of mortality, morbidity, and health status.Outlier One who does not fall within the norm. A provider who uses either too many or too few services (for example,anyone whose utilization differs by two standard deviations from the mean on a bell curve is called an outlier.)

Out-of-Area (OOA)Treatment given to a member outside of his service area.Out-of-Pocket LimitThe maximum dollar amount of coinsurance and deductible an individual will be required to pay, after which theinsurer will pay 100% of covered expenses up to the policy limit.

Paid ClaimsAmounts paid to providers based on the health plan.

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Paid Claims Loss RatioPaid claims divided by total premiums.

Participating Provider (1) A health care provider under contract with a health insurer or managed care organization. (2) A health careprovider approved by Medicare to participate in the program and receive benefit payments directly from carriersor fiscal intermediaries.

ParticipationThe number of employees enrolled compared to the total number eligible for coverage. LHSIC usually requires aminimum participation percentage of 75%. Minimum participation percentages are no longer legally required inLouisiana.

Peer ReviewReview of health care provided by a medical staff with training equal to the staff which provided the treatment.

Per Member Per Month (PMPM )Refers to the cost to cover one member for one month.

Pharmacy and Therapeutics (P&T) Committee

A panel of physicians - usually from different specialties - who advise the health plan regarding the proper use of prescription drugs.

Pharmacy Benefit Manager (PBM)A managed care organization for prescription drug benefits, using discounted pharmacy networks and utilizationmanagement to control costs.

Physician Contingency Reserve (PCR)A portion of the claim which is deducted and withheld by the health plan before payment is made to thephysician. It serves as an incentive for proper quality and utilization of health care. A portion of this reserve maybe returned to the physician or to pay claims where the plan needs additional funds. It is also sometimes called“withhold.”

Point-of-Service (POS) PlanA health plan that is a “hybrid HMO” allowing the covered person to choose to receive a service from aparticipating or nonparticipating provider, with different benefit levels associated with the use of participatingproviders.

Pre-Admission AuthorizationA cost containment feature of many group medical policies whereby the insured must contact the insurer prior toa hospitalization and receive authorization for the admission. LHSIC and HMOLA require preauthorization for organ transplants.

Pre-Admission CertificationA cost containment feature of many group medical policies whereby the insured must contact the insurer prior toa hospitalization and receive certification for the admission, as being medically necessary and in an appropriatesetting.

Pre-existing ConditionA physical condition that existed prior to the effective date of a policy. HIPAA and state law limit the timepreceding the effective date of a policy during which a condition exists to be considered preexisting. In manyhealth policies these are not covered until after a stated period of time, called a “waiting period” has elapsed,usually one year.

Preferred Provider Organization (PPO)

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An organization of contracts with hospitals and physicians who provide services to insurance company clients.These providers are listed as preferred and the insured may select from any number of hospitals and physicianswithout being limited as with an HMO. The insured’s cost sharing is less if he utilizes a PPO provider.

Premium Stabilization AgreementA financial agreement LHSIC offers to a fully insured merit rated (100+) group, designed to allow a group toaccumulate a source of funds to offset future rate increases. The nature of the agreement is to define acalculation of net ending financial results for a policy year. Should the group terminate coverage, at the end of

15 months any remaining positive balance after all expenses have been charged are returned to the group.Under this agreement, premiums paid in excess of claims and administrative expenses are accumulated in afund, the balance of which can be used to offset rate increases.

Preventive CareThis type of care is best exemplified by routine physical examinations and immunizations. The emphasis is onpreventing illnesses before they occur.

Primary CareBasic health care provided by doctors who are in the practice of family care, pediatrics, and internal medicine.Louisiana law requires insurers to recognize OB/GYNs as primary care physicians.

Prior Authorization

Procedure used in managed care to control utilization of services by requiring prior review and approval. Certainprocedures or drugs may require prior authorization.

Prospective ReimbursementA system where hospitals or other health care providers are paid annually according to rate of payment whichhave been established ahead of time.

Quality AssuranceA formal set of activities to review and affect the quality of services provided. Quality assurance includes qualityassessment and corrective actions to remedy any deficiencies identified in the quality of direct patient,administrative, and support services.

Quality Improvement

A continuous process that identifies problems in health care delivery, tests solutions to those problems, andconstantly monitors the solutions for improvement.

Quality Improvement System for Managed Care (QISMC)An initiative backed by the Health Care Financing Administration to improve the public health by developing auniform quality oversight system. The initiative addresses quality assessment and performance improvement,enrollee rights, health services management, and delegation.

Reasonable and Customary ChargesThe charge for medical services which refers to the amount approved for payment. Customary charges arethose which are most often made by a provider for services rendered in that particular area. Sometimes called“C&R.”

RebateA monetary amount that is returned to a payor from a prescription drug manufacturer based upon utilization by acovered person or purchases by a provider.

ReferralOccurs when a physician or other health plan provider receives permission to consult another physician or hospital.ReinsuranceReinsurance is a transaction whereby one insurer, usually for a fee or premium, agrees to indemnify another insurer against all or part of a loss (risk) that the latter incurs under the insurance policies that it issues. The

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indemnifying insurer assumes the risk and is known as the “Reinsurer.” The insurer being indemnified cedes therisk and is known the “Reinsured.”

Relative Value ScheduleA surgical schedule which basically compares the value of one surgical procedure to another and establishesthe surgical fee to be paid.

Relative Value Unit

Sometimes used instead of dollar amounts in a surgical schedule, this number is multiplied by a conversionfactor to arrive at the surgical benefit to be paid.

Resource Based Relative Value Scale (RBRVS)This is a classification system which is used to determine how physicians will be compensated for servicesprovided under Medicare benefits. May be utilized by private insurers.

Restoration of BenefitsA provision in many Major Medical Plans which restores a person’s lifetime maximum benefit amount in smallincrements after a claim has been paid. Usually, only a small amount ($1,000 to $3,000) may be restoredannually.

Retention

The portion of the premium which is used by the insurance company for administrative costs.

Second Surgical OpinionA cost containment technique to help patients and insurance companies determine whether a recommendedprocedure is necessary, or whether an alternative method of treatment could accomplish the same result. Somehealth policies require a second surgical opinion before specified procedures will be covered, and many policiespay for the second opinion.

Section 125 PlanA plan which provides flexible benefits. This plan qualifies under the IRS code which allows employeecontributions to meet with pre-tax dollars. Also called a Cafeteria Plan.

Self-Funded Plan

Plan of insurance where an employer, which has fairly predictable claim costs, pays the claims rather than aninsurance company. See also Administrative Services Only and Third Party Administrator.

Service AreaThe area, allowed by state agencies or by the certification of authority, in which a health plan can provideservices.

Short-Term Disability InsuranceA group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon. Contrast with Long-Term Disability Insurance.

Split Dollar CoverageAn arrangement of Disability Income Insurance in which the employer and employee each pay a portion of thepremium. The employer purchases coverage for the sick pay or paid disability leave provided as an employeebenefit. The employee pays for disability coverage beyond what the employer provides as a benefit.

Stop-Loss InsuranceThis is a type of reinsurance which can be taken out by a health plan or self-funded employer plan. The plan canbe written to cover excess losses over a specified amount either on a specific or individual basis, or on a totalbasis for the plan over a period of time such as one year.

Subacute CareAn intermediate level of care provided to medically fragile patients who are too ill to be cared for at home, butrequire medical and nursing services at a higher intensity level than is offered in a typical skilled nursing facility.

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Subacute care may be provided in long-term care hospitals, hospital-based skilled nursing units, transitional, or intermediate care units within community-based nursing facilities, as well as in certain other settings.

Subscriber This term has two meanings - first, it refers to a person or organization who pays the premiums, and second, theperson whose employment makes him or her eligible for membership in the plan.

Summary Plan Description

This is a recap or summary of the benefits provided under the plan. It is used most often with employeescovered by self-funded plans.

Supplemental Medical Insurance (SMI)Part B of Medicare is a voluntary program which generally covers physician’s services and various outpatientservices. A premium is charged for electing Part B coverage.

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)This act defines the primary and secondary coverage responsibilities of the Medicare program and also theprovisions to be used by health plans in their contracts with the HCFA (Health Care Financing Administration).

Ten Day Free LookA notice, placed prominently on the face page of the policy, advising the insured of his or her right to examine a

health policy, and if dissatisfied return the policy within ten days for a full refund of premium and no further obligation.

Tertiary CareServices provided by such providers as thoracic surgeons, intensive care units, neurosurgeons, etc.

Third Party Administrator (TPA)An entity that provides administrative services for employers and other associations having group insuranceplans. TPA’s usually administer employer self-funded plans but may act as a liaison between an employer andits insurer.

Third-Party Payor This refers to any organization such as Blue Cross/ Blue Shield, Medicare, Medicaid, or commercial insurance

companies which is the payor for coverages provided by a health plan.

Trend Factor The factor applied to rates which allows for such changes as increased cost of medical providers, the cost of new and expensive medical technology, etc.

Triple OptionA plan where employees have their choice, among different types of provides such as HMO, PPO, or basicindemnity plan. Usually, their choice depends on how much they want to pay for the coverage.

UnderwritingAn insurer’s procedure for analyzing a group or individual applicant to determine whether or not to offer insurance coverage and, if so, at what price. Insurers weigh risk assessment and feasibility based on anapplicant’s past usage and health-risk factors.

Uniform Billing Code of 1992 (UB-92)A federal directive that states how a hospital must provide their patients with bills, itemizing all services includedand billed on each invoice. The UB-92 is the standard bill submitted by hospitals to insurers.

UtilizationA measure of medical service consumption.

Utilization ReviewA formal assessment of a patient’s course of treatment to evaluate the appropriateness of care.

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Waiting PeriodThe period of time between the beginning of coverage and the start of benefits. In case of disability insurance,this is called an “elimination period.” In health policies it means either (1) the time between the effective date of coverage and the date benefits will be paid for a pre-existing condition (“pre-ex waiting period”) or (2) the timebetween an employee’s date of hire and the date on which he is eligible for benefits under his plan.

ACRONYMS and ABBREVIATIONS

AAAPCC Adjusted Average per Capita CostADL Activities of DailyLivingALOS Average Length ofStayASO Administrative ServiceOnlyAWP Average WholesalePrice

BBBA Balanced Budget Act of 1997BCBSA Blue Cross Blue Shield Association

C

C&R/CNR Customary and ReasonableCAP CapitationCEA Charge Exceeds AllowanceCHAMPUS Civilian Health and Medical Program of the Uniformed ServicesCIE Cancer EndorsementCMP Competitive Medical PlanCOA Certificate of AuthorityCOB Coordination of BenefitsCOBRA Consolidated Omnibus Budget Reconciliation Act of 1986CPN Community Pharmacy NetworkCPT Current Procedural TerminologyCSD Cancer/SeriousDisease

DDME Durable Medical EquipmentDOI Department of InsuranceDRG Diagnosis-Related GroupDUR Drug Utilization Review

EEOB Explanation of BenefitsEPO Exclusive Provider OrganizationERISA Employees Retirement Income Security Act of 1974

FFASB Financial Accounting Standards BoardFEP Federal Employees BenefitProgramFFS Fee-for-ServiceFMLA Family and Medical LeaveActFMP Fair Market PriceFSA Flexible SpendingAccount

GGBS Group BusinessSegment

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HHCFA Health Care Financing AdministrationHEDIS Health Plan Employer DataInformation SetHIPAA Health InsurancePortability&Accountability ActHIPCS Health InsurancePurchasing CooperativesHIPMA Health Information PrivacyModel ActHMO Health MaintenanceOrganizationHMP Health MaintenancePlan

IIBNRIncurred But NotReportedIBSIndividual BusinessSegmentIDSIntegrated DeliverySystemIPAIndependent PracticeAssociationITSInter Plan TeleprocessingServices

J-KKEYKey PhysicianNetwork

LLHCC Louisiana Health Care Commission

LHSIC Louisiana Health Service&Indemnity Company(d/b/a Blue Cross andBlue Shield of LouisianaLLHIGA Louisiana Life&Health GuarantyAssociationLTC Long Term Care

MMCO&nsp; Managed Care OrganizationMET Multiple Employer TrustMEWA Multiple Employer Welfare AssociationMLR Medical Loss RatioMNRO Medical Necessity Review OrganizationMSA Medical Savings AccountsMTM Member Touchpoint Measures

NNABP National Association ofBoards of PharmacyNAIC National Association ofInsurance CommissionersNASCO National Accounts ServiceCompanyNCQA National Committee forQuality AssuranceNDC National Drug CodeNMIS National ManagementInformation SystemNOPLG National Other PartyLiability Group

OOED Original Effective Date ofthe ContractOOA Out-of-Area

PPBM Pharmacy BenefitManager PCP Primary CarePhysicianPCR Physician ContingencyReservePCS Pharmaceutical CardSystemPHO Physician HospitalOrganizationPIE Prolonged IllnessEndorsementPIU Provider InquiryUnitPMPM Per Member PerMonthPOS Point of ServicePPM Physician PracticeManagement

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PPO Preferred ProviderOrganizationPSO Provider SponsoredOrganization (Medicare Managed Care)

QQA Quality AssuranceQM Quality ManagementQMISC Quality Improvement Systemfor Managed Care

RR&C Reasonable andCustomaryRBRVS Resource Based RelativeValue ScaleRETRO Retrospective RateDerivation

SSCR Standard Class RateSMI Supplemental MedicalInsuranceSOB Schedule ofBenefitsSPD Summary PlanDescriptionStark Law Prohibits PhysicianSelf-ReferralsSUB Subscriber

TTEFRA Tax Equity and FiscalResponsibility Act of 1982TPA Third PartyAdministrator

U-ZUB-92 Uniform Billing Code of1992UCR Usual Customary andReasonableUR Utilization ReviewURAC Utilization Review AccreditationCommission

Health Insurance Glossary of Terms

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