Glossary of Terms

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Accreditation: A professional status given to a health care provider by an organization in exchange for meeting a specific set of standards.

Adjudication: Processing a claim through a series of edits to determine proper payment.

Adjusted Community Rating: The process of determining a group’s premium rate in which an HMO adjusts the standard or pure community rate premium by adding or subtracting an amount that reflects the group’s past claims experience.

Administrative Costs: The costs assumed by a managed care plan for administrative services such as claims processing , billing and overhead costs.

Adverse Selection: A particular health plan, whether indemnity or managed care, is selected against by the enrollee, and thus an inequitable proportion of enrollees requiring more medical services are found in that plan. Example: Low en4rollee out-of-pocket costs might lure those individuals requiring more health services into an HMO rather than an indemnity plan because the former does not have a deductible. Therefore, the HMO would have a greater proportion of less-healthy enrollees, thereby driving up costs and increasing financial risk.

Allowable Charge: The maximum fee that a third party will reimburse a provider for a given service.

Allowable Costs: Items or elements of an institution’s costs that are reimburseable under a payment formula. Allowable costs may exclude, for example, uncovered services, luxury accommodations, costs that are not reasonable and expenditures that are unnecessary.

Ambulatory Care: Outpatient medical services.

Ancillary Care: Additional health care services performed, such as lab work and x-rays.

ASO (Administrative Services Only): A self insured plan contracts with an insurance company for services such as claims processing and stop-loss coverage.

Authorization: As it applies to managed care, authorization is the approval of care, such as hospitalization. Pre-authorization may be required before admission takes place or care is given by non-HMO providers.

Bed Days: A measurement used by managed care plans to indicate the total number of days of hospital care provided to a member of a health plan.

Board Certification: A physician who is board certified has pursued advanced training in his or her specialty and has passed a qualifying examinations; a physician who is board eligible has received the training but has not taken or passed the exam.

Cafeteria Plan: A corporate benefits plan under which employees are permitted to choose among two or more benefits that consist of cash and certain qualified benefits. Cafeteria plans are also called flexible benefit plans or flex plans.

Capitation: A payment structure in which an HMO pre-pays a provider a flat amount for each member’s medical care, usually on a monthly basis.

Carve Out: To seperately purchase services that are typically part of a managed care package. For example, an HMO may “carve out” the vision care benefit and select a specialized vendor to supply these services on a stand-alone basis.

Case Management: The process by which patients with extensive, complex or serious medical conditions can receive planned treatment that is both cost effective and of high quality. Early intervention and a systematic coordination of care among multiple providers are elements of this approach.

Coinsurance: A term used to describe the enrollee’s share of cost. The insurer pays a fixed percentage of the enrollee’s medical expenses, and the enrollee pays the balance.

Community Rating: The process of determining a group’s premium rate in which the HMO sets premium rates based on the average cost of providing care to the HMO’s enrollees. This rating method is required of federally qualified HMOs.

Copayment: A flat, set amount-for example, $5 or $10 - must be paid at the time of service for certain medical services. This is the patient’s out-of-pocket expense for health care treatment.

CPT (Current Procedural Terminology) A set of five-digit codes that apply to medical services delivered.

Credentialing: The process of reviewing a provider’s qualifications to be sure they meet the criteria established by a managed care organization.

Deductible: The part of an individual’s health care expenses that the patient must pay before coverage from the insurer begins.

Direct Contracting: Individual, self-insured employers or business coalitions contract directly with providers for health care services with no HMO or PPO intermediary. This enables employers to include in the plans the specific services preferred by their employees.

Discounted Fee-For-Service: A payment structure in which physicians are paid a certain percentage of their normal fees.

Disease Management: A philosophy toward the treatment of the patient with an illness (usually chronic in nature) that seeks to prevent recurrence of symptoms, maintain high quality of life, and prevent future need for medical resources by using an integrated, comprehensive approach to health care. Pharmaceutical care, continuous quality improvement, practice guidelines and case management all play key roles in this effort, which (in theory) will result in decreased health care costs as well.

EPO (Exclusive Provider Organization) A managed care organization usually made up of a group of physicians, one or more hospitals and other providers who contract with an insurer, employer or other sponsoring group to provide discounted medical services to enrollees. It is similar to a PPO in that it allows the patient to go out of network for care; however, the patients will not be reimbursed if they do so.

Experience Rating: The rating method used by most traditional indemnity insurers, which uses the group claims experience to establish premium rates.

Federal Employees Health Benefits Program (FEHBP): The health benefits program for federal employees that is administered through the U.S. Office of Personnel Management.

Federally Qualified: An accreditation for HMO’s that can be obtained from the Office of Pre-paid Health Care (OPHC). OPHC ensures that an HMO meets certain requirements by conducting an extensive review of its operations and financial strength.

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