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Glossary and Acronyms

Glossary of Terms from SelectHealth Trustees Handbook Allowed Amount - This is the dollar amount typically considered full payment by an insurance company and an associated network of healthcare providers. It is typically a discounted rate rather than the actual charge. It is also referred to as the allowable charge, approved charge, maximum allowable, or eligible charges.

Any Willing Provider - A statutory requirement, adopted in some states, for managed care plans to accept any healthcare provider willing to meet the plan’s terms and conditions. The requirement eliminates a managed care plan’s screening process in developing quality- and cost-control programs.

Assignment of Benefits - An arrangement between the insurance company and a network provider for payment. This agreement benefi ts providers by guaranteeing direct payment from the insurance company rather than requiring them to seek payments from the member.

Benefit - The amount payable by the insurer to a claimant, assignee, or beneficiary when the insured suffers a loss covered by the policy.

Benefits Package - A number of services provided by an employer to its employees after a probationary or elimination period of employment. This package could include benefits such as health insurance, life insurance, disability insurance, retirement options, reimbursement accounts, etc.

Claim - A form filed by a healthcare provider to an insurance company either on paper or electronically to request payment for services covered under an insured’s policy.

Contracts - Written agreements between providers and hospitals, providers and health plans, hospitals and health plans, or all three to manage healthcare costs and charges. Healthcare providers who contract are usually placed on a network with other providers who have agreed to the same terms. Contracts also are made between health plans and an employer or between health plans and an individual.

Fee-For-Service - A method of charging whereby a physician or other practitioner bills for each visit or service rendered.

Full-billed Charges - The fee for service a provider invoices for services rendered. This generally occurs when no contract is in place with a provider to allow for a discounted rate. Fully Insured Plans - Plans for which the employer pays a monthly premium to an insurance carrier to assume all of the risk associated with the group insurance claims of their employees.

Health Flexible Spending Account (FSA) - An individual, tax-advantaged, self-insured medical reimbursement plan that can be funded by employee and/or employer contributions. Employee contributions can be made on a pretax basis through "cafeteria plan" salary reduction elections. It reimburses qualifi ed medical expenses, which do not include healthcare premiums and qualified long-term care services.

Health Maintenance Organization (HMO) - An organization that provides health coverage for its members at a low, fixed cost. With an HMO, members receive care provided through the HMO’s network of physicians and facilities.

Health Reimbursement Account (HRA) - An individual, tax-advantaged, self-insured medical reimbursement plan that is only funded by employer contributions. It reimburses qualified medical expenses, including healthcare premiums.

Health Savings Account (HSA) - A portable, nonforfeitable, individual tax-advantaged account that can be funded by contributions from employee, employer, and/or anyone else. It reimburses qualifi ed medical expenses and certain premiums, such as COBRA coverage, long-term care, coverage while on unemployment compensation, or for any health insurance after age 65 except Medicare supplemental policies. It can be used for nonmedical expenses without penalty after age 65—subject only to income tax (before age 65, income tax and 10 percent excise tax are incurred).

High Deductible Health Plan (HDHP) - These plans can be used with a tax-advantaged Health Savings Account (HSA). These plans carry a higher deductible, which is waived for preventive care services.

Indemnity - Compensation or a benefit paid by an insurance policy for insured loss.

Network Providers - A limited grouping or panel of providers in a managed care arrangement with several delivery points. Enrollees may be required to use only network providers or may have financing liability for using nonparticipating providers for medical services.

Point of Service (POS) - The point-of-service option is a combination of HMO and Preferred Provider Organization (PPO) features. This plan provides a comprehensive set of health benefits and offers a full range of health services much the same as the HMO. However, members do not have to choose how to receive services until they need them. The member can then opt to use the defined participating benefits or can go out of the network for services but pay the difference for nonparticipating benefits (e.g., 100 percent coverage for in-network vs. 80 percent coverage for out-of-network).

Preferred Provider Organization (PPO) - This is a managed care arrangement consisting of a group of hospitals, physicians, and other providers who have contracts with an insurer, employer, third-party administrator, or other sponsoring group to provide healthcare services to covered persons.

Premium - The amount paid to an insurer for specific insurance protection. This is either paid by the insured, the insured’s employer, or a combination of both.

Self-funded Plans - These health plans, also known as self-insured plans, are ones where the employer assumes the financial risk of covering its employees and pays medical claims from its own resources. These plans are regulated by the Employee Retirement Income Security Act (ERISA). However, state laws and regulations do not apply to self-funded plans.

Small Employer - Small employers are those organizations that have two to 50 benefits eligible employees.

Third Party Administrator (TPA) -
An independent company that offers administrative services for employers or government entities. The TPA deals with billing, claim processing, and other administrative functions.

Utilization - Patterns of usage for a single medical service or type of service, such as hospital care, prescription drugs, and physician visits. Measurement of utilization of all medical services in combination is typically done in terms of dollar expenditures. Use is expressed in rates per unit of population at risk for a given period, such as the number of annual admissions to a hospital per 1,000 persons over age 65.
 

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