KEY HEALTH INSURANCE TERMS AND DEFINITIONS

Obviously, understanding the jargon of any field is essential to

mastering the business done there. In this chapter—before

moving on to detailed discussions of specific health coverages

—we will review some of the key terms and definitions.

ACCIDENTAL

In a health insurance policy, accidental means an

unexpectedcause of bodily injury. A related term— accidental

means—the mishap itself must be accidental...not just the

resulting injury. An example: You are chopping wood when the

ax slips from your hand and cuts your foot; this is accidental

means. However, if your finger gets in the way of the ax, it may

not count as accidental means.

ACCIDENTAL DEATH AND DISMEMBERMENT

AD&D coverage is a policy or a provision of a policy that pays

either a specific amount or a multiple of a weekly disability

benefit. The full coverage takes effect if the policyholder loses

his or her sight—or two limbs—in an accident. (A lower amount

is payable if the person loses one eye or one limb.)

ACUTE CARE

Acute Care means skilled, medically necessary care provided

by medical and nursing professionals in order to restore the

person to health or the ability to function. For example, acute

care would be rendered to persons recovering from major

surgery.

ADDITIONAL INSURED

A person other than the named insured who is protected

under the terms of a policy. Usually, additional insureds are

added by endorsement or are described in the definition of

insured in the policy.

AGE CHANGE

The date on which a persons age—for insurance purposes—

changes is an important coverage point. In most policies,

health insurers use the age at the previous birthday for rate

determinations.

ASSISTED LIVING FACILITY

Assisted Living Facility means a senior residential

community which makes custodial and nursing care available

to residents who need it, while allowing them to live in a home-

like setting.

BASIC PREMIUM

This is a fixed cost charged in a retrospective rating plan. The

basic plan is a kind of starting point—a percentage of the

standard premium, designed to give the insurance company

enough money to cover administrative expenses and

commissions.

BENEFIT PERIOD

The benefit period defines the period during which you are

eligible for benefits. Usually, a 90-day benefit period starts with

each illness and commences the day you are admitted to a

hospital and ends when you haven’t been hospitalized for a

period of 60 consecutive days.

CAPITATION

Capitation (CAP) is the fixed amount of money paid on a

monthly basis to an HMO medical group or to an individual

health provider for the full medical care of an individual.

CASE MANAGEMENT

Case Management means the assessment of a person’s LTC

needs and the appropriate recommendations for care,

monitoring and follow-up as to the extent and quality of the

services provided.

CASE MANAGER

A case manager is a health professional (e.g. nurse, doctor,

social worker) affiliated with a health plan who is responsible

for coordinating and approving the medical care of an

individual enrolled in a managed care plan.

CLOSED PANEL

This is a system in which insured people must select one

primary care physician who will refer patients to other health

care providers within the plan. This is also called a closed

access or gatekeeper system.

COINSURANCE

CoInsurance is the percentage of your medical bills that you

are expected to pay. CoInsurance payments usually constitute a

fixed percentage of the total cost of a medical service covered

by the plan. If a health plan pays 80 percent of a physicians

bill, the remaining 20 percent which the member pays is

referred to as coinsurance.

COPAYMENT

A copayment is the fee paid by a plan member for medical

services. A copayment would be the out-of-pocket expenses you

are expected to pay, such as $10 for an office visit or $5 for a

prescription.

COVERED EXPENSES

Health care expenses incurred by an insured person that

qualify for reimbursement under the terms of a policy are,

simply, covered expenses. This is an easy concept to describe in

the abstract—but it can become quite complicated in a dispute.

DEDUCTIBLE

The sum of money that an individual must pay out of pocket for

medical expenses before a health plan reimburses a percentage

of additional covered medical expenses is called the

deductible. Deductibles for family coverage are often $200 to

$500 per year.

ELIMINATION PERIOD

Elimination Period (EP) means the period of time, usually

expressed in days or months, at the beginning of a confinement

in a long-term care facility, during which no benefits are

payable. The EP could be defined as a “time deductible.”

FEE-FOR-SERVICE

Health insurance plans which reimburse physicians and

hospitals for each individual service they provide are called

fee-for-service plans. These plans allow insureds to chose any

physician or hospital.

FORMULARY

This is a health plan’s list of approved prescription medications

for which it will reimburse members or pay for directly.

GATEKEEPER PHYSICIAN

The primary care physician who directs the medical care of

HMO members is the gatekeeper physician. The primary care

physician determines if patients should be referred for

specialty care.

HEALTH CARE FINANCING ADMINISTRATION

The Health Care Financing Administration (HCFA), part of the

Department of Health and Human Services, administers

Medicare and Medicaid with the assistance of Social Security

Administration offices throughout the country. The HCFA

establishes standards for medical providers and organizations

if they are to satisfy the requirements to be certified as a

qualified Medicare provider.

HEALTH MAINTENANCE ORGANIZATIONS (HMOS)

These are health plans that contract with medical groups to

provide a full range of health services for their enrollees for a

fixed prepaid, per-member fee. There are three different kind

of HMOs:

Group model HMOs contract with independent

groups of physicians that provide coordinated care

for large numbers of HMO patients for a fixed, per-

member fee. These groups will often care for the

members of several HMOs.

Staff model HMOs employ salaried physicians and

other health professionals who provide care solely

for members of one HMO.

Independent practice associations (IPA) contract

with groups of independent physicians who work in

their own

offices. These independent practitioners receive a per-

member payment or capitation from the HMO to provide

a full range of health services for HMO members. These

providers often care for members of many HMOs.

A growing number of HMOs now offer a Point of Service

(POS) option. These “escape hatch” plans allow HMO members

to seek care from non-HMO physicians, but the premiums for

POS plans are more costly than those for traditional HMOs.

Moreover, when an HMO member receives care from a non-

participating physician or hospital, the HMO pays far less than

its usual 100 percent coverage of necessary medical services.

HEALTH INSURANCE PLAN

This term includes an HMO, preferred provider organization or

traditional health insurance plan that covers a set range of

health services.

HOME HEALTH CARE

Home Health Care is care received at the patient’s home,

such as part-time skilled nursing care, speech, physical or

occupational therapy, or part-time services of home health

aides.

HOSPICE CARE

Hospice Care refers to nursing services provided to the

terminally ill. It’s offered in a hospice, a nursing home, or in

the patient’s home—where nurses and social workers can visit

on a regular basis. The purpose of the care is to keep the

patient comfortable and to enable the patient to die with

dignity.

INDEMNITY CONTRACTS

Indemnity Contracts are policies which provide a daily

benefit, such as $50, $60, $70 per day, for each day of

confinement in a hospital or long-term care facility. This

method of payment can be contrasted with an expense incurred

contract which reimburses for actual expenses incurred while

confined.

INTERMEDIATE NURSING CARE

Medically supervised health care and services for individuals

who do not require the level of care and supervision provided

by hospitals or nursing homes is called Intermediate Nursing

Care. Typically, the degree of care provided is between acute

and custodial care.

INTERMEDIARY

Intermediary: A private insurance company contracted by the

Department of Health and Human Services for the purpose of

processing payments to patients and health care providers.

LIMITED HEALTH INSURANCE

These special health insurance policies provided limited

coverage for specific injuries or illnesses—such as travel

accidents, particular diseases and hospital income.

LONG-TERM CARE

Long-Term Care (LTC) is care which is provided for persons

with chronic disease or disabilities. The term includes a wide

range of health and social services which may involve adult day

care, custodial care, home health care, hospice care,

intermediate care, respite care and skilled nursing care. LTC

does not include hospital care.

MANAGED CARE

Managed care refers to a broad and constantly changing

array of health plans which attempt to control the cost and

quality of care by coordinating medical and other health-

related services. The vast majority of Americans with private

health insurance are currently enrolled in managed care plans.

Proposals currently being considered by the United States

Congress would, if enacted, guarantee that many millions of

Americans who are covered by Medicare and Medicaid will

soon join managed health care plans. The following are some of

the key terms associated with managed care.

MEDICAID

Medicaid is the federal-state health insurance program for low

income Americans. Medicaid also foots the bill for nursing-

home care for the indigent elderly and mentally disabled.

MEDICARE

Medicare is a federal health insurance program for persons

age 65 or older, individuals with permanent kidney failure and

certain persons who are totally disabled. The program was

implemented in 1965 as part of the amendments to the Social

Security Act of 1935.

Hospital Insurance of Medicare provides for inpatient

hospital care, skilled nursing home care, home health care and

hospice care. Part A of Medicare is automatically made

available to persons age 65 who have been covered under

Social Security.

Medical Insurance of Medicare is a voluntary program which

covers physician’s services, physical therapy, ambulance

expenses, medical equipment and generally, outpatient

services. A premium is charged to the individual when Part B

coverage is elected.

NURSING HOME CARE

Nursing Home Care includes nursing and custodial care

provided in a nursing home setting.

PEER REVIEW

Groups of doctors who are paid by the federal government to

conduct pre-admission, continued stay and reviews of services

provided to Medicare patients by Medicare approved hospitals

are referred to as peer review organizations (PROs).

PREVENTIVE CARE

An approach to health care which emphasizes preventive

measures such as routine physical exams, diagnostic tests (e.g.

PAP tests), immunization, etc.

PREFERRED PROVIDER ORGANIZATION

A health plan that encourages savings by establishing a

network of preferred providers—health professionals who

agree to provide medical services to plan members for

discounted rates. Plan members may go “out of network” to

seek medical services from non-affiliated medical professionals.

Members are charged higher copayments for this option.

PRIMARY CARE PHYSICIAN

These physicians provide basic health services to their

patients. General practitioners, pediatricians, family practice

physicians and internists are recognized by health plans as

primary care physicians. HMOs require that members be

assigned to a primary care physician who functions as a

gatekeeper.

PROSPECTIVE PAYMENT

A system of Medicare reimbursement which bases most

hospital payments on the patient’s diagnosis at the time of

hospital admission rather than the costs the hospital actually

incurs prior to discharging the patient is called a prospective

payment system.

RESPITE CARE

Normally associated with hospice care, respite care is for the

family of the patient. The patient may be admitted to a nursing

home or hospice for care. This care constitutes a respite—or

break—for family members taking primary care of the patient.

RISK CONTRACT

This is an arrangement through which a health provider agrees

to provide a range of medical services to a population of

patients for a prepaid sum of money. The physician is

responsible for managing the care of these patients and risks

losing money if expenses exceed the predetermined amount.

SKILLED NURSING CARE

Skilled Nursing Care is daily nursing and rehabilitative

care that is performed only by, or under the supervision of,

skilled professional or technical personnel. The care is based

on a physician’s orders and performed directly by or under the

supervision of a registered nurse. This care would include

administering prescription drugs, medical diagnosis, minor

surgery, etc.

A Skilled Nursing Facility is a facility, licensed by the state,

which provides 24-hour-a-day nursing services under the

supervision of a physician or registered nurse.

UTILIZATION REVIEW

This includes the various methods used by health plans to

measure the amount and appropriateness of health services

used by its members. These checks can occur before, during

and after services have been sought or received from health

professionals.

SUMMARY

These are a few of the basic definitions and terms that apply to

insuring your health. You will see these definitions—and others were needed, we will reiterate and expand definitions to

provide you with the tools necessary to understand the

language of health care financing.