Glossary


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Published by AIS Health
© 2018 Managed Markets Insight & Technology, LLC. All Rights Reserved.

A

ACA
See Patient Protection and Affordable Care Act (ACA).

access
A patient’s ability to obtain medical care, determined by factors such as the availability of medical services, their acceptability to the patient, the location of health care facilities, transportation, hours of operation, and cost of care.

accountable care organization (ACO)
A group of coordinated health care providers that give care to a group of patients. The ACO is contractually accountable to the patients and the third-party payer for the quality, appropriateness and efficiency of the health care provided.

accreditation
The process by which a provider or payer is recognized by an industry organization as meeting predetermined industry-wide standards.

actual acquisition cost
The net amount paid by a pharmacist to purchase a drug product, after taking into account such items as purchasing allowances, discounts and rebates.
See also: average wholesale price, maximum allowable cost.

actuarial value (AV)
The percentage of total average costs for covered benefits that a plan will cover. For example, if a plan has an AV of 60%, on average, the patient would be responsible for 40% of the costs of all covered benefits.

actuary
A person in the insurance field who decides insurance policy rates and reserves dividends as well as conducts various other statistical studies.

acute care
Treatment for a short-term or episodic illness or health problem.
See also: chronic care, long-term care, ambulatory care, skilled care, intermediate care, tertiary care.

acute-care hospital
A hospital that provides short-term patient care.

additional drug benefit list
A catalog of pharmaceuticals approved by a managed health care plan for dispensing when a therapy not listed under the benefit package is prescribed.
aka drug maintenance list.

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

adjusted average per capita cost (AAPCC)
The estimated average cost of Medicare benefits for an individual in a particular county. It is based on the following population factors: age, sex, institutional status, Medicaid status and disability status. This formula is used by the Centers for Medicare & Medicaid Services (CMS) to make monthly payments to risk and cost contractors.

adjusted community rate proposals (ACRs)
In the Medicare Advantage program, participating plans are required to submit proposed benefits and cost estimates each year for the following coverage year.

adjusted community rating
Also called prospective rating. Adjusted community rating is set by group demographics and prior experience in the region.
See also: rating.

administrative costs
Health plan costs related to overhead, such as claims processing, premium billing, marketing and commissions, medical underwriting, insurer profit, utilization review and quality assurance programs and risk management.

administrative expense ratio
The ratio of total administrative expenses compared to revenue received. Expressed as [Administrative Expense Ratio]=[Admin Costs]/[Premium Revenue].
aka administrative cost ratio.

administrative services only (ASO)
A contractual arrangement where a health plan provides only sales, marketing, billing and other administrative services for a self-funded group plan, but does not take on any risk for medical expenses or provision of care.
self funding

admissions
The number of patients placed (admitted) in a hospital or inpatient facility for an overnight stay in a given time period.

adult day care
A range of services, such as health, medical, psychological, social, nutritional and educational services, provided to elderly or disabled adults during the day on a regular basis, allowing an adult to remain at home rather than in an institution.

advanced premium tax credit (APTC)
A new tax credit created by the ACA beginning in 2014 for individuals who are not eligible for health insurance coverage through an employer and who have a modified adjusted gross household income between 100% and 400% of the federal poverty level.

adverse selection
When a health plan draws an inequitable proportion of enrollees requiring a high level of medical services. Example: Low enrollee 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.

Affordable Care Act
See Patient Protection and Affordable Care Act (ACA).

aftercare
Services that are administered after hospitalization or rehabilitation that are individualized for each patient’s needs.

Agency for Healthcare Research and Quality (AHRQ)
Created by Congress in 1989 to conduct federal research into technology assessment and outcomes management, and to develop practice guidelines for public dissemination. The AHRQ is perhaps best known for funding the patient outcomes-based research trials (PORTs) that form the basis for its practice guideline efforts.

aggregate stop loss
A form of insurance coverage that protects the employer against an accumulation of claims exceeding a certain level.
See also: stop loss.

all product clauses
A clause in a contract between a managed care firm and a provider that requires the provider to participate in all benefit packages offered by the firm or none at all.

allied health personnel
Trained and licensed health workers other than physicians, dentists, optometrists, chiropractors, podiatrists and nurses. The term is sometimes used synonymously with paramedical personnel, all health workers who perform tasks that must otherwise be performed by a physician, or health workers who do not usually engage in independent practice.

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 reimbursable under a payment formula. Allowable costs may exclude, for example, uncovered services, luxury accommodations, costs that are not reasonable and expenditures that are unnecessary.

alternate care
Medical care received in lieu of inpatient hospitalization. Examples include outpatient surgery, home health care and skilled nursing facility care. It also may refer to nontraditional care delivered by providers such as midwives.

alternative delivery systems
An expression used at one time to describe all forms of health care delivery systems other than traditional fee-for-service indemnity health care.

alternative therapy
Otherwise known as complementary care, it is the use of unconventional treatments such as chiropractic, homeopathy, massage therapy and acupuncture.

ambulatory care
Health services delivered on an outpatient basis. If the patient visits a doctor’s office or surgical center without an overnight stay, it is considered ambulatory care.

ambulatory payment classifications (APCs)
Groups of services and procedures that have similar clinical characteristics and resource consumption. They form the basis of payment for hospital outpatient services under Medicare.

ambulatory setting
A type of health care setting where health services are provided on an outpatient basis. Ambulatory settings include physicians’ offices, clinics and surgery centers.

America’s Health Insurance Plan (AHIP)
National trade association representing more than 1,000 managed care plans. Created by the merger of the Group Health Association of America and the American Managed Care and Review Association in 1995.

American Health Benefit Exchange (AHBE)
An individual public health insurance exchange offering premium tax credits.

American Society of Health-System Pharmacists (ASHP)
Trade group for pharmacists in hospitals and managed care systems.

ancillary care or ancillary services
Supplemental health care services performed in addition to acute care services. Includes lab work and radiology services.

any willing provider laws
Laws that require managed care plans to contract with all health care providers that meet their terms and conditions.

assignment of benefits
The process by which a claimant requests that benefits paid pursuant to a claim go to a designated person, physician or hospital.

at risk
Term used to designate financial liability in compensation/reimbursement arrangements. A provider may be at risk for additional costs, for example, if the expense of caring for a particular panel of patients exceeds the provider’s capitation payment.
risk, fully funded

attachment point
The amount of claims liability that must be reached before a stop-loss or reinsurance policy kicks in.

authorization
As it applies to managed care, authorization is the approval of care, such as hospitalization. Preauthorization may be required before admission takes place or care is given by out-of-network providers.

average length of stay
The average period of time an inpatient stays in the hospital, used to measure a hospital’s efficiency in providing services.

average wholesale price (AWP)
The average cost of pharmaceuticals charged to a pharmacy provider by a large group of pharmaceutical wholesale suppliers. The price that drug manufacturers suggest wholesalers charge retail pharmacies for their products.
See also: actual acquisition cost, maximum allowable cost.

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B

balance billing
When a provider bills a patient for the difference between what the payer is contractually obligated to pay (per the managed care contract between the provider and the payer) and what the provider would normally charge for the service rendered.

Balanced Budget Act of 1997
This legislation formally allows provider-sponsored organizations to participate in the Medicare program, changes the way in which health plan premiums are paid for Medicare enrollees and designates what types of home health services the Medicare program will pay for and how they will be reimbursed.

Basic Health Program (BHP)
Created under the ACA, the BHP uses federal tax money to subsidize insurance coverage for low-income residents and improve continuity of care for people whose income fluctuates above and below Medicaid eligibility levels.

bed days
A measurement used by MCOs to indicate how much hospital utilization a health plan has experienced in the aggregate, often expressed as “bed days per 1,000” (members per year). Also used to measure ambulatory utilization in “visits per 1,000.”

benchmark plan or EHB benchmark plan
A state-chosen plan, meeting federal actuarial guidelines, that serves as a reference point for the implementation of essential health benefits as defined by the federal government under the ACA.
See also: essential health benefits.

beneficiary
A person who is eligible to receive insurance benefits.

benefit levels
The limit or degree of service a person is entitled to receive based on his or her contract with a health plan or insurer. The dollar value of the services a person is entitled to receive under their health plan.

benefit package
A set of services an insurer, government agency, health plan or employer offers under the terms of a contract.

benefit plan
An entity that pays claims for a defined benefit, such as an insurance company, MCO or TPA.

biotech drugs
Medications or therapeutic compounds derived from living systems, tissues or organisms.
aka biotechnology, biomedical.

Blue Cross and Blue Shield
Blue Cross and Blue Shield are trademarked brands owned by the Blue Cross and Blue Shield Association. Only plans that are licensed by the association may use those brands in their company name or product names. BCBS plans are licensed to cover specific areas, ensuring that they are not in competition with one another. This allows local and regional carriers to have nationally recognized branding power, along with the lobbying power of a national association. BCBS plans cover one another's members who are outside of their home service area under the BlueCard program.

BlueCard
A program of the Blue Cross and Blue Shield Association that allows BCBS licensed plans to cover one another's members who are outside of their home service area. The plan that is contracted to cover the member is known as the "home" plan, and the plan with jurisdication in the service area in which the member is currently residing is known as the "host" plan.

brand name drug
Drugs marketed under a specific name given by the manufacturer, as opposed to generic drugs, which are marketed by the common (or chemical) name.

broker
A person who represents an insured in procuring insurance policies.

business coalition
A group of employers who use their pooled resources and leverage to study health benefits and, in some cases, purchase health benefit packages.

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C

cadillac tax
A 40% excise tax created in the ACA that is imposed on the value of health insurance benefits exceeding a certain threshold beginning in 2008. The thresholds are $10,200 for individual coverage and $27,500 for family coverage (indexed to inflation).

cafeteria plan
A corporate benefits plan under which employees are permitted to choose among two or more benefits. Cafeteria plans are also called flexible benefit plans or flex plans.

capacity
An organized system’s ability to meet the demands of patient or enrollee needs. For a hospital, capacity might include routine, scheduled and after-hours care. For a health plan, it might be measured in terms of the plan’s ability to provide health and administrative services using provider networks, information systems and customer relations staff.

capitated financial alignment model
A CMS-designed financial model in which CMS, a state and a health plan enter a three-way contract. The health plan receives prospective payments for coordinated care services.
three-way contract

capitation
A per-member, monthly payment to a provider that covers contracted services and is paid in advance of delivery of services. In essence, a provider agrees to provide specified services to plan members for this fixed, predetermined payment for a specified length of time (usually a year), regardless of how many times the member uses the service. The rate can be fixed for all members or it can be adjusted for the age and sex of the member, based on actuarial projections of medical utilization.

capitation rate
The rate paid to health plans, per member per month, prospectively, to provide care to members covered under the dual-eligibles demonstration project. The capitation rate is calculated as the sum of monthly capitated payments for Medicare Parts A and B, Medicare Part D and state Medicaid services.

care coordination
A model of care for beneficiaries with myriad health and social needs. Typically, a coordination team made up of behavioral, acute, primary medical and LTSS specialists work together with individual beneficiaries to ensure their needs are met while preventing medical errors or duplication of services. Can also be referred to as a medical home.

carve-out
To separately 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 in a particular market on a stand-alone basis.
See also: rider.

case management
The process whereby a health care professional supervises the administration of medical or ancillary services to a patient who typically has a catastrophic disorder or who is receiving mental health services. The role of the case manager is to reduce the costs associated with the care of such patients, while also assuring that the care provided is high quality.

case manager
An experienced professional (usually a nurse, physician or social worker) who handles catastrophic or high-cost cases as a member of a utilization management team. Case managers work with patients, providers and insurers to coordinate all health care services.

case mix
The mix of patients treated by a hospital, physician or health plan. It’s typically expressed in terms of the severity of illness, demographic characteristics, number and frequency of hospital admissions or managed care services utilized.

case rate
A flat fee charged for a group of services by diagnosis, usually limited by a certain period of time, also called bundling.
See also: global payment.

catastrophic health insurance
Insurance beyond basic and major medical coverage for severe and prolonged illness, which poses the threat of financial ruin.

ceiling
The limit on the amount of money an insurance company will pay for a certain claim.

Center for Consumer Information and Insurance Oversight (CCIIO)
The government agency charged with helping implement many provisions of the Affordable Care Act. CCIIO oversees the implementation of the provisions related to private health insurance. CCIIO is part of the Centers for Medicare & Medicaid Services, which is part of the Department of Health & Human Services (DHHS).

Centers for Medicare & Medicaid Services (CMS)
The federal agency responsible for administering the Medicare program and overseeing states’ management of Medicaid programs. Formerly known as the Health Care Financing Administration (HCFA).

centers of excellence
A network of health care facilities selected for specific services based on criteria such as experience, outcomes, efficiency and effectiveness. For example, an organ transplant managed care program wherein members access selected types of benefits through a specific network of medical centers.

certificate of coverage
A description of the benefits included in a carrier’s plan. The certificate of coverage is required by state laws and represents the coverage provided under the contract issued to the employer (purchaser).

certification
Certification is the official authorization for use of services.

chain pharmacy
One of a group of pharmacies under the same management or ownership.

channel management
The process by which a producer or supplier directs marketing activity by involving and motivating parties comprising its channel of distribution. In pharmaceuticals, the traditional channel is manufacturer, wholesaler, pharmacy (retailer) and consumer.

chargeback
An amount of money returned by a pharmaceutical manufacturer—directly or through a wholesaler—to a health plan after the purchase of pharmaceuticals. A chargeback is essentially a “discount” for the purchase of the pharmaceuticals. It is usually the difference between the average wholesale price of a drug and the price bid by the pharmaceutical manufacturer.

charge-based payment system
A system of paying for a health care service (usually a hospital or other facility) on the basis of what the provider furnishing the service usually charges all patients. For instance, a health plan contract may specify that the payer will reimburse a provider via a certain percentage of the usual charge.

Children’s Health Insurance Program (CHIP)
A government program that provides subsidized coverage for low- and moderate-income children. Both the state and federal government jointly fund and administer CHIP.

claim
Information submitted by a provider or covered person to establish that medical services were provided to a covered person, from which processing for payment to the provider or covered person is made.

claims clearinghouse system
A system that allows electronic claims submission through a single source.

claims repricing
The process of applying negotiated discounts to claims submitted under a PPO plan. This service can be performed via special software and/or vendors.

claims review
The method by which an enrollee’s health care service claims are reviewed before reimbursement is made. The purpose of this monitoring system is to validate the medical appropriateness of the provided service and to be sure the cost of the service is not excessive.

clinical outcome
The state of a patient’s health after receiving medical care.

coding systems
Systems for identifying services provided on claims. See Healthcare Common Procedure Coding System (HCPCS), ICD-9 System, NDC Coding System for examples.

coinsurance
The amount paid by the patient to the provider for covered services in an indemnity, POS or PPO plan. In a typical example, the health plan would pay 80% of the covered service and the patient would pay the other 20% as coinsurance.
See also: cost sharing, copay.

commercial health plan
Any health plan sponsored by commercial or government employers (including FEHBP/FEP), employer groups or unions, or purchased directly by individuals in a commercial marketplace. In the commercial group market, the client/sponsor pays premiums for one or more health plan products that it makes available to its employees and their dependents as a benefit of working for the company or belonging to the group. In most cases the employee members pay a portion of the premium as determined by the employer/sponsor. Individual or SHOP plans marketed on public exchanges are Commercial, even if the member qualifies for a subsidy. AIS defines all health plans as commercial unless they are part of a public entitlement program.

community rating
A method in which actuarial statistics are used regarding a total population to determine a uniform premium.
See also: rating.

comparative-effectiveness research (CER)
Type of research designed to inform health care decisions by providing evidence of the effectiveness, benefits and harms associated with specific treatment options. Evidence is generated from research studies that compare drugs, medical devices, tests, surgeries or ways to deliver health care. Evidence is found through two ways: researchers conduct research reviews of existing clinical trials, clinical studies and other research; and researchers conduct studies that generate new evidence.

comparison group
A group of duals living in a region where there is no demonstration activity. States can use such groups to compare quality of care, cost, etc. with duals participating in the demo.

competitive medical plan (CMP)
Alternative health care delivery mechanisms, such as preferred provider organizations or other health insurance services or prepaid plans (other than health maintenance organizations), that meet Medicare qualifications for a risk-sharing contract.

compliance
The degree to which a provider or payer complies with the terms of a contract, regulation or law.

comprehensive care
A broad spectrum of health services that are required to prevent, diagnose and treat physical and mental illnesses and to maintain health. Comprehensive care includes both physician and hospital services.

concurrent review
A screening method used to review a hospital stay or other treatment while it is ongoing. Some concurrent reviews are conducted by a health care provider performed by a colleague in order to assess its necessity. Health plans also use this strategy to reduce utilization by placing a health plan staff person at the provider site to review charts and other patient information to make sure the treatment is medically necessary.

Consolidated Omnibus Budget Reconciliation Act (COBRA)
A law that requires employers to offer continued health insurance coverage to employees who have had their health insurance coverage terminated.

consultant pharmacist
A pharmacist who provides pharmacy and clinical services to a long-term care facility. Often, a consultant pharmacist has a community pharmacy practice and offers his or her services to local nursing homes. The services provided include drug regimen review and pharmaceutical care, among others.

Consumer Assessment of Health Plans Survey (CAHPS)
A consumer survey of satisfaction levels with health plans’ administrative services.

consumer operated and oriented plan (CO-OP)
A non-profit, non-government, consumer-driven health plan that would serve as an alternative to a private health insurance program. A health insurance co-op would be owned and controlled by people and small businesses that purchase health coverage from the co-op, not by insurance companies or outside investors. CO-OPs were initiated by the ACA, which allowed for start-up loans for new CO-OPs. That funding was later rescinded under tax relief legislation.

consumer-directed health plan (CDHP)
A model of health plan that starts with a traditional HMO or PPO network-based plan, and then combines a high deductible, a consumer funding mechanism such as an HSA, and various information and decision-support tools for consumers. The goal is to engage the consumer in decisionmaking to reduce waste and encourage compliance with medical treatments.

continuous quality improvement
A cycle of monitoring, evaluation, action and more monitoring that has the intended effect of continuously raising the level of quality delivered.
See also: total quality management.

continuum of care
Clinical services provided during a single inpatient hospitalization, or for multiple conditions over a lifetime. It provides a basis for evaluating quality, cost and utilization over the long term.

copay
A fee, usually nominal, paid by patient to the provider when services are utilized. This can either be a fixed amount for each service or a percentage.
aka copayment.

copay coupons
Coupons or subsidy cards to reduce copays on prescription drugs. They may be provided to consumers by drug manufacturers or by insurers wishing to drive utilization of certain products.

cost containment
A strategy that aims to reduce health care costs and encourages cost-effective use of services.

cost effectiveness
Usually considered as a ratio, the cost effectiveness of a drug or procedure, for example, relates the cost of that drug or procedure to the health benefits resulting from it. In health terms, it is often expressed as the cost per year per life saved or as the cost per quality-adjusted life-year saved.

cost sharing
A financing arrangement whereby the member of a health plan must pay some of the costs to receive care. Examples of cost sharing include copays, coinsurance and deductibles.

cost shifting
The redistribution of payment sources. Typically, cost shifting occurs when a discount on provider services is obtained by one payer, and the providers increase costs to another payer to make up the difference.

cost-based health maintenance organization
A type of managed care organization that will pay for all of the enrollees/members’ medical care costs in return for a monthly premium, plus any applicable deductible or co-payment. The MCO will pay for all hospital costs (generally referred to as Part A) and physician costs (generally referred to as Part B) that it has arranged for and ordered. Like a health care prepayment plan (HCPP), except for out-of-area emergency services, if a Medicare member/enrollee chooses to obtain services that have not been arranged for by the HMO, he/she is liable for any applicable deductible and coinsurance amounts, with the balance to be paid by the regional Medicare intermediary and/or carrier.

cost-based reimbursement
Also referred to as retrospective reimbursement. A method of paying hospitals for actual costs incurred by the patient. Those costs must conform to explicit principles defined by third-party payers.

cost-benefit analysis
An assessment of both costs and outcomes in dollar terms. Performed to help maximize the return on investment made in alternative pharmaceutical products and services that provide a variety of outcomes. In cost-benefit studies, recognition of who pays the costs and who receives the benefits is significant.

cost-effectiveness analysis
The underlying premise of cost-effectiveness analysis in health-related decisions is that, for any given level of resources available, the decision maker wishes to maximize the aggregate health benefits conferred to the population of concern. Alternatively, a given health benefit goal may be set with the objective of minimizing the cost to achieve it.

cost-minimization analysis
This pharmacoeconomic technique finds the lowest cost among pharmaceutical alternatives that provide clinically equivalent outcomes.

cost-utility analysis
Measures the costs of therapy in dollars. Economists use the term “utility” to refer to the amount of satisfaction a consumer receives from consuming a particular good. Cost-utility analysis, therefore, measures outcomes in terms of patient preference and quality. In contrast, cost-effectiveness analysis measures the total costs of therapy compared to the number of life-years gained. In cost-utility analysis, patient preference for outcomes is considered in the measurement of quality-adjusted life-years. For example, in the analysis of cancer chemotherapeutic agents, since different agents have varied side effects, the quality of life-years gained may vary even though the number of years is equivalent. The patient’s preference for a shorter duration of symptom-free survival is considered as an alternative to life prolongation, possibly associated with pain, suffering and dependence on others.

counter detailing
A strategy by which pharmceutical manufcturers or other health care professionals discuss with physicians why they should not be prescribing a particular pharmaceutical therapy--one that is in competition with the a product that is preferred by the entity initiating the meeting. This type of physician education is used to alter drug utilization and drug formulary compliance.
See also: detailing.

coverage period
The time period for which a member receives coverage, using lasting one year.

coverage waiver
An agreement attached to an insurance policy that exempts certain disabilities or injuries from those that are normally covered by the policy.

covered person
An individual who meets a health plan’s eligibility requirements and for whom premium payments are paid for specified benefits of the contract between the insurance carrier and a contract holder.

credentialing
Review procedure to determine whether a health care provider should be entitled to clinical privileges at a hospital or to contract with an MCO, based on his/her credentials. May include registration, certification, licensure, professional association membership or the award of a degree in the field.

current procedural terminology (CPT)
A five-digit code that accompanies a list of medical services performed by physicians and other providers. Used to identify physician services, such as injections and surgeries, for purposes of reimbursement.

customary charge
The typical amount charged by a provider for a particular service. Payers typically pay the provider a percentage of this amount. See usual and customary.

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D

data retrieval
The collection of patient care data from medical records.

decision tree
The fundamental analytic tool for decision analysis, it displays the temporal and logical sequence of a clinical decision problem. It has three structural components: the alternative actions that are available to the decision maker; the probable events that would realistically follow from and affect these actions, such as clinical information obtained or the clinical consequences revealed; and the outcomes for the patient that are associated with each possible scenario of actions and consequences

deductible
An amount that the insured member must pay out of pocket for procurement of health services before benefits become payable. A cost-sharing technique most commonly used by indemnity plans.

defined contribution
A new structure for providing health benefits to employees, whereby the employer gives the employee a set or “defined” amount of money to spend on health insurance, and the employee negotiates directly with an insurer or MCO for the health benefit package of his/her choice. Not widely practiced yet.

demonstrations
Projects and contracts that CMS has signed with various health care organizations. These contracts allow CMS to test various or specific attributes such as payment methodologies, preventive care, social care, etc., and to determine if such projects/pilots should be continued or expanded to meet the health care needs of the Nation. Demonstrations are used to evaluate the effects and impact of various health care initiatives and the cost implications to the public.
The dual-eligibles demonstration, also known as the Financial Alignment Initiative, is a three-year partnership states can apply to enter with CMS in order to test a model of coordinated care for dual-eligible beneficiaries.

dependent
An individual who receives health insurance through a spouse, parent or other family member.

detailing
When pharmaceutical manufacturer representatives visit physician offices in order to educate the physician about their products and encourage the physician to prescribe them. Free product samples and/or coupons or vouchers are distributed at these meetings.
See also: counter detailing.

diagnosis-related group (DRG)
A program in which hospital procedures are rated in terms of cost and intensity of services delivered. A standard rate per procedure is derived from this scale, which is paid by Medicare for its beneficiaries, regardless of the cost to the hospital to provide that service.

direct contracting
Employers contract directly with hospitals, physicians and other providers to provide health services to covered employees, eliminating the role of health plan in negotiating and providing services.

direct contract-model HMO
An HMO that contracts directly with individual physicians.

direct costs
Costs that are wholly attributable to the service in question. For example, the services of professional and paraprofessional personnel, equipment and materials.
See also: indirect costs.

discounted fee for service
A contractual arrangement between a payer and provider in which the provider accepts a discounted rate off the fee schedule in order to increase the volume of patients seen.

disease classification
A list of related diagnoses in a limited number of clinically homogeneous categories, usually to support the analysis of the quality, access, utilization and cost of health care services.
See also: therapeutic class.

disease episode
The time period in which a person has a specific disease or disorder.

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 will theoretically result in decreased health care costs as well.

disease state
A medical condition that presents a specific group of symptoms, clinical signs and laboratory assessments.

disenrollment
The procedure involved when individuals or groups leave enrollment with a health carrier.

dispensing fee
A charge levied by pharmacists and added to the price of a drug, which covers both their pharmaceutical expertise and the cost of filling the prescription. Usually a set dollar amount, but sometimes a percentage of the drug cost, added to the total price of the drug.

drug edits
Also referred to as online edits or alerts. A function of the point-of-service prescription drug claims processing system that alerts the pharmacist to a situation that may preclude filling that prescription for that particular patient. Examples are if the drug is not covered under the patient’s health plan and a substitution is recommended, or if there are contraindications to that patient taking that drug, such as a possible adverse interaction with the patients other medications. Drug edits can be employed for any situation that the health plan designs in order to enforce formulary objectives or provide patient or pharmacist education.
See also: on-line adjudication, point of sale.

drug regimen review (DRR)
A frequent evaluation of the medications being taken by a patient in intermediate or long-term care facilities. Typically performed by a pharmacist, DRR is especially useful in avoiding adverse drug reactions and drug interactions in patients taking multiple medications.

drug use evaluation (DUE)
An evaluation of prescribing patterns of physicians to specifically determine the appropriateness of drug therapy. There are three forms of DUE: prospective (before or at the time of prescription dispensing), concurrent (during the course of drug therapy), and retrospective (after the therapy has been completed).

drug utilization review (DUR)
The process of retrospectively evaluating prescription drug use, physician prescribing patterns, or patient drug utilization to determine the appropriateness of drug therapy.

dual demonstration
The demonstration, also known as the Financial Alignment Initiative, is a three-year partnership states can apply to enter with CMS in order to test a model of coordinated care for dual-eligible beneficiaries.

dual eligible
An enrollee who is eligible to receive both Medicare and Medicaid benefits.

durable medical equipment (DME)
Equipment that can be repeatedly used, is primarily and customarily used to serve a medical purpose, generally is not useful to a person in the absence of illness or injury, and is appropriate for use at home. Examples include hospital beds, wheelchairs, and oxygen equipment.

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E
Early Periodic Screening, Diagnosis, and Treatment (EPSDT)
A mandatory benefit under Medicaid in all 50 states intended to offer all enrollees under 21 screening for a variety of physical or behavioral problems.

electronic data interchange (EDI)
The electronic exchange (through computers) of information between two or more organizations. In the health care setting, EDI has made enormous gains in the transmission of claims information.

electronic health record (EHR)
An electronic version of a patient’s medical history that is maintained by a provider over time.

eligible dependent
A dependent of a covered employee who meets the requirements specified in the group contract to qualify for coverage.

eligible employee
An employee who meets the eligibility requirement specified in the group contract to qualify for coverage.

Emergency Medical Treatment and Active Labor Act (EMTALA)
Part of the Comprehensive Omnibus Budget Reconciliation Act of 1986 (COBRA), this statute dictates how Medicare-participating hospitals handle emergency patients, including stabilizing conditions, transferring and refusing treatment.

employee assistance program (EAP)
A group of job-based benefits sold by managed behavioral health companies to employers. Benefit typically encompass counseling, referral services and some case management functions.

employee contribution
The portion of the insurance premium paid by the employee.

Employee Retirement Income Security Act of 1974 (ERISA)
A law that mandates reporting and disclosure requirements for group life and health plans. ERISA is enforced by the U.S. Dept. of Labor’s Employee Benefits Security Administration (EBSA).

employer mandate
The requirement of the ACA that employers with at least 50 employees must provide health insurance or pay a penalty. This provision was delayed until 2015.

encounter data
Information submitted by a provider to a payer describing the range and severity of services provided to a patient during an encounter, often used to determine the payment level.

enrollee
A health plan member. Someone who is enrolled in a health plan.

episode of care
All treatment rendered in a specified time frame for a specific disease.

essential community providers (ECPs)
Providers that serve predominately low-income, medically underserved individuals; the ACA requires that issuers that offer plans on the health insurance marketplace include in their network a sufficient number and geographic distribution of ECPs.

essential health benefits (EHBs)
10 broad health care service categories that must be covered by insurance policies and all Medicaid state plans by 2014 in order to be certified and offered in the health insurance marketplace.

evidence-based medicine
The practicing of employing the latest clinical research into healthcare decisionmaking.

exchange
See American health benefit exchange (AHBE), federally facilitated exchange (FFE), group market exchange, health insurance exchange (HIX), individual market exchange, private exchange, public exchange, small business health options program (SHOP).

exchange platform
The technological infrastructure that allows a health insurance exchange to function, facilitates the flow of data between all stakeholders, and includes an online graphical user interface for people shopping for coverage on the exchange.

excluded services
Healthcare services not covered by a health insurance company or plan.

exclusionary formulary
A formulary that name specific drugs that the plan will not reimburse. This is used as a bargaining chip to favor a preferred drug product -- one that is in competition with the excluded drug(s) -- in return for best possible pricing on the preferred product.

exclusive provider organization (EPO)
The EPO is a form of preferred provider organization (PPO) in which patients must visit a caregiver that is on its panel of providers. If a visit to an outside provider is made, the EPO will offer limited or no coverage for the office or hospital visit. This plan is less flexible than a PPO, but differs from an HMO in that it is not prepaid.

experience rating
A method in which actuarial statistics are used regarding a specific group’s medical experience (e.g., age, sex, etc.) to determine the premium. For example, if an employer with ten workers has three with diabetes, that employer’s health insurance premiums would be higher than an employer with 10 healthy workers.
See also: rating.

experimental procedures
Also called investigational or unproved procedures. Any health care services, supplies, treatments or drug therapies that have been determined by the health plan to not be generally accepted by health care professionals as effective in treating the illness for which their use is proposed.

explanation of benefits (EOB)
An Explanation of Benefits (EOB) is a record of care charges and benefit plan payments provided by the payer to the patient. Whenever health care services are received, the carrier sends an EOB to the primary account holder. The form details what claim was submitted, what has been paid, and what is owed by the customer.

extended care facility
A nursing home-type setting that offers skilled, intermediate or custodial care.

extension of benefits
A component of some insurance policies that allows medical coverage to continue past the termination date of the policy for employees not actively at work.

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F

family practitioner
A physician who specializes in family medicine, and treats family members of all ages. Family practitioners often serve as primary care physicians.

Federal Employees Health Benefit Program (FEHBP)
The FEHB program became effective in 1960 and is the largest employer-sponsored group health insurance program in the world, covering more than 8 million federal employees, retirees, former employees, family members and former spouses.
aka FEHBP or FEP.

federal poverty guidelines or federal poverty level (FPL)
The set minimum amount of gross income that a family needs for food, clothing, transportation, shelter and other necessities. The FPL varies according to family size and is issued each year in the Federal Register by the Department of Health and Human Services. It is used for administrative purposes, most commonly for determining financial eligibility for certain federal programs. In 2013 the FPL was $11,490, $19,530 and $27,570 for an individual, three-person and five-person family, respectively.

federally facilitated exchange (FFE)
A health insurance marketplace established and operated by the federal government in states that do not establish their own, under authority of the ACA.

federally facilitated marketplace (FFM)
See federally facilitated exchange (FFE).

federally qualified
An HMO that meets certain standards mandated by the Public Health Service Act. Two of these standards include prepaid care for a fixed amount per month or year and community rating. A federally qualified HMO has been qualified by the Centers for Medicare & Medicaid Services (CMS) to contract on a full-risk, capitation basis for Medicare enrollees. All federally qualified HMOs must also meet the licensing requirements of the states where they operate.

federal-state partnership exchange
See state partnership exchange (SPE)

fee for service
Traditional provider reimbursement, in which the physician is paid according to the service performed. This is the reimbursement system used by conventional indemnity insurers.

For certain government-funded programs, this refers to a reimbursement system under which a provider or state is paid according to the services provided, as opposed to a capitated rate. A fee schedule dictates the allowed payment for each service.

fee schedule
A comprehensive listing of fees used by either a health care plan or the government to reimburse physicians and/or other health care providers on a fee-for-service basis.

first-dollar coverage
A feature of an insurance plan in which there is no deductible, and therefore the plan’s sponsor pays a proportion of or all of the covered services provided to a patient as soon as he or she enrolls.

fiscal intermediary
A company that has contracted with CMS to process Medicare claims from hospitals and other providers and remit payment for services.

formulary
A list of drugs chosen by a hospital, MCO or other health plan that is used to treat patients. Drugs not listed on the formulary are only used in rare, specific circumstances. In a pharmacy benefit plan, formulary can refer to either a list of preferred drugs or a list of covered drugs. Under the ACA, health plan formularies are typically divided into four tiers--generic drugs, preferred brand drugs, non-preferred brand drugs, and specialty drugs.

formulary tiers
A system by which health plan members pay higher or lower cost-sharing amounts depending on whether the product is in the first, second, third or fourth tier as defined by the health plan's formulary.
In most, the first tier has the lowest copay amount and the highest tier has the highest cost-sharing requirement.
See also: generic drugs, preferred drugs, non-preferred drugs, specialty drugs.

fraud and abuse
Willfully misleading payers about the number or scope of health services rendered in order to gain increased payment.

fully funded
An insurance product in which the insurance company is at full risk for any medical losses incurred by the covered population.
risk, non-risk

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G

gag clause or gag rule
A statement in an managed care provider contract that prohibits the provider from revealing financial compensation relationships with the health plan and possibly from criticizing the MCO under threat of removal from the provider network. Such clauses have generally been abandoned by MCOs or are now prohibited by state law.

gatekeeper
A physician who provides primary healthcare and authorizes all other care except in case of an emergency. Most HMOs rely on the primary care physician, or “gatekeeper,” to screen patients seeking medical care to prevent unnecessary referrals to costly specialists. The gatekeeper coordinates all medical services including lab work, specialist services, and hospitalizations. In most HMOs, if an enrollee visits a specialist without prior authorization from his or her designated primary care physician, the medical services delivered by the specialist will have to be paid in full by the patient.

general practitioner
A physician who specializes in general practice. A general practitioner often serves as a primary care physician and also as a “quarterback” for an individual’s health care needs, coordinating referrals to other specialists, when appropriate.

generic drug
A chemically equivalent copy designed from a brand-name drug whose patent has expired. Typically less expensive and sold under the common name for the drug, not the brand name.
The generic drug tier is the level of the formulary under which generic drugs are covered. Typically plans require the lowest member cost share at this tier.

generic substitution
In cases in which the patent on a specific pharmaceutical product expires and drug manufacturers produce generic versions of the original branded product, the generic version of the drug (which is theorized to be the exact same product manufactured by a different firm) is dispensed, even though the original product is prescribed. Some MCOs and Medicaid programs mandate generic substitution because of the generally lower cost of generic products.

genomics
A scientific discipline that applies research and knowledge of the genome, and DNA sequencing, to developing diagnostic and therapeutic products and strategies.

global budgets
Prospectively defined caps on spending for some portion of the health care industry, which would ultimately establish binding targets for permissible growth in the U.S. public and private health care system.

global payment
A method of compensation in which a hospital, for example, receives one negotiated payment for all care rendered to a patient undergoing a particular surgical procedure. Therefore, the hospital is at risk for all expenses incurred beyond the global payment.

grandfathered plan
In relation to the ACA, these are group health plans, or individual health insurance policies, that were created or purchased on or before March 23, 2010. These plans are not required to meet the standards of Qualified Health Plans (QHPs) under the ACA. New plans created or purchased after March 23, 2010, must meet the ACA's QHP standards.

group health
A body of subscribers eligible to purchase health insurance (or other insurance) as a group, by virtue of some common identifying attribute. Groups can be formed by people who are employed by the same employer, or are members in a union, association or other organization.

group market exchange
A private health insurance marketplace that sells group health insurance to employees of employers.

group practice without walls
Physicians are organized to share common administrative costs in a corporate structure, but they still maintain separate practices and revenue streams. Group practices without walls can be single specialty or multispecialty and are often formed by physicians in an attempt to gain the security that goes along with teaming up with other physicians in a very competitive environment.

group-model HMO
In a group-model HMO, the HMO contracts with a group of physicians, which is paid a set amount per patient to provide a specified range of services. The group of physicians determines the compensation of each individual physician, often sharing profits. The practice may be located in a hospital or clinic setting. Popularized by Kaiser Permanente, one of the pioneers of the HMO movement, the administration of the group practice then decides how the HMO payments are distributed to each member physician. This type of HMO is usually located in a hospital or clinic setting and may include a pharmacy. These physicians usually do not have any fee-for-service patients.

guaranteed issue
Requires that health insurers allow enrollment regardless of age, gender, health status or other factors.

guaranteed renewability
Requires that health insurers offer to renew a consumer’s policy as long as they continue to pay the plan’s premium.

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H

HCFA 1500
The standard form developed by the Centers for Medicare & Medicaid Services (CMS) for submitting provider service claims to third party companies or insurance carriers.

health home
Integrated care coordination for beneficiaries with two or more chronic conditions, beneficiaries with a chronic illness who are at risk for developing another, or beneficiaries with any serious, persistent mental illness. Established under the ACA.

health information exchange (HIE)
The process of reliable and interoperable electronic health-related information sharing. HIEs are expected to improve the quality of care and patient safety and reduce health care costs.

health insurance exchange (HIX)
State or federally run online health insurance marketplaces created by the ACA for purchase from private health care providers; public exchanges opened on Oct. 1, 2013. There are four HIX models: state-based, federally facilitated, federal/state partnership and marketplace plan management.

health insurance marketplace
See American health benefit exchange (AHBE), federally facilitated exchange (FFE), group market exchange, health insurance exchange (HIX), individual market exchange, private exchange, public exchange, small business health options program (SHOP).

Health Insurance Portability and Accountability Act (HIPAA)
Also known as the Kennedy-Kassebaum Act, HIPAA intends to provide better portability of employer-sponsored insurance from one job to another, thus preventing “job lock,” or the need to stay in the same position because of its health care benefits. The Act also outlaws excluding people from obtaining health insurance because of preexisting conditions and offers tax deductions to those who are self-employed to help pay for their health benefits. It is widely viewed as a first step in the federal initiative to significantly reduce the number of uninsured people in this country.

health maintenance organization (HMO)
A form of health insurance in which its members prepay a premium for health services, which generally includes inpatient and ambulatory care. For the patient, it means reduced out-of-pocket costs (i.e., no deductible), no paperwork (i.e., insurance forms), and only a small copay for each office visit to cover the paperwork handled by the HMO. Some specific forms of the HMO include: staff-model, IPA-model, group-model, network model, POS model, and mixed-model or hybrid-model HMOs.

health outcomes survey
All MCOs with MA contracts must complete a random sampling of beneficiaries every spring. CMS uses this information to check for oversights, quality improvement measures and performance bonuses.

health reimbursement account (HRA)
A flexible spending plan associated with a beneficiary’s health benefit. The employer contributes to the HRA and the beneficiary uses these funds to pay medical expenses before and after the beneficiary annual deductible is met. Because the HRA is set up and managed by the employer, beneficiaries are usually unable to carry money over at the end of the year and will lose access to their HRA if they change jobs.
See also: health savings account.

health risk assessment
A comprehensive assessment of an enrollee's needs in order to create an individualized care plan. The first step to meeting the needs of dual eligible beneficiaries, typically required within 30-90 days of enrollment.

health savings account (HSA)
A flexible spending plan to which a beneficiary contributes a portion of his/her pre-tax salary each year, up to a pre-set limit. A beneficiary’s employer may also contribute to the HSA. The beneficiary can then use the money in the HSA to pay for medical expenses, including uncovered expenses and cost sharing, but not including premiums. Taxes are not incurred on the HSA amounts that are used to pay for medical expenses allowed under the plan.
See also: health reimbursement account.

Healthcare Common Procedural Coding System (HCPCS)
A listing of services, procedures and supplies offered by physicians and other providers. The HCPCS includes CPT (Current Procedural Terminology) codes, national codes, and local alpha-numeric codes. The national codes are developed by the Centers for Medicare & Medicaid Services (CMS) in order to supplement CPT codes. They include physician services not included in CPT as well as nonphysician services such as ambulance, physical therapy, and durable medical equipment. The codes are developed by local Medicare carriers in order to supplement the national codes. These codes are five-digit codes; the first digit is a letter followed by four numbers. The HCPCS codes beginning with A through V are national; those beginning with W through Z are local.

Healthcare Effectiveness Data and Information Set (HEDIS)
A set of performance measures designed to help health care purchasers understand the value of health care purchases and measure health plan performance. HEDIS is sponsored by the National Committee for Quality Assurance (NCQA).

healthcare prepayment plan (HCPP)
A type of managed care organization. In return for a monthly premium, plus any applicable deductible or co-payment, all or most of an individual's physician services will be provided by the HCPP. The HCPP will pay for all services it has arranged for (and any emergency services) whether provided by its own physicians or its contracted network of physicians. If a member enrolled in an HCPP chooses to receive services that have not been arranged for by the HCPP, he/she is liable for any applicable Medicare deductible and/or coinsurance amounts, and any balance would be paid by the regional Medicare carrier.

high deductible health plan (HDHP)
A health plan structure most often used with PPOs, HMOs and POS models. It features lower premiums but higher deductibles than traditional versions of these models. HDHPs may include a savings program such as an HSA or HRA that allows members to pay for the resulting higher out-of-pocket costs with pre-tax income. For 2016, the IRS definition of a high deductible health plan featured an annual deductible of $1,300 or more for individual coverage, or $2,600 for family coverage, combined with an annual out-of-pocket limit of $6,550 per individual or $13,100 per family.

HIOS ID
Designation from the Health Insurance Oversight System (HIOS) used to uniquely identify ACA-qualified plans. Corresponds to data sets from CMS. Issuers should use the same HIOS Plan ID if the same plan was offered the previous plan year and remains available for the upcoming plan year. An insurer can raise the deductible and OOP maximum if the increases are in accordance with the federal limits (or the state’s, if the state’s limits are different).

HMO Act of 1973
Federal law that required employers with more than 24 employees to offer an alternative to conventional indemnity health insurance in the form of a federally qualified HMO. The main intention of the Act was to encourage HMO development.

HMO with POS option
Also called an open-ended HMO. An option of some HMOs which allows the member to elect to use an out-of-network provider at a reduced benefit. Patients are prepaid enrollees of the HMO. These products are governed by state and federal HMO regulation and are usually offered through employer-sponsored group policies.

Home and Community Based Services (HCBS) Waivers
Waivers allowing certain special services to be provided in a home or community setting for Medicaid beneficiaries who would normally be in an institution. Designed for beneficiaries with chronic health needs, such as mental illness or a physical/developmental disability, exact offerings vary by state, but typically these are LTSS. Depending on the state contract, some waiver programs will be omitted from dual coverage, while some will be integrated.

home care
In contrast with inpatient and ambulatory care, home care is medical care ordinarily administered in a hospital or on an outpatient basis; however, the patient is not sufficiently ambulatory to make frequent office or hospital visits. In these patients, intravenous therapy, for example, is administered at the patient’s residence, usually by a health care professional. Home care reduces the need for hospitalization and its associated costs.

hospital alliance
A group of hospitals that have joined together to improve competitive positions and reduce costs by sharing common services and developing group purchasing programs.

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I

ICD-9-CM (The International Classification of Diseases, 9th Revision, Clinical Modification)
A listing of diagnoses and identifying codes used by physicians for reporting diagnoses of health plan enrollees. The coding and terminology provide a uniform language that can accurately designate primary and secondary diagnoses and provide for reliable, consistent communication on claim forms. HHS published a final rule adopting ICD-10-CM with an implementation date of October 1, 2014. Although this release of ICD-10-CM is now available for public viewing, the codes are not currently valid for any purpose or use.

incurred but not reported (IBNR) expenses
This term refers to a financial accounting of all services that have been performed but, as a result of a short period of time, have not yet been invoiced or recorded.

indemnity insurance
Traditional fee-for-service coverage in which providers are paid according to the service performed.

independent practice association (IPA)
An organization that contracts with individual physicians who provide care to HMO members, as well as their own patients, in their own private offices. Physicians in an IPA are paid either on a capitation or a modified fee-for-service basis.

indirect costs
Indirect costs are usually termed overhead costs, as they are the costs that are shared by many services concurrently, such as maintenance, administration, equipment, electricity or water.
See also: direct costs.

individual (non-group)
The market sector in which health plans are sold directly to individuals and/or families, not via an employer or other group purchaser. Includes individuals shopping on public exchanges.

individual mandate
A mandate created in the ACA that requires individuals to have health insurance by 2014 or potentially pay a penalty for noncompliance.

individual market exchange
A health insurance marketplace that sells health insurance policies to individuals and families that may have jobs/income, but do not have an employer-sponsored health benefit.

individualized care plan
A treatment plan developed for a member based on an individual health risk assessment. A major element of care coordination for dual eligibles. Interdisciplinary (behavioral, acute, primary medical, LTSS) care teams, led by a primary provider, develop a plan of care and coordinate all services received by a beneficiary. The beneficiary may also be involved in the coordination process and in making some care decisions.

in-network benefits
Services furnished by a provider participating in the network contracted by the member’s health plan.
See also: out-of-network benefits.

insolvency
The financial state in which a health plan is no longer able to cover its obligations to patients, providers and other creditors. Many states use risk-based capital ratios to measure solvency, promulgated by the National Assn. of Insurance Commissioners.

integrated care organization (ICO)
Health care financing and delivery organizations created to provide a continuum of care, ensuring that patients get the right care at the right time from the right provider. This continuum of care from primary care provider to specialist and ancillary provider under one umbrella is designed to guarantee that patients receive appropriate care, thus saving money and increasing quality.
aka integrated delivery system.

interdisciplinary care team
A group of medical professionals assigned to individual dual beneficiaries. Led by a primary care provider, the team includes behavioral, acute and LTSS professionals, depending on the member’s needs. In some states, this can include healthy lifestyle coaching and personal financial services.

IPA-model HMO
One of the most prevalent types of HMO. The HMO contracts with an IPA (independent practice association), which in turn contracts with individual physicians. It is the ability of IPA physicians to see both IPA and private patients in their own offices that principally differentiates an IPA from a group-model or staff-model HMO. Physicians are paid via capitation for the HMO patients and via conventional means for their fee-for-service patients. Physicians belonging to the IPA guarantee that the care needed by each patient for which they are responsible will fall under a certain amount of money by allowing the HMO to withhold an amount of their payments (usually about 20% per year). If, by the end of the year, the physician’s cost for treatment falls under this set amount, then the physician receives his entire “withhold fund.” If the opposite is true, the HMO can then withhold any part of this amount, at their discretion, from the fund. Essentially, the physician is put at risk for keeping down the treatment cost. This is the key to the HMO’s financial viability.

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J

Joint Commission, The (TJC)
Formerly known as The Joint Commission on the Accreditation of Health Care Organizations. An organization that reviews and accredits hospitals and other healthcare providers. The TJC usually surveys organizations once every three years and reviews policies, patient records, professional credentialing procedures, governance and quality improvement programs. See accreditation.

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K

kickback
An illegal payment made by one provider to compensate another for referring patients.

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L

large group
As of 2014, any business that employs 51 or more full-time equivalent employees is considered a “large group.” The Affordable Care Act sets different requirements for plans offered in large groups, and they can choose from a wider selection of plans.

legend drug
A drug that, by law, can be obtained only by prescription and bears the label, “Caution: Federal law prohibits dispensing without a prescription.”

length of stay
The number of consecutive days a patient is hospitalized.

lifetime limit
Dollar limits that health insurers placed on claims that the plan would pay over the course of a consumer’s life. Under the ACA, health insurers are no longer allowed to place lifetime limits on benefits provided by health plans.

limited network
A tool used by health insurers to stratify physicians and other health care providers in an attempt to control resource use and steer patients towards the least costly providers. Patients in a narrow network frequently pay higher copays or coinsurance when they see physicians that the insurer has placed in a more expensive tier. They may also be denied access to a provider that has been deemed too expensive by the insurer.
See also: narrow network, restricted network.

limited-benefit plans/mini-meds
A type of low-cost health insurance plan that typically covers very few medical services. These plans do not protect against catastrophic or chronic disease.

long-term care
Services ordinarily provided in a skilled nursing, intermediate care, personal care, supervisory care or elder care facility.

Long Term Services and Supports (LTSS)
Special services for beneficiaries whose needs go beyond primary medical coverage, who require support in an at-home or institutionalized setting. This can include help with feeding, dressing, bathing, etc. Traditionally paid by Medicaid (or Medicare in some circumstances, for beneficiaries in hospice or skilled nursing settings).
See also Home and Community Based Services (HCBS) Waivers

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M

mail-order pharmacy
A closed door pharmacy dispensing medication directly to the MCO members through the mail. Mail-order drug distributors can purchase drugs in larger volumes than retail or wholesale outlets. These pharmacies typically dispense medications for a three-month or 90-day supply per order. The incentive to members is convenience and lower cost. The incentive to MCOs is lower cost and higher control on the type of medications it dispenses.

managed behavioral health organization
A company that relies on managed care strategies such as care management plans and service caps in its provision of behavioral or mental health care in order to reduce costs and increase quality of care.

managed care
The process of using formal programs to control health care costs while helping to ensure the quality of care. Frequently used to describe arrangements where care is provided under a prepaid contract, managed care programs are also an integral part of most fee-for-service plans as well.

managed care organization (MCO)
Any organization — insurance company, health plan, physician group, or other provider organization — that coordinates care for an enrolled population. Companies that market and administer managed care plans including HMOs, PPOs, POS and managed indemnity plans. MCOs are responsible for the health of the enrolled population and must provide health care directly or contract with providers to care for enrollees.

managed competition
One type of health care reform designed to correct the inequities of the health care delivery system through increased competition. Health plans would compete on the basis of cost and other factors; health care purchasers would have information at their disposal that would allow them to compare competing health plans based on performance.

managed fee for service
A plan in which the cost of covered services is paid by the insurer after services have been used. Various managed care tools such as pre-certification, second surgical opinion and utilization review are used to control inappropriate utilization.
See also: fee for service.

management services organization (MSO)
Any organization that provides administrative services to a physician group, hospital, or other providers. MSOs typically do not provide medical or clinical services.

mandated benefits
Health benefits that health plans are required by state or federal law to provide to members.

market share
The share of enrollees a managed care plan or other health provider serves in a given market, expressed as a percentage of the total potential patients that could be served by the organization. In health insurance, market share may be measured by premium revenue, enrollment or other metrics that may apply to the particular population being measured. Most AIS analyses measure market share as the percentage of a plan's total membership in a state geographic area, as a percentage of total managed care enrollment reported in a state.

marketplace plan management (PM)
A category of public health insurance exchange, for which the state conducts plan management functions on behalf of the federal government which operates the remaining core exchange functions under a federally facilitated exchange .

maximum allowable cost (MAC)
A list of prescription medications, established by the health plan and distributed to pharmacies, that will be covered at a generic product level.
See also: actual acquisition cost,average wholesale price.

Medicaid
An entitlement program run by both the state and federal government for the provision of health care insurance to patients who cannot afford to pay for private health insurance. The federal government matches the states’ contribution on a certain minimal level of available coverage. The states may institute additional services at their own expense. Some states contract with insurance companies to offer managed care plans (Medicaid HMOs) to their Medicaid-eligible populations, while other states cover their Medicaid populations through a state-administered fee-for-service based program. Some states use a combination of both strategies.

medical home
See care coordination.

medical loss ratio (MLR)
The ratio of total medical expenses compared to revenue received. This ratio is used to determine a health plan’s administrative costs and overhead. Sometimes referred to as the medical care ratio (MCR).
aka medical cost ratio.

medical necessity
The determination of whether health services provided to a patient are required to maintain health according to accepted medical practice, current research and efficiency considerations.

medical protocols
Medical protocols provide the caregiver with specific treatment options or steps when faced with a particular set of clinical symptoms signs, or laboratory data. Medical protocols are designed through an accumulated database of clinical outcomes. Medical protocols are the guidelines that physicians may be required to follow in order to have an acceptable clinical outcome.
See also: practice guidelines.

medical savings account (MSA)
A pre-tax savings account from which funds are used to pay for routine medical expenses such as insurance deductibles, copays and uncovered services.

Medicare
An entitlement program run by the Centers for Medicare & Medicaid Services (CMS) of the federal government through which people aged 65 years or older receive health care insurance. Created by the 1965 amendment to the Social Security Act. Medicare Part A covers hospitalization and is a compulsory benefit. Medicare Part B covers outpatient services and is a voluntary service.

Medicare Advantage
The federal program promulgated through the Balanced Budget Act of 1997 that offers Medicare recipients a wider variety of health plan options than was previously available, including PPOs and provider-sponsored organizations. Sometimes referred to as Medicare Part C.

Medicare Advantage star ratings
Rating system used by Medicare to help beneficiaries compare plans based on quality and performance. A plan can get a rating between 1 and 5 stars with a 5-star rating considered to be excellent. Medicare uses information from member satisfaction surveys, plans and health care providers to give the ratings, which are updated each fall.

Medicare Part D
The Medicare prescription drug program. These plans add supplemental prescription drug coverage to original Medicare, some Medicare cost plans, some Medicare private fee-for-service plans and Medicare medical savings account plans.

Medicare supplemental policy
Insurance provided by carriers to supplement the monies reimbursed by Medicare for medical services. Since Medicare pays physicians according to its own fee schedule regardless of what the physician charges, the individual may be required to pay the difference between Medicare’s reimbursable charge and the physician’s fee. Medigap insurance is meant to fill this gap in reimbursement, so that the Medicare beneficiary is not at risk for the difference.
See also: Medigap.

Medicare-Medicaid Coordination Office
Established under section 2602 of the Affordable Care Act, the coordination office serves beneficiaries who are dually eligible for Medicare and Medicaid. The office is responsible for developing new care models to ensure dual beneficiaries receive high-quality, cost-effective healthcare.

medication therapy management (MTM)
A tool use to track patients who are taking prescription medications, and work with them directly to ensure the best possible outcomes. A pharmacist, physician or other provider checks in regularly with the patient to ensure he or she is taking the prescribed medication, following health and wellness guidelines and to promptly identify any related problems such as adverse effects or loss of efficacy. The MTM provider also keeps in touch with other health care providers of the patient such as their primary care physician.

Medigap
Insurance provided by carriers to supplement the monies reimbursed by Medicare for medical services. Since Medicare pays physicians according to its own fee schedule regardless of what the physician charges, the individual may be required to pay the difference between Medicare’s reimbursable charge and the physician’s fee. Medigap insurance is meant to fill this gap in reimbursement, so that the Medicare beneficiary is not at risk for the difference.
See also: Medicare supplemental policy.

member
A participant in a health plan who makes up part of the plan’s enrolled population.

member enrollment mix adjustment (MEMA)
Updates a participating MCO’s rates to account for its risk mix. Plans with a greater proportion of high cost/high risk beneficiaries receive more revenue, and vice versa.

metal tiers/metal plans
Tiers indicating the actuarial values of health plans offered on exchanges, to allow for comparability of products. All plan offerings fall within a range of coverage corresponding to a metal name; bronze 60%, silver 70%, gold 80% and platinum 90% coverage.

minimum savings rate/percentage
The minimum threshold a state must achieve to benefit from savings under fee-for-service duals demonstration programs, in which CMS reimburses the state directly for services provided to duals. The state achieves savings by employing coordination efforts in serving its duals population.

mixed-model HMO
Also called a hybrid-model HMO. A combination of at least two managed care organizational models that is melded into a single health plan. Since its features do not uniformly fit only one type of model, it is called a hybrid.

morbidity
The occurrence of illness in a given population.

mortality
The death rate at each age, calculated from prior experience.

most favored customer price
The best price the drug is sold at to its largest customer(s).

most favored nation clauses
An agreement between a buyer and a seller that guarantees the buyer the lowest price for a product or service during the contract period.

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N

narrow network
A tool used by health insurers to stratify physicians and other health care providers in an attempt to control resource use and steer patients towards the least costly providers. Patients in a narrow network frequently pay higher copays or coinsurance when they see physicians that the insurer has placed in a more expensive tier. They may also be denied access to a provider that has been deemed too expensive by the insurer.
See also: limited network, restricted network.

National Committee for Quality Assurance (NCQA)
A non-profit organization created to improve patient care quality and health plan performance in partnership with insurers, purchasers, consumers and the public sector.

National Drug Code (NDC)
A universal product identifier for human drugs, developed by the Food & Drug Administration.

National Practitioner Data Bank (NPDB)
A database maintained by the federal government that contains information on physicians who have experienced malpractice judgments or other punitive actions against them. The data is commonly used in the credentialing process.

navigator
An unbiased individual or organization trained and able to help consumers, small businesses and employees shopping for health coverage options in a public health insurance exchange marketplace. Navigators help consumers understand options, apply any available subsidies and complete eligibility and enrollment forms.

NDC Coding System
Used by insurers to pay outpatient pharmaceutical claims. The NDC System was originally established as an essential part of an out-of-hospital drug reimbursement program under Medicare.

negotiated discount
A method of reimbursement for managed care providers that stipulates specific percentages by which charges may be reduced if included in the provider’s contract or agreement.

negotiated fee schedule
The most controversial form of reimbursement. The basis of the PPO network; doctors and hospitals agree to treat PPO patients at a lower rate than non-PPO patients.
See also: fee schedule.

net loss ratio
The result of total claims liability and all expenses divided by premiums. This represents the carrier’s loss ratio after accounting for all expenses.

network
A defined group of providers, typically linked through contractual arrangements, which supply a range of primary and acute health care services. A “closed” network is one in which beneficiaries are not allowed to access non-network providers whereas an “open” network allows access to other providers at some additional cost to the beneficiary.

network-model HMO
A prepaid health care system that contracts with two or more physician groups. It may also include some solo practices.

non-participating provider
A health care provider who has not contracted with the carrier or health plan to be a participating provider of health care. A provider not on the provider network of a specific health plan.

non-preferred drugs
Prescription drugs that are not selected by the health plan as preferred brand-name drugs. Non-preferred brand drugs are placed on the third tier, and require a member cost share per prescription that is higher than similar drugs placed on the preferred brand tier.

nonprofit plan
A term applied to a prepaid health plan under which no part of the net earnings may lawfully accrue to the benefit of any private shareholder or individual.

non-risk
A health plan in which the employer/group sponsor is assuming risk for medical losses incurred by the covered population. The insurance company's role is to limited to claims processing or other administrative services, but the insurance company is not the party at risk.
self-funding, administrative services only (ASO)

nurse practitioner
A registered nurse who has advanced skills in the assessment of physical and psychosocial health status of individuals, families, and groups in a variety of settings through medical history taking and physical examination.

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O

ombudsman
A staff member of a health plan or outside agency who reviews and investigates enrollee complaints about health services, including coverage disputes, denials of care and access issues. CMS offers additional funding for states to develop Demonstration Ombudsman Programs. These programs are designed to ensure a person-modeled method of care; benefits for members include enrollment assistance and independent advisory boards with beneficiary members.

on-line adjudication
An electronic claims processing process at the point of service meant to eliminate paper claims, verify member eligibility, maintain medication history and detect potential problems that should be addressed before drugs are dispensed to patients.
See also: point of sale, drug edits.

open access
Open access arrangements allow members to see participating providers, usually specialists, without referral from the health plan’s gatekeeper. These types of arrangements are most often found in IPA-model HMOs.
See also: access.

open enrollment
A period during which an MCO allows persons not previously enrolled to apply for plan membership. Or a period during which an employer allows persons to switch among offered health plan options.

opt out
A dual-eligible beneficiary may choose not to participate in a state demonstration, and remain in fee-for-service Medicare, or in a D-SNP or PACE plan, rather than enrolling in a Duals Demo plan. High opt-out rates are a cause for concern for duals plans and programs, as a decreased population of beneficiaries may impact reporting and quality measures.

outcomes management
Efforts to better direct the clinical outcomes of managed care enrollees to increase patient and payer satisfaction while holding down costs. It is thought that, through a database of outcomes experience, caregivers will know better which treatment modalities result in consistently better outcomes for patients. Outcomes management will, as a natural consequence, lead to medical protocols.

outcomes research
Studies that evaluate the effect of a given product, procedure or medical technology on health or costs.

outlier
One who does not fall within the norm; typically used in utilization. A provider who uses either too many services or too few services for example, anyone whose utilization differs two standard deviations from the mean on a bell curve is termed an outlier.

out-of-network benefits
Reimbursement for services performed by a provider that is not in a health plan's contracted network. Usually a higher copay or a lower reimbursement level applies for out-of-network benefits.
See also: in-network benefits.

out-of-pocket (OOP) costs
Amounts paid by the enrollee at the point of service for covered benefits. Out-of-pocket costs include deductibles, copays and coinsurance. Typically the amount of out-of-pocket costs that an enrollee must incur is capped at a maximum amount per year.

out-of-pocket maximum
A cap on out-of-pocket expenses that the member must incur before the health plan stops requiring cost-sharing. Benefits increase to full coverage when the member has met the cap.
aka out-of-pocket limit.

outpatient
A patient who receives health care services without being admitted to a hospital.

over-the-counter (OTC) drug
A drug product that does not require a prescription under federal or state law.

overutilization
When health care services--such as physician office visits, prescription drugs or diagnostic tests--are used when not medically necessary or are used more frequently than necessary. Also, when a higher level of service or costlier option is utilized when a less expensive product or point of care would suffice.

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P

PACE
Program of All-Inclusive Care for the Elderly, a program funded by both Medicare and Medicaid to care for elderly in the community instead of a nursing home.

passive enrollment
The process most state demonstrations use to enroll dual eligibles in a managed care organization if they do not choose to enroll voluntarily. Eligibles are notified of enrollment beforehand, and can opt out if they wish.

Patient Centered Outcomes Research Institute (PCORI)
Research institute authorized by Congress to conduct research to provide information about the best available evidence to help patients and their health care providers make informed decisions.

patient compliance
When a patient follows the written instructions for using a drug or other prescribed treatment regimen.

Patient Protection and Affordable Care Act (ACA)
Signed into law on March 23, 2010, by President Obama, this health care reform law made sweeping changes to the U.S. health care system. The primary goal of the program is to reduce the number of uninsured and make health insurance more accessible and affordable for individuals and employers. Primary components of the law include the creation of public health insurance exchanges, and of critiera for qualified health plans, such as essential health benefits.

patient-centered medical home (PCMH)
A primary health care delivery model that facilitates partnerships between individual patients and their personal physicians. Medical homes are set up by payers as part of provider reimbursement contracts to allow physicians to receive additional reimbursement in exchange for more attention and responsibility to the patient.
See also care coordination

patients’ bill of rights
Referring to federal or state proposals (or signed legislation) that typically mandates that health plans offer expanded external appeals policies, faster appeals decisions than offered in the past, greater access to specialists than was previously available in many managed care plans and other specific consumer protections.

pay-for-delay
A legal tactic in which manufacturers of brand-name drugs stifle competition by offering patent settlements that pay generic drug manufacturers not to bring lower-cost generic versions of a product to market during a specified time period.

peer review organization (PRO)
A group founded by the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) to review quality of care and appropriateness of admissions for Medicare and Medicaid beneficiaries. Peer review organizations are accountable for maintaining admission rates and reducing lengths of hospital stays while protecting against inadequate treatment.

per employee per month (PEPM)
A unit of measurement related to each employee for each month, not including dependents, enrolled in a health plan. Frequently used to measure enrollment in PPO plans as a standard of reimbursement.

per member per month (PMPM)
A unit of measurement related to each enrollee for each month.

pharmaceutical care
A strategy that attempts to utilize drug therapy more efficiently to achieve definite outcomes that improve a patient’s quality of life. A pharmaceutical care system requires a reorientation of physicians, pharmacists and nurses toward effective drug therapy outcomes. It is a set of relationships and decisions through which pharmacists, physicians, nurses and patients work together to design, implement and monitor a therapeutic plan that will produce specific therapeutic outcomes.

Pharmaceutical Care Management Association (PCMA)
A national association representing U.S. pharmacy benefit managers (PBMs).

pharmacoeconomics
The field involving the assessment of the cost effectiveness of drug therapy in terms of long-term benefits to the patient.

pharmacy and therapeutics (P&T) committee
A group of physicians, pharmacists and other health care providers from different specialties who advise a managed care plan regarding safe and effective use of medications. The P&T Committee manages the formulary and acts as the organizational line of communication between the medical and pharmacy components of the health plan.

pharmacy benefit management company (PBM) or pharmacy benefit manager
An organization that contracts with insurers, employers or government payers to administer pharmacy benefits to members. May sell benefit packages directly to employers or may contract with MCOs to control prescription costs for their members. An organization that provides prescription benefit services to enrollees of managed care plans. The functions of PBMs have evolved over time from simple electronic claims adjudication and pharmacy network development to more involved clinical services. A PBM can contract with provider groups on behalf of MCOs, so that individual and chain pharmacies can provide services to MCO members.

physician assistant (PA)
Physician assistants practice medicine under supervision of licensed physicians. They perform a wide range of duties such as history taking, diagnosis, drawing blood samples, urinalysis and injections under the supervision of a physician. Often acting as first or second assistants in major surgery, PAs provide preoperative and postoperative care.

physician contingency reserve
The at-risk portion of a claim that is deducted and withheld by the health plan before payment is made to a participating physician as an incentive for appropriate utilization and quality of care. This amount may range from 20% of the contracted payment rate with MCOs. The contingency reserve can be used in instances where the plan needs additional funds to pay for claims. The withheld amount may be returned to the physician in varying levels which are determined based on analysis of his/her performance or productivity compared with his/her peers.

physician practice management company (PPM)
A firm that provides management services to physician practices, typically including billing, credentialing, managed care contracting, staffing and payroll. Some PPMs purchases physicians’ practices in exchange for a percentage of the gross receivables. The PPM then leases the office back to the physician or employs the physician on a salaried basis.

physician-hospital organization (PHO)
A type of integrated health care system that, in its simplest form, is an organization that collectively commits both physicians and the hospital to payer contracts. The PHO sometimes uses existing IPA structures or individual physician contracting. In its most effective form, the PHO must commit the entire physician and hospital panel, without an opt-out, to the PHO organization.

plan year
A 12-month period of benefits coverage under a group health plan. For individual insurance policies this duration is called a “policy year.”

point of sale
A term usually used to describe information use for on-line technology. For example, a computer terminal at the pharmacist’s counter (i.e., the “point of sale”) connected to an MCO’s information system will be able to inform the pharmacist whether the patient’s prescription is for a formulary product and the required copay before the prescription is dispensed.
See also: on-line adjudication, drug edits.

point of service (POS) plan
A health plan that offers the option to members of using the health plan’s network panel of providers, or out-of-network services. The decision by the member on whether to use in-network or out-of-network services is made at the time the service is required. In an HMO with a POS option, the plan is a licensed HMO with prepaid enrollees. POS plans can also be based on PPO networks, in which patients are not prepaid enrollees but pay indemnity premiums.

portability
The right of an enrollee of one health plan to enroll in a new employer’s health plan upon changing jobs, without being subjected to a waiting period.

practice guidelines
Also called practice parameters or medical protocols, physicians may be required to follow these in order to obtain the highest level of reimbursement. The guidelines provide the caregiver with specific treatment options or steps when faced with a particular set of clinical symptoms, signs or laboratory data. The protocols can be very flexible in nature or very rigid. They are designed through an accumulated database of clinical outcomes and are thought to provide the best possible clinical outcome.

precertification
Authorization from the insurance company required for routine hospital admission or other medical procedures to assure that the service to be delivered is medically appropriate and will be covered by the health plan. This cost-control mechanism is intended to eliminate unnecessary utilization expenses by denying medically unnecessary treatments.
aka pre-admission certification.

pre-existing condition
Any medical condition that has been diagnosed or treated within a specified period before the member’s effective date for coverage with a new health plan.

pre-existing condition exclusion
The period of time when an individual receives no benefits under a health plan for a medical condition for which they received care for prior to enrollment in a new health plan. Under the ACA, pre-existing condition exclusions are prohibited for most plans.

pre-existing condition insurance plan (PCIP)
Created and funded with $5 million by the ACA, this plan was designed for individuals who had been denied insurance due to pre-existing conditions. It serves as transitional coverage during 2013 for those individuals will qualify to receive coverage under the Health Insurance Exchanges as of Jan. 1, 2014.

preferred drugs
Comparatively inexpensive prescription drugs listed on a payer’s formulary. Drugs outside of the formulary are only used in rare, specific circumstances. In a pharmacy benefit plan, formulary can refer to either a list of preferred drugs or a list of covered drugs.
The preferred brand drug tier is the formulary level in a health plan that specifies which brand-name drugs are preferred by the plan. These drugs typically require a member cost share that is higher than the generic level, and lower than the non-preferred brand drug tier.

preferred provider
A physician, hospital or other health care provider who contracts to provide health services to persons covered by a particular health plan, and agrees to accept discounted fees as specified in the contract.

Preferred Provider Health Care Act of 1985
A federal law easing restrictions on PPOs and allowing subscribers to use health care providers outside of the PPO.

preferred provider organization (PPO)
PPOs are MCOs that offer integrated delivery systems (i.e., networks of providers) that are available through a vast array of health plans and are readily accountable to purchasers for cost, quality, access and services associated with their networks. They use provider selection standards, utilization management and quality assessment techniques to complement negotiated fee reductions as an effective strategy for long-term cost savings. Under a PPO benefit plan, covered individuals retain the freedom of choice of providers but are given financial incentives (i.e., lower out-of-pocket costs) to use the preferred provider network. Preferred provider organizations are marketed directly to employers as well as to insurance companies and TPAs, who then market the network to their employer clients.

premium
A fee paid by an employer and/or enrollee, typically on a monthly basis, to cover insurance coverage.

prepayment
Paying, in advance of service, the cost of a predetermined package of health care benefits for a population group through regular periodic payments in the form of premiums or contributions, including those contributions that are made to a health and welfare fund by employers on behalf of their employees.

prescription card
Also called drug cards or pharmacy cards. Issued by pharmacy benefit plans to members for the purpose of identification at the pharmacy counter.

preventive care
Health care emphasizing priorities for prevention, early detection and early treatment of conditions, generally including routine physical examination, immunization and well-person care.

primary care case management (PCCM)
A model for the provision of health services to Medicaid recipients, in which the state contracts with primary care physicians who not only provide care themselves, but also coordinate the enrollee’s health services received from other providers. The physician is typically paid an additional case management fee to provide this service.

primary care network
A group of primary care physicians who have joined together to share the risk of providing care to their patients, who are members of a given health plan.
See also: network.

primary care physician (PCP)
Sometimes referred to as a gatekeeper, the primary care physician is usually the first doctor a patient sees for an illness. The physician then treats the patient directly, refers the patient to a specialist (secondary care) or admits the patient to a hospital. The primary care physician is usually a general practitioner, internist, family practitioner, pediatrician, or sometimes a gynecologist.

private exchange
Health insurance marketplace managed by a private entity such as a broker or insurer.

private fee-for-service plan
A insurance plan offered under Medicare that allows enrollees to go to any physician or hospital, and pays a fee schedule developed by the insurer rather than by the Medicare program.

profiling
Profiling is an analytical tool that uses epidemiological methods to compare practice patterns of providers on the dimensions of cost, service use or quality of care. The provider’s pattern of practice is expressed as a rate, aggregated over time, for a defined population of patients.

prompt-pay legislation
Federal or state bills or laws that govern how health plans reimburse providers for services rendered to members, including requirements to pay an undisputed claim within a certain period and the levying of late fees, fines or interest for unpaid or late-paid claims.

prospective payment
A payment that is received before care is actually needed. It gives the provider organization a financial incentive to utilize fewer resources, as they get to keep the difference between what is prepaid and what is actually used.

provider
Any supplier of health care services, (i.e., physician, hospital, pharmacist, case management firm, etc.)

provider network
A group of providers--physicians, hospitals or other health care providers--that have contracted with a health plan to provide health services to members under specific terms or discounts. The network is the portion of the plan that indicates which providers a member may use to seek covered services.

provider-sponsored organization (PSO)
A group of providers, including physicians and hospitals, that contract directly with CMS to serve Medicare enrollees rather than working through an insurance company.

public exchange
Health insurance marketplace managed by a government entity; includes government-funded incentives such as premium tax credits and cost-sharing tax credits.

public sector
Refers to the health insurance market sector that serves individuals under entitlement programs, including Medicare Advantage, Medicaid HMOs, State Children's Health Insurance Plans, and traditional fee-for-service Medicare. Plans are available only from insurers that have been contracted by government entities. This section is not intended to include state/government employee groups, teachers’ unions, prison populations or other government populations that are not entitlements — those are counted as commercial because they have the same flexibility in contracting, structure and benefit limits as other employer-based health plans.

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Q

qualified health plan (QHP)
Under the ACA, starting in 2014, an insurance plan that is certified by the health insurance marketplace, provides essential health benefits and follows established limits on cost-sharing; QHPs will have a certification by each marketplace in which it is sold.

qualifying event
A qualifying event is a major life change that qualifies a patient to alter her insurance coverage outside of the normal enrollment period, including a marriage, divorce, adoption or birth of a child.

Quality Assessment and Performance Improvement (QAPI) Program
Established by the Affordable Care Act to assess the quality of nursing home care, this program implements standards that monitor the level of care being provided by physicians, medical institutions, or any health care vendor in order to assess whether health plan enrollees are receiving adequate quality of care. The program is designed to ensure continuous evaluation of problems and identification of cost-effective solutions.

qualifying event
A qualifying event is a major life change that qualifies a patient to alter her insurance coverage outside of the normal enrollment period, including a marriage, divorce, adoption or birth of a child.

quality assurance (QA)
Also called quality assessment, activities that monitor the level of care being provided by physicians, medical institutions, or any health care vendor in order to ensure that health plan enrollees are receiving adequate quality of care. The level of care is measured against pre-established standards, some of which are mandated by state and federal law.

quality improvement
A continuous process that identifies problems, examines solutions to those problems, and regularly monitors the solutions implemented for improvement.

Quality Improvement System for Managed Care (QISMC)
A program developed by CMS to impose a quality improvement system on Medicare+Choice plans.

quality of care
A desired standard of excellence in the provision of health care. Though quality is a subjective attribute, various characteristics usually associated with the health care delivery process are thought to be determinants of quality.

quality withhold rates
CMS withholds a portion of each MCO’s capitated payment (under capitated duals demos), which will be distributed to the MCO once national and state-specific quality standards are met.

quality-adjusted life-year (QALY)
This unit of measure is one way to quantify health outcomes resulting from some type of intervention. The QALY is based on the number of years of life that would be added by the intervention, including both the quality and the quantity of life lived. Each year of life added is assigned a value between 1.0 – 0.0; 1.0 being perfect health and 0.0 being dead. For example, if an extra year of life blind is half as desirable as a year of life in perfect health, it would be given a value of .5. If an intervention would cause a patient to survive for an extra 10 years but be blind, then that would be counted as 5 QALY’s.

quality-of-life measures
An assessment of the patient’s perceptions of how they deal with their disease or everyday life when suffering from a particular condition. It is subjective in the sense that the information cannot be measured objectively. The term has been used in the health care literature for at least 25 years; however, it has been tapped in the area of pharmaceuticals most recently in the last seven or eight years. Through statistical means, the indices that have been developed to measure various quality-of-life aspects have been validated over time, and these measures are reliable and reproducible.

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R

rate band
The difference between highest and lowest premium offered by a health plan, according to state law.

rating
The method that is used to determine the cost of premiums to the members of a managed health care or indemnity insurance plan.
See also: adjusted community rating, community rating and experience rating.

rebate
Amount returned by the manufacturer when a drug is purchased. Rebates are negotiated by pharmacy benefit managers, health plans, providers and other large purchasers of drugs in exchange for the volume of business they can bring to the manufacturer.

referenced-based pricing
A prescription drug plan sponsor – an insurer, employer, or state or federal entity like Medicare – agrees to pay a maximum price or price range for a particular drug. Reference-based pricing is generally applied when the exact same drug is available in generic and brand name forms. The maximum price is set at the generic price and patients who are prescribed or want to have the brand product have to pay the difference between the generic and the brand price.”

referral
A recommendation by a physician or health plan for a plan member to be evaluated or treated by a different physician or specialist. In many managed care plans the referral must be made in a formal, written format by the gatekeeper or primary care physician in order for the referred physician’s services to be covered.

reinsurance
A risk-leveling program that protects insurers offering individual coverage from the risk of high-cost claims and allows for lower premium levels.

report card on health care
A tool used by employers, the government, employer coalitions and consumers to compare and understand the actual performance of health plans. Report cards provide health plan performance data such as health care quality and utilization, consumer satisfaction, administrative efficiencies, financial stability and cost control.

rescission
A cancellation of a health insurance policy retroactively. Under the ACA, rescission is illegal except when fraud or intentional misrepresentation of material fact is present.

reserves
A percentage of premiums that is withheld and earmarked by health plans to cover anticipated claims and operating expenses.

resource-based relative value scale (RBRVS)
The new RBRVS became effective in January 1992; it is a financing mechanism that reimburses health care providers on a classification system that measures training and skill required to perform a given health care service. This classification system is used to correct Medicare’s inequitable tendency to overcompensate for such services as surgery and diagnostic tests and to underpay for primary care services.

restricted network
A tool used by health insurers to stratify physicians and other health care providers in an attempt to control resource use and steer patients towards the least costly providers. Patients in a narrow network frequently pay higher copays or coinsurance when they see physicians that the insurer has placed in a more expensive tier. They may also be denied access to a provider that has been deemed too expensive by the insurer.
See also: limited network, narrow network.

retail insurance outlets
Retail stores opened by health insurance companies hoping to open up a new direct-to-consumer channel for individual policy sales.

retrospective review
Also known as internal review. A manner of judging medical necessity and appropriate billing practices for services that have already been rendered. Under the ACA, all plans are required to conduct an internal review upon the request of a patient or their representative.

rider
A supplemental or additional benefit that is purchased separately and in addition to a standard insurance policy. In health insurance, certain specialty benefits--such as dental, prescription drugs or behavioral health benefits--have been traditionally sold as riders to the main health insurance policy.
See also: carve-out.

risk
The possibility that revenues of the insurer will not be sufficient to cover expenditures incurred in the delivery of contractual services. A risk-based health plan is that in which the insurance company/health plan entity is the party at risk for medical losses.

risk adjustment
A risk-leveling program for individual and small group insurers that assesses charges to insurers with enrollment of less-than-average risk and “transfers” those dollars to insurers with enrollment of higher than average risk.

risk analysis
The process of evaluating expected medical costs for a prospective group and determining what product, benefit level and price best meets the needs of the group and the carrier.

risk contract
An agreement between the Centers for Medicare & Medicaid Services (CMS) and an HMO or competitive medical plan requiring the HMO to furnish, at a minimum, all Medicare-covered services to Medicare eligible enrollees for an annually determined, fixed monthly payment rate from the government and a monthly premium paid by the enrollee. The HMO is then liable for services regardless of their extent, expense, or level.

risk corridors
A risk-leveling program that limits the extent of issuer gains or losses inside the exchange; insurers with costs lower than projected remit a percentage of savings to HHS while insurers with costs more than projected receive a payment from HHS.

risk pool
A risk pool seeks to define expected claim liabilities of a given defined account as well as required funding to support the claim liability.

risk retention
The financial liability one undertakes when signing, for example, capitated contracts.

risk sharing
An arrangement in which the MCO and contracted providers share in the total financial responsibility for all health care services related to a specific diagnosis-related group or disease. If there is a surplus in the funds at the end of a specified period of time, MCO and providers share the surplus. If there is a deficit in the funds, then MCO and providers share the loss.

risk-based health maintenance organization
A type of managed care organization. After any applicable deductible or co-payment, all of an enrollee/member's medical care costs are paid for in return for a monthly premium. However, due to the "lock-in" provision, all of the enrollee/member's services (except for out-of-area emergency services) must be arranged for by the risk-HMO. Should the Medicare enrollee/member choose to obtain service not arranged for by the plan, he/she will be liable for the costs. Neither the HMO nor the Medicare program will pay for services from providers that are not part of the HMO's health care system/network.

risk-leveling programs (3Rs)
Programs required by the ACA to help protect insurers in the individual and small group markets against risk selection and market uncertainty and ensure exchange and market viability. There are three different types of programs called the “3Rs”: reinsurance, risk adjustment and risk corridors.

Rx deductible
Some health plans carve out a special drug deductible separate from the overall medical deductible. Members must pay prescription drug costs until the drug deductible is satisfied, at which point the payer begins to cover a share of the cost.
aka prescription deductible.

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S

safety-net members
Health plan members that an insurer guarantees (to the state) that it will cover when another insurer leaves the state.

sales, general and administrative (SG&A)
Another term for administrative costs.

savings percentages
See minimum savings rate/percentage

scheduled drug
Also called controlled drugs. Drugs with a significant potential for abuse that are subject to additional regulation by the U.S. Drug Enforcement Administration. Schedule I drugs have the greatest restrictions and Schedule V drugs the least.

screening
The method by which MCOs limit access to unnecessary health care. In most HMOs, a phone call to the physician is required before an office visit can be arranged. Gatekeepers and concurrent review are other methods of screening patients.

secondary care
Health care services provided by medical specialists who generally do not have first contact with patients, but instead are referred to them by primary care and family physicians.

Section 1115 Medicaid waiver
Permission granted by the U.S. Department of Health and Human Services to states to change the way the Medicaid program is administered in order to improve services or access and/or reduce costs.

self funding
Also known as self insured. A health care plan funded entirely by an employer—typically a large employer—who does not purchase insurance. The employer assumes the risk. Self-funded plans may be self-administered, or the employer may contract with an outside administrative services provider. Self-funded plans are exempt from certain insurance laws. Self-funded plans that are administered by a MCO may carry the name of either the MCO or the employer on the membership cards and paperwork.
administrative services only (ASO), non-risk

self insured
See self funding.

service area
A geographic area in which a regional health insurance plans accepts members. For plans connected with a particular network of providers, it's also generally the area where you can get routine (non-emergency) services. The plan can disenroll a member if she moves out of the service area.

single-payer system
A financing arrangement whereby money is funneled to the federal government, which assumes all responsibility for the health care system. These systems can be regional, statewide, or nationwide. The most popular example of the single-payer system is Canada.

skilled nursing facility (SNF)
Typically an institution for convalescence or a nursing home, the skilled nursing facility provides a high level of specialized care for long-term or acute illness. It is an alternative to extended hospital stays or difficult home care.

small business health options program (SHOP)
A group public health insurance exchange for employers with 100 or fewer employees.

small business tax credit
The ACA includes a tax credit equal to 50% (35% in the case of tax-exempt eligible small employers) for qualified small employers that provide health coverage to their employees. The tax credit is available to employers with 25 or fewer employees with average annual wages of less than $50,000.

small group
As of 2014, the federal government considers a business a small group if it employs 50 or fewer full-time equivalent employees.

small group pooling
Small businesses combine resources and bargaining clout to obtain better insurance rates. Claims are determined by a pool and not on a group-specific basis.

specialist
A physician practicing in a medical specialty who does not perform gatekeeper functions. In most managed care plans, members need to have a referral from their primary care physician in order to see most kinds of specialists.
See also: secondary care.

specialty drugs
An expensive drug that treats a prolonged or chronic health condition like multiple sclerosis or HIV/AIDS. Specialty drugs often require special handling, administration or monitoring, such as refrigerated shipment. Some payers require that members get special approval to order these products, and/or to order products through a specialty pharmacy.
The specialty tier is the fourth/highest formulary tier on a qualified health plan. Drugs listed on this tier typically require the highest level of member cost sharing for covered drugs.

specialty pharmacy
A pharmacy that specializes in handling and fulfilling prescriptions for injectable, infusible products, biotech products, or other products that require special handling and adminstration. Specialty pharmacies can be stand-alone companies or units of retail or institutional pharmacies, and may fill prescriptions directly to patients or supply physicians offices or other point of care sites.

specific stop loss
The form of excess risk coverage that provides protection for the self-insured employer against high claims on any one individual. This is protection against abnormal severity of a single claim rather than abnormal frequency of claims in total.
See also: reinsurance, stop loss.

staff-model HMO
The purest form of managed care. All of the physicians are in centralized sites in which all clinical and perhaps inpatient and pharmacy services are offered. The HMO holds the tightest management reins in this setting, because none of the physicians traditionally practice on an independent, fee-for-service basis. Staff-model HMO physicians are employees of the HMO as opposed to contracted network doctors and are paid on salary, sometimes with a mix of performance incentives.

standard benefit package
A set of specific health benefits offered by delivery systems. See benefit package.

standing referral
A special type of referral issued to an enrollee who typically has a chronic illness. The referral allows for open-ended visits to the specialist rather than a limited number of visits or over a limited period of time. Some states require standing referrals for certain types of chronic illnesses such as HIV.

State Children’s Health Insurance Program (SCHIP)
A government program that provides subsidized coverage for low- and moderate-income children. Both the state and federal government jointly fund and administer SCHIP.

state partnership exchange (SPE)
A hybrid health insurance marketplace where the state conducts plan management and/or consumer assistance, outreach and education functions and the federal government operates the remaining core exchange functions.

state-based exchange
A health insurance marketplace created and operated by a state.

state-federal partnership exchange
See state partnership exchange (SPE)

step therapy
A prescription protocol used by HMOs or PPOs to try the most cost-effective drug therapy for selective diagnoses. If the patient does not respond satisfactorily, progressively more advanced therapy is prescribed as needed.

stop loss
Insurance purchased by an insurance company or health plan from another insurance company to protect itself against losses. Reinsurance purchased to protect against the single overly large claim or the excessively high aggregated claim during a set period. Insurance with a third party against a risk that the payer cannot financially manage.
See also: specific stop loss, aggregate stop loss.

sub-acute
Inpatient services provided outside an acute-care hospital for patients with chronic illness. Sites include nursing homes, rehabilitation hospitals, hospices and skilled nursing facilities.

subrogation
A provision in some insurance company contracts that allows the insurer to take over funds paid to an accident victim through automobile or other insurance or a court settlement to cover health costs associated with the accident.

summary of benefits and coverage (SBC)
Specific to each health plan, the SBC summarizes which services the plan covers and the member’s share of the costs. For example, it lists the deductible, copay and out-of-pocket limits. The format is intended to be identical across plans and payers so shoppers can easily compare. Members or shoppers can ask an insurance company or group health plan for a copy of an SBC at any time. Payers are legally obligated to provide SBCs by the Affordable Care Act.

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T

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)
The federal law that created the current risk and cost contract provisions under which health plans contract with the Centers for Medicare & Medicaid Services (CMS) and the Medicare program.

technology assessment
The term used to describe the evaluation process of new or existing diagnostic and therapeutic devices and procedures. Technology assessment evaluates the effect of a medical procedure, diagnostic tool, medical device, or pharmaceutical product. In the past, technology assessment primarily meant evaluating new equipment and focused on the clinical safety and efficacy of an intervention; in today’s health care world, it includes both a broader view of clinical outcomes, such as the effect on a patient’s quality of life, and the effect on society, such as cost-benefit analysis.

telemedicine
The provision of consultant services by off-site physicians to health care professionals on the scene as by means of closed-circuit television; the ability of health care providers to examine patients remotely by means of a computer screen.

termination
The date on which a covered member’s benefits expire.

tertiary care
Tertiary care is administered at a highly specialized medical center. It is associated with the utilization of high-cost technology resources.

therapeutic class
A group of drugs that are used to treat the same disease, or category, of diseases. Classes, or categories, are defined by each individual formulary, so that on one formulary all the drugs in a given class may be virtually interchangeable and in another formulary they may be significantly different.
See also: disease classification.

therapeutic substitution
A drug that is believed to be therapeutically equivalent (i.e., will achieve the same outcome) to the exact drug prescribed by a physician. The drug is substituted by the dispensing pharmacist without the need to obtain permission from the physician. Therapeutic substitution is generally mandated by health plan formularies as a cost-containment measure.
aka therapeutic alternative.

third-party administrator (TPA)
Any outside organization that handles administrative duties such as claims processing and utilization review for insurance companies, self-funded plans or provider-based plans. Third-party administrators are used by organizations that actually fund the health benefits but do not find it cost effective to administer the health plan benefits themselves. A TPA may or may not be an insurance company.

third-party payer
A public or private organization that pays for or underwrites coverage for health care expenses. The third-party payment system is frequently blamed for rising medical costs because patients utilize medical services but are insulated from medical expenses. The patient (party one) does not pay the bill generated by the provider (party two), since it is instead covered by the payer (party three).

three-way contract
Under the capitated demonstration model, selected MCOs enter a three-way contract with CMS and a state Medicaid agency. The plan receives three capitated payments from (1) Medicare Parts A and B, (2) Medicare Part D and (3) the participating state’s Medicaid agency.

total quality management
Total quality management is a philosophy of management in which, through a continuous loop of monitoring, evaluating and correcting, businesses increase and maintain the highest quality output possible. This philosophy played a vital role in transforming the Japanese manufacturing industry from a source of poor-quality goods to a producer of state-of-the-art products. Many health organizations are attempting to use this philosophy for the improvement of health care delivery.
See also: continuous quality management.

trending
A calculation used to anticipate future utilization of a group based on past utilization by applying a trend factor, the rate at which medical costs are changing because of various issues, including prices charged by health care providers, changes in the pattern of utilization and use of expensive medical equipment.

triage
A term that originated on the battlefield. Triage is the evaluation of a patient’s conditions for urgency and severity in order to establish the most appropriate course of care. In the setting of managed care, triage is often performed on the telephone by a nurse or other health professional to screen patients for emergent or urgent treatment.

TRICARE
A government health care program serving uniformed service members, retirees and their families worldwide.

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U

unbundling
The act of separating a medical procedure or operation into its many components, resulting in separate payment for each component rather than a lower global price for the entire procedure.

under treatment
Failure on the part of the provider to recommend or deliver at the proper time one or more doses of medications that are necessary and appropriate.

underwriting
Process of selecting, classifying, analyzing and assuming risk according to insurability. The insurance function bearing the risk of adverse price fluctuations during a particular period. Analysis of a group that is done to determine rates or to determine whether the group should be offered coverage at all.

United States Per Capita Cost (USPCC)
The national average cost of caring for each Medicare enrollee, as determined by CMS.

United States Pharmacopeial Convention (USP)
A scientific non-profit organization that develops and publishes standards for drug substances, drug products, excipients and dietary supplements in the United States Pharmacopeia-National Formulary (USP-NF). These standards have been recognized in the Federal Food, Drug and Cosmetic Act since it was first enacted in 1938.

upcoding
The intentional or accidental act of changing a procedure code, such as a CPT code digit, to reflect a higher intensity of care and thus a higher payment.

up-front billing
When a provider tries to collect for services rendered before the bill is submitted to a payer.

usual, customary and reasonable charge (UCR)
Fee-for-service payment to physicians based on the usual and customary fee for the same service in the area where the practice is located or on some other judgment of reasonableness.

utilization
Use of health care services such as physician or hospital care or prescription drugs. Utilization is measured in rates per unit of population at risk for a given period such as physician visits per year per 1,000 population, per age group.

utilization review (UR)
Also referred to as utilization management (UM). Review performed by the health plan to discover if a particular physician is spending as much of the health plan’s money a particular treatment as are other physicians in the area. Findings from utilization review help determine of a physician will receive money from the withhold fund at the end of the contract period, or if a health plan will continue contracting with a provider. Utilization review in hospitals includes reviewing the appropriateness of admissions, length of stay, discharge practices, and services ordered. Utilization review can occur on a concurrent or retrospective basis. Usually called utilization management when it is formed on a precertification basis.

Utilization Review Accreditation Commission (URAC)
A Washington DC-based, nonprofit corporation formed in 1990 and dedicated to improving the quality of utilization review in the health care industry by providing a method of evaluation and accreditation of utilization review programs.

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V

validation criterion
Determination of whether a patient had the diagnosis or problem ascribed to him or her in the patient medical record.

value-based insurance design
When plans use financial incentives to promote cost-efficient health care services and consumer choices with the aim to increase health care quality and decrease costs. Examples include covering preventive care, wellness visits and treatments such as medications to control blood pressure or diabetes at low to no cost to reduce future claims for expensive medical procedures.

variation
In utilization review, an instance in which information on a patient’s record does not conform to a screen criterion. The information in question may or may not subsequently be justified by audit committee review.

vertical integration
A provider strategy usually accomplished through partnerships, joint ventures and contractual agreements whereby providers establish a local or regional health care delivery network serving a geographically defined population. This system provides a seamless, full range of services and delivery settings for patients.

volume performance standards
Standard rates of increase for physician services expenditures, enacted as part of the Omnibus Budget Reconciliation Act of 1989 (OBRA89) to control the rate of increase in the volume and intensity of services provided to Medicare beneficiaries. The goal is for physicians to order fewer tests that have limited value to patients.

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W

waiting period
Also known as probation period. The time that passes before coverage becomes effective for an employee or dependent, who is eligible for coverage under a job-based health plans.

web-based entity (WBE)
A company that HHS has allowed exchanges to work with to enroll people into qualified health plans.

wellness
A health care process that fosters awareness and attitudes toward unhealthy lifestyles so that individuals can make informed choices and change their behavior to achieve optimum physical and mental health.

withhold fund
The portion of the monthly capitation payment to physicians withheld by the MCO until the end of the year or other time period to create an incentive for efficient care. If the physician exceeds utilization norms for other members of his group or geographic region, he or she loses the fund. The principle of the withhold fund may be applied to hospital services, specialty referrals, laboratory and imaging usage, etc. See risk sharing.

workers’ compensation
A state-governed system which addresses work-related injuries. Under this system, employers assume the cost of medical treatment and wage losses stemming from a worker’s job-related injury. In return, employees give up the right to sue employers.