Tools - Glossary of Terms


When used as a legal term in the business of healthcare, it normally refers to actions that do not involve intentional misrepresentations in billing but which, nevertheless, result in improper conduct. Consequences can result in civil liability and administrative sanctions. An example of abuse is the excessive use of medical supplies. (Also see Fraud, OIG, FBI, and Compliance)

Accelerated Benefits

Riders on life insurance policies which allow the life insurance policy's death benefits to be used to offset expenses incurred in a convalescent or nursing home facility.


The availability of medical care to a patient. This can be determined by location, transportation, type of medical services in the area, etc.

Accidental Death and Dismemberment

A policy or a provision in a Disability Income policy which pays either a specified amount or a multiple of the weekly disability benefit if the insured dies, loses his or her sight, or loses two limbs as the result of an accident. A lesser amount is payable for the loss of one eye, arm, leg, hand, or foot. (H)

Accidental Death Benefit

An extra benefit which generally equals the face of the contract or principal sum, payable in addition to other benefits in the event of death as the result of an accident. See also Double Indemnity and Multiple Indemnity.

Accidental Death Insurance

A form that provides payment if the death of the insured results from an accident. It is often combined with Dismemberment Insurance in a form called Accidental Death and Dismemberment. See also Accidental Death and Dismemberment.

Accountable Care Organization (ACO)

These organizations coordinate patient care and provide the full range of health care services for patients. The health reform law provides incentives for providers who join together to form such organizations and who agree to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to the ACO.


The process by which an organization recognizes a provider, a program of study or an institution as meeting predetermined standards. Two organizations that accredit managed care plans are the National Committee for Quality Assurance (NCQA) and the Joint Commission on Accreditation of Health Care Organizations (JCAHO). JCAHO also accredits hospitals and clinics. CARF accredits rehabilitation providers.


A Medicare term which means the process of adding new members to a health plan.

Accumulation Period

Timeframe within a policy period in which deductible and out-of-pocket amounts are calculated. For most health insurance policies, the accumulation period is a calendar year.


Most group health insurance policies state that if an employee is not actively at work on the day the policy goes into effect, the coverage will not begin until the employee does return to work.

Activities of Daily Living (ADL)

Everyday living functions and activities performed by individuals without assistance. These functions would include mobility, dressing, personal hygiene and eating.

Activities of Daily Living (ADL) Standards

Used to assess the ability of an individual to live independently, measured by the ability to perform unaided such activities as eating, bathing, toiletry, dressing, and walking. ADL standards are sometimes discussed as a way to measure or define eligibility for long term care.

Actual Charge

The actual amount charged by a physician for medical services rendered.

Acute Care

Skilled, medically necessary care provided by medical and nursing personnel in order to restore a person to good health.


Processing claims according to contract

Adjusted Community Rating (ACR)

Community rating adjusted by factors specific to a particular group. Also known as factored rating.


See Activities of Daily Living Standards.

Administrative Services Only (ASO)

A relationship between an insurance company or other management entity and a self-funded plan or group of providers in which the insurance company or management entity performs administrative services only, such as billing, practice management, marketing, etc., and does not assume any risk. The client bears the financial risk for the claims. Clients contracting for ASO can include health plans, hospitals, delivery networks, IPAs, etc. A provider system wishing to capitate might contract with a TPA for ASO for certain services for which the provider group does not want to bring in house. This is a form of outsourcing. See also TPA.

Admitting Physician

The doctor responsible for admitting you to a hospital or other inpatient health facility.

Admitting Privileges

The right granted to a doctor to admit patients to a particular hospital.

Adverse Selection

The problem of attracting members who are sicker than the general population, specifically, members who are sicker than was anticipated when developing the budget for medical costs. A tendency for utilization of health services in a population group to be higher than average or the tendency for a person who is in poor health to be enrolled in a health plan where he or she is below the average risk of the group. From an insurance perspective, adverse selection occurs when persons with poorer-than-average health status apply for, or continue, insurance coverage to a greater extent than do persons with average or better health expectations. Occurs when premium doesn't cover cost. Some populations, perhaps due to age or health status, have a great potential for high utilization. Some population parameter such as age (e.g., a much greater number of 65-year-olds or older to young population) that increases the potential for higher utilization and often increases costs above those covered by a payer's capitation rate. Among applicants for a given group or individual program, the tendency for those with an impaired health status, or who are prone to higher than average utilization of benefits, to be enrolled in disproportionate numbers and lower deductible plans.

Affiliated Provider

A health care provider or facility that is part of the HMO's network usually having formal arrangements to provide services to the HMO member.

After Care

The care or follow-up treatment needed by a patient who has recently undergone surgery, been involved in an accident or has experienced an illness requiring hospitalization.

Age Change

The date on which a person's age, for insurance purposes, changes. In most Life Insurance contracts this is the date midway between the insured's natural birth dates. Health insurers frequently use the age of the previous birth date for rate determinations. On the date of age change, a person's age may change to that of the last birth date, the nearer birth date, or the next birth date, depending upon the way in which the rating structure has been established by that particular insurer.

Age-at-Issuance Rating

A method for establishing health insurance premiums whereby an insurer's premium is based on the age of individuals when they first purchased health insurance coverage. This is an older form of actuarial assessment.

Age-Attained Rating

Similar to the above, this method for establishing health insurance premiums whereby an insurer's premium is based on the current age of the beneficiary. Age-attained-rated premiums increase in price, as the purchasers grow older.

Age/Sex Factor

Compares the age and sex risk of medical costs of one group relative to another. An age/sex factor above 1.00 indicates higher than average risk of medical costs due to that factor. Conversely, a factor below 1.00 indicates a lower than average risk. This measurement is used in underwriting.

Age/Sex Rates (ASR)

Separate rates are established for each grouping of age and sex categories. Preferred over single and family rating because the rates and premiums automatically reflect changes in the age and sex content of the group. Also sometimes called table rates.


A licensed individual who represents several insurance companies and sells their products.

Agent of Record

The insurance agent recognized by a client to represent the client's interests in doing business with an insurance company.

Aggregate Stop Loss

The form of excess risk coverage that provides protection for the employer against accumulation of claims exceeding a certain level. This is protection against abnormal frequency of claims in total, rather than abnormal severity of a single claim.

Allowable Charge

The lesser of the actual charge, the customary charge and the prevailing charge. It is the amount on which Medicare will base its Part B payment.

Allowable Costs

Charges which qualify as covered expenses.

Allowed Charge

This is the amount Medicare approves for payment to a physician, but may not match the amount the physician gets paid by Medicare (due to co-pay or deductibles) and usually does not match what the physician charges patients. Medicare normally pays 80 percent of the approved charge and the beneficiary pays the remaining 20 percent. The allowed charge for a nonparticipating physician is 95 percent of that for a participating physician. Non-participating physicians may bill beneficiaries for an additional amount above the allowed charge. The CMS intermediary in each state publishes these rates.

Allowed Expenses

The maximum amount a plan pays for a covered service. See Usual and Customary Charges.

Ambulatory Care

Similar to outpatient treatment in that it is care which does not require hospitalization.

Ambulatory Setting

Institutions such as surgery centers, clinics, or other outpatient facilities which provide health care on an outpatient basis.


Additional services (other than room and board charges) such as X-rays, anesthesia, lab work, etc. Fees charged for ancillary care such as X-rays, anesthesia, and lab work. This term may also be used to describe the charge made by a pharmacy for prescriptions which exceed the health insurance plan's maximum allowable cost (MAC).

Ancillary Benefits

Benefits for miscellaneous hospital charges.

Ancillary Services

Services, other than those provided by a physician or hospital, which are related to a patient’s care, such as laboratory work, x-rays and anesthesia.

Anniversary Date

The beginning of an employer group's benefit year. The first day of effective coverage as contained in the policy Group Application and subsequent annual anniversaries of that date. An insured has the option to transfer from an indemnity plan (which may have maximum benefit levels) to an HMO.

Annual Benefit Limit

In the past, some insurance plans have placed a limit on the dollar amount of claims they will pay in a given year for an individual. Beginning in 2010, annual benefit limits on certain "essential health benefits" are restricted on a graduated basis, and annual limits will eventually be prohibited in 2014.

Any Willing Provider Laws

Legislation that requires health care plans to accept into their PPO and HMO networks any provider willing to agree to the network's terms and conditions.


Request made to a payer to reconsider a decision, such as a claim denial or denied prior authorization request. Most appeals must be submitted in writing within a specified period.

Approved Charge

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

Approved Health Care Facility or Program

A facility or program which has been approved by a health care plan as described in the contract.


An authorization to pay Medicare benefits directly to the provider. Medicare payments may be assigned to participating providers only.

Assignment of Benefits

A method where the person receiving the medical benefits assigns the payment of those benefits to a physician or hospital.

Assisted Living

Broad range of residential care services, but does not include nursing services. Normally lower in cost than nursing homes.


A policy modification which changes, restricts or clarifies coverage.


If a physician wants to perform a surgery, order a medical supply, or refer the patient to a specialist an authorization and approval by the health plan is required.

Balance Billing

The practice of billing a patient for the fee amount remaining after insurer payment and co-payment have been made. Under Medicare, the excess amount cannot be more than 15 percent above the approved charge.

Beneficiary (Also eligible; enrollee; member)

Individual who is either using or eligible to use insurance benefits, including health insurance benefits, under an insurance contract. Any person eligible as either a subscriber or a dependent for a managed care service in accordance with a contract. An individual who receives benefits from or is covered by an insurance policy or other health care financing program.

Benefit Levels

The maximum amount a person is entitled to receive for a particular service or services as spelled out in the contract with a health plan or insurer.

Benefit Period

Defines the period during which a Medicare beneficiary is eligible for Part A benefits. A benefit period is 90 days which begins the day the patient is admitted to a hospital and ends when the individual has not been hospitalized for a period of 60 consecutive days.


Medical services for which your insurance plan will pay, in full or in part.

Billed Claims

The amounts submitted by a health care provider for services provided to a covered individual.

Birthday Rule

One method of determining which parent's medical coverage will be primary for dependent children: the parent whose birthday falls earliest in the year will be considered as having the primary plan.

Board Certified

A physician who has passed examinations given by a medical specialty group and who has, as a result, been certified as a specialist in this area of practice.

Brand-Name Drug

Prescription drug which is marketed with a specific brand name by the company that manufactures it. May cost insured individuals a higher co-pay than generic drugs on some health plans. (see "generic.")


A licensed insurance professional who obtains multiple quotes and plan information in the interest of his client.


A method by which the insurance company decides to combine payment for two or more medical services.

Cafeteria Plan

Arrangements under which employees may choose their own benefit structure. Sometimes these are varying benefit plans or add-ons provided through the same insurer or 3rd party administrator, other times this refers to the offering of different plans or HMOs provided by different managed care or insurance companies.

Calendar Year

January 1 through December 31 of the same year. Many deductible amount provisions are on a calendar year basis under major medical plans. Also, benefits under basic hospital surgical and medical plans are usually stated as so much for each calendar year.

Capitation (CAP)

A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver the health services agreed upon to any covered person.

Care Plan

A written plan for one's health care.


Usually a commercial insurer contracted by the Department of Health and Human Services to process Part B claims payments.

Carrier Replacement

This refers to a situation where one carrier replaces one or more carriers.

Carry Over Provision

In major medical policies, allowing an insured who has submitted no claims during the year to apply any medical expenses incurred in the last three months of the year toward the new calendar year's deductible.


Medical services that are separated from a contract and paid under a different arrangement.

Case Management

The assessment of a person's long term care needs and the appropriate recommendations for care, monitoring and follow-up as to the extent and quality of services to be provided.

Case Manager

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

Catastrophic Illness

A very serious and costly health problem that could be life threatening or cause life-long disability. The cost of medical services alone for this type of serious condition could cause financial hardship.

Centers of Excellence

Hospitals that specialize in treating particular illnesses, or performing particular treatments, such as cancer or organ transplants.

Certificate Booklet

The plan agreement. A printed description of the benefits and coverage provisions intended to explain the contractual arrangement between the carrier and the insured group or individual. May also be referred to as a policy booklet.

Certificate of Coverage (COC)

Outlines the terms of coverage and benefits available in a carrier's health plan.


These are the published prices of services provided by a facility. CMS requires hospitals to apply the same schedule of charges to all patients, regardless of the expected sources or amount of payment. Controversy exists today because of the often wide disparity between published prices and contract prices. The majority of payers, including Medicare and Medicaid, are becoming managed by health plans that negotiate rates lower than published prices. Often these negotiated rates average 40% to 60% of the published rates and may be all-inclusive bundled rates.

Chemical Dependency Services

The services required in the treatment and diagnosis of chemical dependency, alcoholism, and drug dependency.


A request for payment by a medical provider for a given medical service or item.

Claims Review

The method by which an enrollee's health care service claims are reviewed prior to reimbursement. The purpose is to validate the medical necessity of the provided services and to be sure the cost of the service is not excessive.

Clinical Practice Guidelines

Reports written by experts who have carefully studied whether a treatment works and which patients are most likely to be helped by it.


Coordination of Benefits. See Nonduplication of Benefits.


See Consolidated Omnibus Budget Reconciliation Act of 1986.

Cognitive Impairment

A deficiency in the ability to think, perceive, treason or remember resulting in loss of the ability to take care of one's daily living needs.

Coinsurance Clause

A provision stating that the insured and the insurer will share all losses covered by the policy in a proportion agreed upon in advance, i.e., 80-20 would mean that the insurer would pay 80% and the insured would pay 20% of all losses. See also Percentage Participation.

Community Rating

Under this rating system, the charge for insurance to all insureds depends on the medical and hospital costs in the community or area to be covered. Individual characteristics of the insureds are not considered at all.

Composite Rate

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

Comprehensive Major Medical

A plan of insurance which has a low deductible, high maximum benefits, and a coinsurance feature. It is a combination of basic coverage and major medical coverage which has virtually replaced separate hospital, surgical and medical policies with each having its own deductible requirements. Also see Major Medical Insurance.

Concurrent Review

A case management technique which allows insurers to monitor an insured's hospital stay and to know in advance if there are any changes in the expected period of confinement and the planned release date.

Conditionally Renewable

A contract that provides that the insured may renew it to a stated date or an advanced age, subject to the right of the insurer to decline renewal only under conditions stated in the contract.


A form of disability or sickness that confines the insured indoors, usually at home or in a hospital. Many policies state that coverage is afforded only if the insured is confined.

Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986

Legislation providing for a continuation of group health care benefits under the group plan for a period of time when benefits would otherwise terminate. Continuation rights apply to enrolled persons and their dependents. Coverage may be continued for up to 18 months if the insured person terminates employment or is no longer eligible. Coverage may be continued for up to 36 months in nearly all other cases, such as loss of dependent eligibility because of death of the enrolled person, divorce, or attainment of the limiting age.


Allows terminated employees to continue their group health insurance coverage under certain conditions.

Continuing Care Retirement Communities (CCRCs)

Residential communities set up to provide residents with easy access to health care.


A legal agreement between a payer and a subscribing group or individual which specifies rates, performance covenants, the relationship among the parties, schedule of benefits and other pertinent conditions. The contract usually is limited to a 12-month period and is subject to renewal thereafter. Contracts are not required by statute or regulation, and less formal agreements may be made.

Contract Year

This period runs from the effective date to the expiration date of the contract.

Contracted Provider

A medical provider that has an agreement with a health plan to accept their patients at a previously agreed upon rate for payment.

Contributory Program

Program where the employee and the employer or the union shares the cost of group coverage.

Conversion Plan

When an individual terminates his/her group policy, an option to continue coverage is by purchasing an individual health plan called a conversion policy.

Coordinated Care

Links the treatments or services necessary to obtain an optimum level of medical care required by a patient and provided by appropriate providers. It is also another term for "managed care" used by federal government officials.

Coordination of Benefits (COB)

A group policy provision which helps determine the primary carrier in situations where an insured is covered by more than one policy. This provision prevents an insured from receiving claims overpayments.


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

Copay Provision

Often used with major medical policies. The copay provision states what percentage of a claim the company will pay and what percentage the insured will pay. For example, an 80 percent copay provision would provide that the insurer pay 80 percent of claims and the insured pay 20 percent.


See Copay.

Corridor Deductible

A Major Medical deductible that provides for a deductible, or "corridor," after the full payment of basic hospital and medical expenses up to a stated amount. In the event of further expenses, payment is on the basis of participation or coinsurance, such as 80%-20% or 85%-15%, and the deductible is that portion paid by the insured.

Cosmetic Procedures

Procedures which improve the appearance, but are not medically necessary.

Cost Containment

When the insurance company devises a way to reduce the benefit payment or costs associated with the health plan.

Cost of Living Benefit

An optional disability benefit where the monthly benefit will be increased annually once the insured is on claim for 12 months.

Cost Sharing

A situation where covered persons pay a portion of the health costs such as deductibles, coinsurance, or copayment amounts.


What the health plan does and does not pay for. Coverage includes almost everything mentioned in this booklet: benefits, deductibles, premiums, limitations, etc.

Covered Benefit

A medically necessary service that is specifically provided for under the provisions of an Evidence of Coverage. A covered benefit must always be medically necessary, but not every medically necessary service is a covered benefit. For example, some elements of custodial or maintenance care, which are excluded from coverage, may be medically necessary, but are not covered.

Covered Entity

Under HIPAA, this is a health plan, a health care clearinghouse, or a health care provider who transmits any health information in electronic form in connection with a HIPAA transaction. For purposes of the HIPAA Privacy Rule, health care providers include hospitals, physicians, and other caregivers, as well as researchers who provide health care and receive, access or generate individually identifiable health care information.

Covered Expenses

Health care expenses incurred by an insured or covered person that qualify for reimbursement under the terms of a policy contract.

Covered Person

A person who pays premiums into the contract for the benefits provided and who also meets eligibility requirements.


This involves approving a provider based on certain criteria to provide or participate in a health plan.

Creditable Coverage

Any previous health insurance coverage that can be used to shorten the pre-existing condition waiting period. See "HIPPA".

Current Procedural Terminology (CPT)

A standardized mechanism of reporting services using numeric codes as established and updated annually by the AMA. A manual that assigns five digit codes to medical services and procedures to standardize claims processing and data analysis. The coding system for physicians' services developed by the CPT Editorial Panel of the American Medical Association; basis of the Medicare coding system for physicians services. A medical code set of physician and other services, maintained and copyrighted by the American Medical Association (AMA), and adopted by the Secretary of HHS as the standard for reporting physician and other services on standard transactions. See Coding.

Current Procedural Terminology (CPT)

A system of terminology and coding developed by the American Medical Association (AMA) that is used for describing, coding, and reporting medical services and procedures.

Custodial Care

Care that is primarily for meeting personal needs such as help in bathing, dressing, eating or taking medicine. It can be provided by someone without professional medical skills or training but must be according to doctor's orders.

Date of Service

The date that the health service was provided.

Death Spiral

The potentially destructive cycle that may occur in an indemnity plan as a result of increased HMO penetration. The process can occur if indemnity plan rates continuously escalate because healthier and younger employees choose HMOs, leaving less healthy individuals in experience-rated indemnity plans. Employer contribution strategies and HMO pricing techniques may aggravate the problem.


The dollar amount an insured individual must pay for covered expenses during a year before the plan begins paying co-insurance benefits.

Deductible Carryover Credit

During the last three months of a calendar year, charges incurred for health services can be used to satisfy the deductible for the following calendar year. These credits may be applied whether or not the prior calendar year's deductible had been met.

Defensive Medicine

Use of unnecessary treatments, procedures or other medical services by doctors to minimize the threat of a malpractice lawsuit.


This refers to the process of taking an individual off coverage.

Denial Of Claim

Refusal by a health insurance company to honor a request by an individual (or his or her provider) to pay for health care services obtained from a health care professional.

Dental Insurance

A group Health Insurance contract that provides payment for certain enumerated dental services.

Dependent Coverage

Insurance coverage on the head of a family which is extended to his or her dependents, including only the lawful spouse and unmarried children who are not yet employed on a full-time basis. "Children" may be step, foster, and adopted, as well as natural. Certain age restrictions on children usually apply.


Usually the spouse and unmarried children (adopted, step or natural) of an employee.

Designated Facility

A facility which has an agreement with a health insurance plan to render approved services (Organ transplants are the most common example.). The facility may be outside a covered person’s geographic area.


The process an individual goes through when withdrawing from alcohol. Usually is done under guidance of medical personnel.


The process of identifying a disease.

Diagnosis Related Groups (DRGs)

A method of classifying inpatient hospital services. It is used as a method of determining financing to reimburse various providers for services performed.

Discharge Planning

Determining what the patient's medical needs will be after discharge from a hospital or other inpatient treatment.


Ending a person's health care coverage with a health plan.

Dismemberment Benefit

The benefits payable for various types of dismemberment. See also Accidental Death and Dismemberment and Multiple Indemnity.

Dread (or Specified) Disease Policy

Coverage, usually with a high maximum limit, for all types of medical expenses arising out of diseases named in the contract. Common diseases covered are poliomyelitis, diphtheria, multiple sclerosis, spinal meningitis, and tetanus. Cancer is sometimes covered or may be added with some companies by a rider.

DRG (Diagnostic Related Group)

A Medicare-developed healthcare cost schedule in which medical service providers are assigned a uniform payment for specific services.

Drug Formulary

A schedule of prescription drugs approved for use which will be covered by the plan and dispensed through participating pharmacies.

Drug Utilization Review (DUR)

A method for evaluating or reviewing the use of drugs in order to determine the appropriateness of the drug therapy.

Dual Choice

The federal requirement that employers having 25 or more employees who are within the service area of a federally qualified HMO, who are paying at least minimum wage and offer a health plan to their employees, must offer HMO coverage as well as an indemnity plan.

Duplicate Coverage Inquiry (DCI)

A request to determine whether or not other coverage exists. Used to apply the coordination of benefits provisions where two or more insurance companies are involved.

Duplication of Benefits

A situation where identical or overlapping coverage exists between two or more insurance companies or service organizations.

Effective Date

The date insurance coverage begins.

Eligibility Date

The date that a person is eligible for benefits.

Eligibility Period

(1) The period of time during which potential members of a Group Life or Health program may enroll without providing evidence of insurability. (2) The period of time under a Major Medical policy during which reimbursable expenses may be accrued.

Eligibility Requirements

Requirements imposed for eligibility for coverage, usually in a group insurance or pension plan.

Eligible Dependent

A dependent of an insured person who is eligible for coverage according to the requirements set forth in the contract.

Eligible Employee

An employee who is eligible based on the requirements as indicated in the group contract.

Eligible Expenses

Expenses as defined in the health plan as being eligible for coverage. This could involve specified health services fees or "customary and reasonable charges."

Eligible Person

Similar to eligible employee except it could be a contract covering people who are not employees of a specified employer. An example might be members of an association, union, etc.

Elimination Period

A loosely used term, sometimes designating the probationary period, but most often designating the waiting period in a Health Insurance policy. See also Probationary Period and Waiting Period.


An injury or disease which happens suddenly and requires treatment within 24 hours.

Emergency Accident Benefit

A group medical benefit which reimburses the insured for expenses incurred for emergency treatment of accidents.

Employee Assistance Program (EAP)

A service, plan or set of benefits that are designed for personal or family problems, including mental health, substance abuse, gambling addiction, marital problems, parenting problems, emotional problems or financial pressures. This is usually a service provided by an employer to the employees, designed to assist employees in getting help for these problems so that they may remain on the job. EAP began with a primary drug and alcohol focus with an emphasis on rehabilitating valued employees rather than terminating them for their substance problems. It is sometimes implemented with a disciplinary program that requires that the impaired employee participate in EAP in order to retain employment. With the advent of managed care, EAP has sometimes evolved to include case management, utilization review and gatekeeping functions for the psychiatric and substance abuse health benefits.

Employee Benefit Program

Benefits offered an employee at his place of work by his employer, covering such contingencies as medical expenses, disability, retirement, and death, usually paid for wholly or in part by the employer. These benefits are usually insured.

Employee Certificate of Insurance

The employee's evidence of participation in a group insurance plan, consisting of a brief summary of plan benefits. The employee is provided with a certificate of insurance rather than the actual insurance policy.

Employee Contribution

The employee's share of the premium costs.

Employer Contribution

The portion of the cost of a health insurance plan which is borne by the employer.


An eligible individual who is enrolled in a health plan _ does not include an eligible dependent.


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

Enrollment Period

The amount of time an employee has to sign up for a contributory health plan.

Episode of Care

The health care services given during a certain period of time, usually during a hospital stay.


See Employee Retirement Income Security Act.

Evidence of Coverage

See Certificate of Coverage.

Evidence of Insurability

The statement of information needed for the underwriting of an insurance policy.

Excepted Period

See Probationary Period.

Excluded Period

See Probationary Period.


Those items or medical services that are not covered by the health plan.

Exclusive Provider Organization (EPO)

A type of preferred provider organization where individual members use particular preferred providers rather than having a choice of a variety of preferred providers. EPOs are characterized by a primary physician who monitors care and makes referrals to a network of providers.

Expected Claims

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

Expected Morbidity

The expected incidence of sickness or injury within a given group during a given period of time as shown on a morbidity table.


A policy's share of the company's operating costs, fees for medical examinations and inspection reports, underwriting, printing costs, commissions, advertising, agency expenses, premium taxes, salaries, rent, etc. Such costs are important in determining dividends and premium rates.


A term used to describe the relationship of premium to claims for a plan, coverage, or benefits for a stated time period. Usually expressed as a ratio or percent. See also Medical Loss Ratio.

Experimental or Unproven Procedures

Any health care services, supplies, procedures, therapies, or devices that the health plan determines regarding coverage for a particular case to be either (1) not proven by scientific evidence to be effective, or (2) not accepted by health care professionals as being effective.

Explanation of Benefits (EOB)

The statement sent to a participant in a health plan listing services, amounts paid by the plan, and total amount billed to the patient.

Explanation of Medicare Benefits

A notice which is sent to the Medicare patient which provides information designed to explain how the claim is to be paid.

Extended Care Facility

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

Extended Coverage

A provision in certain Health policies, usually Group, to allow the insured to receive benefits for specified losses sustained after the termination of coverage, such a maternity expense benefits incurred for a pregnancy in progress at the time of the termination.

Extension of Benefits

A condition in the insurance policy which allows coverage to continue beyond the expiration date of the policy in the case of employees who are not actively at work or dependents who are hospitalized on that date. The extended coverage applies only where the employee or dependent is disabled as of that date and continues only until the employee returns to work or the dependent leaves the hospital.

Family Dependent

A person entitled to coverage because he or she is: 1. The enrollee's spouse, or 2. A single dependent child of either the enrollee or the enrollee's spouse (including stepchildren or legally adopted children), and 3. A resident of the enrollee's home.

Fee Schedule

A list of maximum fees for providers who are on a fee-for-service basis.

Fee-for-Service Reimbursement

A health care system where physicians and other providers receive payment based on their billed charge for each service provided.

Field Underwriting

The initial screening of prospective buyers of health insurance, performed by sales personnel "in the field." May also include quoting of premium rates.

First Dollar coverage

Insurance coverage with no front-end deductible where coverage begins with the first dollar of expense incurred by the insured for any covered benefit.

Flat Maternity Benefit

A stipulated benefit in a Hospital Reimbursement policy that is paid for maternity confinement, regardless of the actual cost of the confinement.

Flexible Benefit Plan

A type of program where employees can tailor their benefits to meet their own specific needs.

Flexible Spending Account (FSA)

A plan that provides employees a choice between taxable cash and non-taxable benefits for unreimbursed health care expenses or dependent care expenses. This plan qualifies under Section 125 of the IRS Code. See also Medical Spending Account.


See Drug Formulary.

Free-Look Period

Typically a 10-day period during which a newly insured person can cancel a policy and receive a full refund of paid premium.

Free-Standing Outpatient Surgical Center

A facility which only provides outpatient surgical services. Also called surgi-center.

Fringe Benefits

See Employee Benefit Program.

Full-Time Student

Under a health plan, an eligible dependant child student (typically age 19 or older) who meets the health plan's criteria of "full-time." Such criteria normally typically includes minimum credit hour requirements (such as 12 credit hours in a semester) and a maximum age (age 23 is typical.)

Fully Insured

An Employer purchases insurance coverage from a licensed insurance company and the insurance company assumes all of the risk.

Funding Level

The dollar amount required to purchase a particular medical care program. Usually measured by the premium rate for an insured program, or an amount assessed for expected claim loss and related fees under a self-funded program.

Funding Methods

The agreed means by which an employer pays for health coverage. (H) Future Increase Option. An option which allows the insured to increase disability income benefits at predetermined times, specified in the policy, without evidence of insurability.

Gag Rule Laws

Special laws that make sure that health plans let doctors tell their patients complete health care information. This includes information about treatments not covered by the health plan.

Gatekeeper Model

Under this model of HMO and PPO organizations, the primary care physician (the gatekeeper) is the initial contact for the patient for medical care and for referrals. This is also called a closed access or closed panel.

General Agent (GA)

An individual appointed by a Life or Health insurer to administer its business in a given territory. He is responsible for building his own agency and service force and is compensated on a commission basis, although he possibly has some additional expense allowances.

General LTC Rider

A LTC rider which is attached to a life insurance policy but stands alone or is independent of the life policy. Any LTC benefits paid do not reduce any of the life insurance benefits.

Generic Drug

A drug which is exactly the same as a brand name drug and which is allowed to be produced after the brand name drug's patent has expired. It is also called a "generic equivalent."

Generic Equivalence

See Generic Drug.

Grace Period

Period past the due date of a premium during which coverage may not be cancelled.


Request made to a health plan to reconsider coverage of a health care service that the health plan has not interpreted to be a covered benefit.

Grievance Procedure

A procedure which allows a member of a health plan or a provider of benefits to express complaints and seek remedies.


Coverage of a number of individuals under one contract. The most common "group" is employees of the same employer.

Group Certificate

The document provided to each member of a group plan. It shows the benefits provided under the group contract issued to the employer or other insured.

Group Contract

A contract of insurance made with an employer or other entity that covers a group of persons identified by reference to their relationship to the entity buying the contract. The group contractual arrangement is generally used to cover employees of a common employer, members of a trade association or trusteeship, members of a welfare or employee benefit association, members of a labor union, or members of a professional or other association not formed only for the purpose of obtaining insurance.

Group Disability Insurance

Coverage provided for a group of individuals for loss of compensation due to accident or sickness.

Group Health Plan

A health plan that provides health coverage to employees and their families, and is supported by an employer or employee organization.

Group Insurance

An insurance contract made with an employer or other entity that covers individuals in the group.

Group Model HMO

A health plan where a group of physicians is reimbursed for services they provide at a negotiated rate. The HMO also contracts with hospitals for the care of the patients of the physicians who belong to the group.

Guaranteed Standard Issue (GSI)

An underwriting term used to describe the fact that a group insurance contract was issued without reference to any medical underwriting. All group participants are covered regardless of health history.

HCFA Common Procedure Coding System (HCPCS)

Name given to CPT codes (Level I), alphanumeric codes (Level II), and local codes (Level III) used by payers and providers for billing purposes. Within the industry, most refer to Level II national codes as HCPCS codes.


The state of complete physical, mental, and social well-being and not merely the absence of disease or infirmity. It is recognized, however, that health has many dimensions (anatomical, physiological, and mental) and is largely culturally defined. The relative importance of various disabilities will differ depending upon the cultural milieu and the role of the affected individual in that culture. Most attempts at measurement have been assessed in terms or morbidity and mortality.

Health Benefits Package

The coverages offered by a health plan to an individual or group.

Health Care Provider

Providers of medical or health care or researchers who provide health care are health care providers. Normally health care providers are clinics, hospitals, doctors, dentists, psychologists and similar professionals.

Health Employer Data and Information Set (HEDIS)

A set of standard performance measures that provides information about the quality of a health plan. These measures are used to compare managed care plans.

Health History

A form used by underwriters to assist in evaluating groups or individuals to determine whether they are acceptable risks.

Health Insurance (HI)

Insurance against loss by sickness or bodily injury. The generic form for those forms of insurance that provide lump sum or periodic payments in the event of loss occasioned by bodily injury, sickness or disease, and medical expense. The term Health Insurance is now used to replace such terms as Accident Insurance, Sickness Insurance, Medical Expense Insurance, Accidental Death Insurance, and Dismemberment Insurance. The form is sometimes called Accident and Health, Accident and Sickness, Accident, or Disability Income Insurance.

Health Insurance Association of America (HIAA)

An association supported by Life and Health insurers to provide the research, public relations, education, and legislative base for the promotion of voluntary private Health Insurance.

Health Insurance Institute (HII)

The public relations arm of the Health Insurance Association of America. It provides for a flow of information from Health insurers to the public and from the public to the insurers.

Health Maintenance Organization (HMO)

An HMO is a prepaid medical service plan which provides services to plan members. Medical providers contract with the HMO to provide medical services to plan members. Members must use contracted providers. The emphasis is on preventive medicine, and it is an alternative to employee benefit plans. Employers of more than 25 persons are required to offer the alternative of HMO to employees, but not if the cost exceeds that of present employee benefit plans.

Health Plan

This refers to any kind of plan that covers health care services such as HMOs, insured plans, preferred provider organizations, etc.

Health Reimbursement Arrangement (HRA)

A tax-advantaged employee health spending account funded and owned by the employer.

Health Savings Account (HSA)

Operating similarly to IRAs, HSAs are tax-advantaged savings accounts for health care services. A person must enroll in a qualified High-Deductible Health Plan (HDHP) before they can establish an HSA.

Health Service Agreement

The agreement between employer and the health plan which outlines a description of benefits, enrollment procedures, eligibility standards, etc.

Health Services

The benefits covered under a health contract.

High Deductible Health Plan (HDHP)

A person must be enrolled in a qualified High-Deductible Health Plan (HDHP) before they can establish a Health Savings Account (HSA). Not all high-deductible health plans qualify for purposes of establishing HSA eligibility. A qualified HDHP benefit design must conform to various federally-mandated requirements, such as a minimum deductible and a lack of first-dollar benefit provisions.


Health Insurance Portability and Accountability Act of 1996, P.L. 104-91. This law relates to underwriting, pre-existing limitations, guaranteed renewal, COBRA and certification requirements in the event someone terminates from the plan. The new law, commonly known as the "Kennedy-Kassebaum Bill," establishes new requirements for self-funded, fully-insured group plans (including church plans) and Individual Health policies. The purpose of the law is to:

  • Improve portability and continuity of health insurance coverage in the group and individual markets 
  • To combat waste, fraud and abuse in health insurance and health care delivery
  • To promote the use of medical savings accounts
  • To improve access to long-term care services and coverage
  • To simplify the administration of health insurance


See Health Maintenance Organization.

Home Health Agency

A certified facility approved by a health plan to provide services under contract.

Home Health Care

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

Home Health Care

Full range of medical and other health related services such as physical therapy, nursing, counseling, and social services that are delivered in the home of a patient, by a provider.

Home Health Services

Health care services provided by a licensed home health agency in the patient's home which is a covered expense under Part A of Medicare.


An organization which is primarily designed to provide pain relief, symptom management and supportive services for the terminally ill and their families. Hospice care is covered under Part A of Medicare.

Hospital Benefits

Benefits payable for hospital room and board, plus miscellaneous charges resulting from hospitalization.

Hospital Care

Reimbursement for both inpatient and outpatient medical care expenses incurred in a hospital. Inpatient Benefits include; Charges for room and board, charges for necessary services and supplies sometimes referred to as 'hospital extras,' 'other hospital extras,' 'miscellaneous charges,' and 'ancillary charges. Outpatient Benefits include; surgical procedures, rehabilitation therapy, and physical therapy.

Hospital-Surgical Coverage

A form of health insurance that offers coverage of certain costs related to hospitalization and surgical procedures. A hospital-surgical plan does not cover other types of medical services, such as physician office visits and outpatient prescription drugs.

Impaired Risk

An insurance applicant who has pre-existing poor health or is in substandard physical condition, is engaged in dangerous activities, or has a hazardous occupation.

Incurral Date

The date on which health care services are provided to a covered person. The incurral date, not the date on which the insurance company pays a health care claim, is the critical date in determining health insurance benefits. For example, a health insurance company will not pay a claim for health care services incurred prior to the effective date of the health insurance coverage.

Independent Practice Associations (IPA)

An IPA is a type of HMO in which care is provided by independent physicians who contract with the HMO. This contrasts with the "staff model" HMO, in physicians are employees of the HMO.

Inpatient Care

Health care that you get when you stay overnight in a hospital.


Termination of insurance for non-payment of premium

Large Claim Pooling

A system designed to help stabilize premium fluctuations in smaller groups. Large claims (those over a stated amount) are charged to a pool contributed to by many small groups who belong and share in that pool. The smaller the group of groups, the lower the pooling level. Larger groups will have a larger pooling level.

Legend Drug

A drug which has on its label "caution: federal law prohibits dispensing without a prescription."

Length of Stay (LOS)

The total number of days a participant stays in a facility such as a hospital.

Lifetime Maximum Benefit

The maximum amount a health plan will pay in benefits to an insured individual.


A restriction on the amount of benefits paid out for a particular covered expense.

Limited Policy

A policy that covers only specified accidents or sicknesses (e.g. a cancer policy).

Living Benefits Rider

A rider attached to a life insurance policy which provides LTC benefits or benefits for the terminally ill. The benefits provided are derived from the available life insurance benefits.

Living Need Benefits

A combination of life insurance and long-term care insurance which allows life insurance benefits to generate long-term care benefits. Up to a certain percentage of the life insurance policy's death benefit may be used in advance to offset nursing home or medical expenses, reducing the face amount of the life policy.

Long Term Care (LTC)

Care which is provided for persons with chronic diseases or disabilities. The term includes a wide range of health and social services provided under the supervision of medical professionals.

Long Term Care Facility

Usually a state licensed facility which provides skilled nursing services, intermediate care and custodial care.

Long-term care insurance

Insurance designed to pay for some or all of the costs of long term care.

Long-Term Disability Insurance

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

Major Medical Insurance

A type of Health Insurance that provides benefits up to a high limit for most types of medical expenses incurred, subject to a large deductible. Such contracts may contain limits on specific types of charges, like room and board, and a percentage participation clause sometimes called a coinsurance clause. These policies usually pay covered expenses whether an individual is in or out of the hospital.

Managed Care

A system of health care where the goal is a system that delivers quality, cost effective health care through monitoring and recommending utilization of services, and cost of services.

Managed Health Care Plan

A plan which involves financing, managing, and delivery of health care services. Typically, it involves a group of providers who share the financial risk of the plan or who have an incentive to deliver cost effective, but quality, service.

Mandated Benefits

Benefits required by state or federal law.

Mandated Providers

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

Manual Rates

Rates based on average claims data for a large number of groups. These rates are then adjusted for specific groups based on that group's characteristics, such as the type of industry, changes in benefits from the standard, etc.

Master Policy

The group insurance policy that explains coverage to all members of the group.

Maximum Allowable Costs (MAC) List

A list of prescriptions where the reimbursement will be based on the cost of the generic product.

Maximum Out-of-Pocket Costs

The most a member will pay considering copayments, coinsurance, deductibles, etc.


A medical benefits program administered by states and subsidized by the federal government. Under this plan, various medical expenses will be paid to those who qualify. It is technically referred to as Title XIX Benefits.

Medical Loss Ratio

Total health benefits divided by total premium.

Medical Savings Account (MSA)

A tax-advantaged personal savings account used in conjunction with a high deductible health policy. Individuals can contribute money to this account on a pre-tax basis to set aside money for qualified medical care and expenses, including annual deductibles and co-payments.

Medical Supplies

Any items which are essential in carrying out the treatment of a patient's illness or injury.

Medically Necessary

A service or treatment which is absolutely necessary in treating a patient and which could adversely affect the patient's condition if it were omitted.


The United States federal government plan for paying certain hospital and medical expenses for persons qualifying under the plan, usually those over 65. The hospital benefits are Part A, and the medical expense portion is Part B. Part A is compulsory social insurance; Part B is voluntary government-subsidized, government-operated insurance.

Medicare Approved Charge

The amount Medicare approves for payment to a physician. Typically, Medicare pays 80 percent of the approved charge and the beneficiary pays the remaining 20 percent. Physicians may bill beneficiaries for an additional amount (the balance) not to exceed 15 percent of the Medicare approved charge. See balance billing.

Medicare Beneficiary

Anyone entitled to Medicare benefits based on the designation by the Social Security Administration.

Medicare Supplement Insurance

Insurance coverage sold on an individual or group basis which helps to fill the gaps in the protection provided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare, but may pay part or all of Medicare's deductibles and copayments, and may cover some services and expenses not covered by Medicare.


Private health insurance plans that supplement Medicare benefits by covering some costs not paid for by Medicare. MediGap plans are supplements to Medicare insurance. MediGap plans vary from State to State; standardized MediGap plans also may be known as Medicare Select plans.


Anyone covered under a health plan (enrollee or eligible dependent).

Member Certificate

Another term for certificate of coverage.

Mental Health Parity

Mental health parity refers to providing the same insurance coverage for mental health treatment as that offered for medical and surgical treatments. The Mental Health Parity Act was passed in 1996 and established parity in lifetime benefit limits and annual limits.

Mental Health Services and Supplies

Items required for treatment of mental illness, including substance abuse and alcoholism.

Minimum Premium

A cost plus arrangement whereby the employer pays the insurer only a portion of the premium which is to be used for administration costs. The remainder is placed in a "bank account" which is then used by the insurer to pay claims.

Miscellaneous Expenses

Ancillary expenses, usually hospital charges other than daily room and board. Examples would be X-rays, drugs, and lab fees. The total amount of such charges that will be reimbursed is limited in most basic hospitalization policies.


Lying or misleading an insurance company about the facts affecting a policy. Misrepresentation is grounds for voiding a policy.

Modified Community Rating

A method of determining rates for medical services based on data from a given geographic area.

Modified Fee-For-Service

A situation where reimbursement is made based on the actual fees subject to maximums for each procedure. (H)

Morbidity Rate

The ratio of the incidence of sickness to the number of well persons in a given group of people over a given period of time. It may be the incidence of the number of new cases in the given time or the total number of cases of a given disease or disorder.

Morbidity Table

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

Multiple Employer Trust (MET)

A trust consisting of multiple small employers in the same industry, which is formed for the purpose of purchasing group health insurance or establishing a self-funded plan at a lower cost than would be available to the employers individually.

Multiple Employer Welfare Arrangements

Employer funds and trusts providing health care benefits to individuals.

National Association of Health Underwriters

An association of agents and related personnel on the Health Insurance business.

National Association of Insurance Commissioners (NAIC)

A national organization of state officials charged with regulating insurance. NAIC was formed to promote national uniformity in insurance regulations.

National Committee for Quality Assurance (NCQA)

A national group responsible for devising and monitoring quality measurements and standards for health care entities.

National Drug Code (NDC)

A system for identifying drugs.

National Health Insurance

Any system of socialized insurance benefits covering all or nearly all of the citizens of a country, established by its federal law, administered by its federal government, and supported or subsidized by taxation.


A group of doctors, hospitals and other providers contracted to provide services to insured individuals for less than their usual fees. Provider networks can cover large geographic markets and/or a wide range of health care services. If a health plan uses a preferred provider network, insured individuals typically pay less for using a network provider.

Network Provider

Physicians, hospitals or other providers of medical services that have agreed to participate in a network, to offer their services at negotiated rates, and to meet other negotiated contractual provisions. Also called "participating provider."

Non-disabling Injury

An injury that does not qualify the insured for total or partial disability benefits. A Disability Income policy may contain a provision for a small benefit in the case of such an injury, including medical costs of up to 25% or 50% of one month's disability benefit payment.

Non-Occupational Policy

A policy or provision of a policy which excludes accidents occurring on the job, when such employment is covered by workers compensation.

Noncancellable Policy

A policy that guarantees you can receive insurance, as long as you pay the premium. It is also called a guaranteed renewable policy.

Nonduplication of Benefits

A provision in some Health Insurance policies specifying that benefits will not be paid for amounts reimbursed by others. In Group Insurance, this is usually called coordination of benefits (COB).

Nonparticipating Provider

(1) A provider who has not signed a contract with a health plan.
(2) A medical or health care provider who is not certified to participate in the Medicare program.


An insurance policy that cannot be renewed or continued after its expiration date.

Nursing Home

A licensed facility which provides general nursing care to those who are chronically ill or unable to take care of necessary daily living needs. May also be referred to as a Long Term Care facility.

Occupational Disease

Impairment of health caused by continued exposure to conditions inherent in a person's occupation or a disease caused by an employment or resulting from the nature of an employment.

Office Visit

Services provided in the physician's office.

Open Access

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

Open Enrollment Period

A period during which members can elect to come under an alternate plan, usually without providing evidence of insurability.

Out-of-Area (OOA)

Treatment given to a member outside of the normal area.


Describes a provider or health care facility which is not part of a health plan's network. Insured individuals usually pay more when using an out-of-network provider, if the plan uses a network.


This phrase usually refers to physicians, hospitals or other health care providers who are considered non-participants in an insurance plan (usually an HMO or PPO). Depending on an individual's health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered at a reduced benefit level.

Out-of-Pocket Costs

The amounts the covered person must pay out of his or her own pocket. This includes such things as coinsurance, deductibles, etc.

Out-of-Pocket Limit

The maximum coinsurnace an individual will be required to pay, after which the insurer will pay 100% of covered expenses up to the policy limit.

Outcomes Measurement

A method of keeping track of a patient's treatment and the responses to that treatment.

Outpatient Care

Care given a person who is not bedridden. Also called ambulatory care. Many surgeries and treatments are now provided on an outpatient basis, while previously they had been considered reason for inpatient hospitalization. Some say this is the fastest growing segment of healthcare.

Over-The-Counter Drugs (OTC)

A drug that can be purchased without a prescription.

Paid Claims

Amounts paid to providers based on the health plan.

Paid Claims Loss Ratio

Paid claims divided by total premiums.

Part A Medicare

Refers to the inpatient portion of benefits under the Medicare Program, covering beneficiaries for inpatient hospital, home health, hospice, and limited skilled nursing facility services. Beneficiaries are responsible for deductibles and copayments. Part A services are financed by the Medicare HI Trust Fund, which consists of Medicare tax payments. Part B, on the other hand, refers to outpatient coverage.

Part B Medicare

Refers to the outpatient benefits of Medicare. Medicare Supplementary Medical Insurance (SMI) under Part B of Title XVII of the Social Security Act covers Medicare beneficiaries for physician services, medical supplies, and other outpatient treatment. Beneficiaries are responsible for monthly premiums, copayments, deductibles, and balance billing. Part B services are financed by a combination of enrollee premiums and general tax revenues.

Partial Disability

A condition in which, as a result of injury or sickness, the insured cannot perform all of the duties of his occupation but can perform some. Exact definitions vary from policy to policy.


An employee or former employee who is eligible to receive benefits from an employee benefit plan or whose beneficiaries may be eligible to receive benefits from the plan.

Participating physician or Participating Provider

Simply refers to a provider under a contract with a health plan. A physician or hospital that has agreed to provide services for a set payment provided by a payer, or who agrees to other arrangements, or who agrees to provide services to a set of covered lives or defined patients. Also refers to a provider or physician who signs an agreement to accept assignment on all Medicare claims for one year. See also Assignment, Preferred Provider or Network.

Participating Provider

A medical provider who has been contracted to render medical services or supplies to insureds at a pre-negotiated fee. Providers include hospitals, physicians, and other medical facilities.


The number of employees enrolled compared to the total number eligible for coverage. Many times, a minimum participation percentage is required.

Patient Liability

The dollar amount that an insured is legally obligated to pay for services rendered by a provider. These may include co-payments, deductibles and payments for uncovered services.

Peer Review

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

Percentage Participation

A provision in a Health Insurance contract which states that the insurer will share losses in an agreed proportion with the insured. An example would be an 80-20 participation where the insurer pays 80% and the insured pays the 20% of losses covered under the contract. Often erroneously referred to as coinsurance.

Permanent and Total Disability

Total disability from which the insured does not recover. When used as a definition in a policy (usually a life insurance policy rider), "permanent" is presumed after a stated period of time, commonly six months.

Permanent Insurance

Coverage that can be continued relatively indefinitely (such as to age 65 for most permanent health insurance policies) as long as the policyholder makes scheduled premium payments and refrains from actions that would invalidate the policy (such as misrepresentations on the application)

Permanent Partial Disability

A condition where the injured party's earning capacity is impaired for life, but he is able to work at reduced efficiency.

Permanent Total Disability

A condition where the injured party is not able to work at any gainful employment for the remaining lifetime.

Pharmacy Benefit Manager (PBM)

PBMs are third party administrators of prescription drug benefits. Pharmacy and Therapeutics (P&T) CommitteeA panel of physicians - usually from different specialties - who advise the health plan regarding the proper use of prescription drugs.

Physical Therapist

A trained medical person who provides rehabilitative services and therapy to help restore bodily functions such as walking, speech, the use of limbs, etc.

Physician's Current Procedural Terminology (CPT)

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

Place of Service

This designates where the actual health services are being performed, whether it be home, hospital, office, clinic, etc.

Plan Administration

Overseeing the details and routine activities of installing and running a health plan, such as answering questions, enrolling new individuals for coverage, billing and collecting premiums, etc.

Plan Document

The document that contains all of the provisions, conditions, and terms of operation of a pension or health or welfare plan. This document may be written in technical terms as distinguished from a summary plan description (SPD) that, under ERISA, must be written in a manner calculated to be understood by the average plan participant.

Point-of-Service Plan

This plan allows a choice of whether to receive services from a participating or nonparticipating provider.


The insurance agreement or contract.

Policy Year

The twelve month period beginning with the effective date or renewal date of the policy.


The insured person named on the insurance policy.

Pool (Risk Pool)

A separate account which includes entries for income and expenses. It is used when a number of groups are put together for the purposes of combining their premium and paying their losses.


Requirement that health plans guarantee continuous coverage without waiting periods for persons moving between plans. The ability for an individual to transfer from one health insurer to another health insurer with regard to pre-existing conditions or other risk factors. This is a new protection for beneficiaries involving the issuance of a certificate of coverage from previous health plan to be given to new health plan. Under this requirement, a beneficiary who changes jobs is guaranteed coverage with the new plan, without a waiting period or having to meet additional deductible requirements. Primarily, this refers to the requirement that insurers waive any pre-existing condition exclusion for beneficiaries previously covered through other insurance. See also HIPAA.

Pre-Admission Authorization

A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to a hospitalization and receive authorization for the admission.

Pre-Admission Testing

Medical tests that are completed for an individual prior to being admitted to a hospital or inpatient health care facility.


An insurance plan requirement in which you or your primary care physician must notify your insurance company in advance about certain medical procedures (like outpatient surgery) in order for those procedures to be considered a covered expense.


an insurance company requirement that an insured obtain pre-approval before being admitted to a hospital or receiving certain kinds of treatment.

Preexisting Condition

A physical condition that existed prior to the effective date of a policy. In many Health policies these are not covered until after a stated period of time has elapsed.

Preferred Provider Organization (PPO)

An organization of hospitals and physicans who provide, for a set fee, services to insurance company clients. These providers are listed as preferred and the insured may select from any number of hospitals and physicians without being limited as with an HMO. Coverage is 100%, with a minimal copayment for each office visit or hospital stay. Contrast with Health Maintenance Organization.

Pregnancy Care

Federal maternity legislation, enacted in 1978, requires that employers engaged in interstate commerce who have 15 or more employees provide the same benefits for pregnancy, childbirth, and related medical conditions as for any other sickness or injury.


The money paid to an insurance company for coverage. Premiums are usually paid monthly and may be paid in part or in full by your employer.

Prescription Medication

A drug which can be dispensed only by prescription and which has been approved by the Food and Drug Administration.

Presumptive Disability

A disability involving loss of sight, hearing, speech, or any two limbs, which is presumed to be a permanent and total disability. In such cases, the insurer does not require the insured to submit to periodic medical examinations to prove continuing disability.

Preventive Care

This type of care is best exemplified by routine physical examinations and immunizations. The emphasis is on preventing illnesses before they occur.

Primary Care

Basic health care provided by doctors who are in the practice of family care, pediatrics, and internal medicine.

Primary Care Physician

Some health insurance plans require members to select and seek treatment from a primary physican who either renders treatment or refers the member to an appropriate specialist within the approved health care network.

Primary Coverage

This is the coverage which pays expenses first, without consideration whether or not there is any other coverage. See also Coordination of Benefits.

Prior Authorization

A cost containment measure which provides full payment of health benefits only when the hospitalization or medical treatment has been approved in advance.

Privacy Notice

Institution-wide notice describing the practices of the covered entity regarding protected health information. Health care providers and other covered entities must give the notice to patients and research subjects and should obtain signed acknowledgements of receipt. Internal and external uses of protected health information are explained. It is the responsibility of the researcher to provide a copy of the Privacy Notice to any subject who has not already received one. If the researcher does provide the notice, the researcher should also obtain the subject's written acknowledgement of receipt. These have become more common and visible in hospitals and physician offices due to HIPAA requirements.

Probationary Period

A period of time between the effective date of a Health Insurance policy, and the date coverage begins for all or certain physical conditions.

Proration of Benefits

The adjustment of Health Insurance policy benefits by reason of the existence of other insurance covering the same contingency.

Prospective Payment System

A system of Medicare reimbursement for Part A benefits which bases most hospital payments on the patient's diagnosis at the time of hospital admission.

Prospective Reimbursement

A system where hospitals or other health care providers are paid annually according to rate of payment which have been established ahead of time.

Protected Health Information

Under HIPAA, this refers to i ndividually identifiable health information transmitted or maintained in any form.


Any individual or group of individuals that provide a health care service such as physicians, hospitals, etc.

Quality Assurance

Activities involving a review of quality of services and the taking of any corrective actions to remove any deficiencies.

Rate Band

The allowable variation in insurance premiums as defined in state regulations. Acceptable variation may be expressed as a ratio from highest to lowest (e.g., 3:1) or as a percent from the community rate (e.g., +/-20%). Usually based on risk factors such as age, gender, occupation or residence.

Rating Process

The steps used to determine a premium rate for a particular group based on the amount of risk that group presents. Items that generally go into the rating process include age, sex, type of industry, benefits, and administrative costs.

Reasonable and Customary Charges

The charge for medical services which refers to the amount approved by the Medicare Carrier for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area.


Anyone designated by Medicaid as being eligible to receive Medicaid benefits.

Recurring Clause

Health Insurance policy provision defining the duration of a period of time during which the recurrence of a condition will be considered a continuation of a prior period of disability or confinement.


Occurs when a physician or other health plan provider receives permission to consult another physician or hospital.

Referral Provider

The person or provider to whom a participating provider has referred a member of the plan.

Registered Nurse (RN)

A licensed professional with a four-year nursing degree. Able to provide all levels of nursing care including the adminstration of medication.

Rehabilitation Clause

A clause in a Health Insurance policy, particularly a Disability Income policy, that is intended to assist the disabled policyholder in vocational rehabilitation.


An insurance arrangement whereby the MCO or provider is reimbursed by a third party for costs exceeding a pre-set limit, usually an annual maximum. A method of limiting the risk that a provider or managed care organization assumes by purchasing insurance that becomes effective after set amount of health care services have been provided. This insurance is intended to protect a provider from the extraordinary health care costs that just a few beneficiaries with extremely extensive health care needs may incur. Insurance purchased by an insurance company or health plan from another insurance company to protect itself against losses. A contract by which an insurer procures a third party to insure it against loss or liability by reason of such original insurance. The practice of an HMO or insurance company of purchasing insurance from another company to protect itself against part or all the losses incurred in the process of honoring the claims of policyholders. See also stop loss. Also called "risk control" insurance. See risk.


Continuance of coverage for a new policy term.


Monies earmarked by health plans to cover anticipated claims and operating expenses A fiscal method of withholding a certain percentage of premium to provide a fund for committed but undelivered health care and such uncertainties as: longer hospital utilization levels than expected, over-utilization of referrals, accidental catastrophes and the like. The fiscal method of providing a fund for committed but undelivered health services or other financial liabilities. A percentage of the premiums support this fund. Businesses other than health plans also manage reserves. For example, hospitals document reserves as that portion of the accounts receivables that they hope to collect but have some doubt about its collectability. Rather than book these amounts as income, hospitals will "reserve" these amounts until paid.

Residual Disability

That form of disability which becomes defined as partial disability when an insured has returned to work immediately following a period of total disability.

Residual Income

A clause used with disability income policies that provides for benefits to be paid when the insured can do some but not all of his/her normal duties. For example, if the insured suffers a disability that causes him or her to lose a third of his or her earning power, the residual diasability clause would provide one-third of the benefit that the policy would provide for total disability.

Respite Care

Normally associated with Hospice care, respite care is a benefit to family members of a patient whereby the family is provided with a break or respite from caring for the patient. The patient is confined to a nursing home for needed care for a short period of time.

Restoration of Benefits

A provision in many Major Medical Plans which restores a person's lifetime maximum benefit amount in small increments after a claim has been paid. Usually, only a small amount ($1,000 to $3,000) may be restored annually.


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

Retrospective Rate Derivation (RETRO)

A rating system whereby the employer becomes responsible for a portion of the group's health care costs. If health care costs are less than the portion the employer agrees to assume, the insurance company may be required to refund a portion of the premium.


Registered Health Underwriter.


A modification to a Certificate of Insurance regarding clauses and provisions of a policy. A rider usually adds or excludes coverage.


Uncertainty of financial loss.

Risk Analysis

The process of determining what benefits to offer and premium to charge a particular group.

Risk Pool

See Pool.

Schedule (Surgical)

A list of specified amounts payable for surgical procedures, dismemberments, ancillary expenses, and the like in hospital and medical reimbursement policies.

Schedule of Benefits and Exclusions

A health insurance listing of the benefits which are covered under the policy guidelines as well as services which are not provided under the policy.

Second Surgical Opinion

A cost containment technique to help patients and insurance companies determine whether a recommended procedure is necessary, or whether an alternative method of treatment could accomplish the same result. Some health policies require a second surgical opinion before specified procedures will be covered, and many policies pay for the second opinion.

Secondary Care

Medical services provided by physicians who do not have first contact with patients. Examples would be specialists such as urologists, cardiologists, etc. See also Primary Care and Tertiary Care.

Secondary Coverage

Coverage which provides payment for charges not covered by the primary policy or plan. See also Coordination of Benefits.

Section 125 Plan

A plan which provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars.

Self-Funded Plan

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

Self-Inflicted Injury

An injury to the body of the insured inflicted by himself.


An Employer who underwrites their own risk. This may is good for groups with a favorable claims history.

Service Area

The area, allowed by state agencies or by the certification of authority, in which a health plan can provide services.

Short-Term Disability Insurance

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

Short-Term Medical

Temporary health coverage for an individual for a short period of time, usually from 30 days to six months.


Includes physical illness, disease, pregnancy, but does not include mental illness.

Single Carrier Replacement

A situation where one carrier replaces several other carriers who had been providing services.

Skilled Nursing Care

Daily nursing and rehabilitative care that is performed only by or under the supervision of skilled professional or technical personnel. Skilled care includes administering medication, medical diagnosis and minor surgery.

Skilled Nursing Facility (SNF)

A facility designed to qualify for treatment to Medicare eligible people. Included is treatment for rehabilitation and other care such as 24-hour nursing coverage, physical, occupational, and speech therapies, etc.

Small Group Market

The insurance market for products sold to groups that are smaller than a specified size, typically employer groups. The size of groups included usually depends on state insurance laws and thus varies from state to state, with 50 employees the most common size.

Small Group Pooling

The combining into one pool of several small group business _ used especially for computing more accurate premium rates for members of the pool.


Skilled Nursing Facility.

Special Benefit Networks

Provider networks for particular services, such as mental health, substance abuse, or prescription drugs.


A physician who practices medicine in a specialty area. Cardiologists, orthopedists, gynecologists and surgeons are all examples of specialists. Under most health plans, family practice physicians, pediatricians and internal medicine physicians are not considered specialists. Some health plans require preauthorization from your primary care physician before you can see a specialist.

Split Dollar Coverage

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

Staff Model

Staff model is a type of HMO in which care is provided by physicians who are employees of the HMO. This contrasts with the "independent practice association (IPA)" HMO, in which independent physicians contract with the HMO.

Standard Industrial Classification (SIC)

Coding of businesses by their product or service. This classification is used in group insurance in determining rates for various industries.

State Insurance Department

An administrative agency that implements state insurance laws and supervises (within the scope of these laws) the activities of insurance companies operating within the state.

State Mandated Benefits

State laws requiring that commercial health insurance plans include specific benefits.

Stop-Loss Insurance

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


Procedure where insurance company recovers from a third party when the action resulting in medical expense (e.g. auto accident) was the fault of another person. The recovery of the cost of services and benefits provided to the insured of one health plan when other parties are liable.


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

Subscriber Contract

An agreement which describes the individual's benefits under a health care policy.

Summary Plan Description

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

Supplemental Medical Insurance (SMI)

Part B of Medicare is a voluntary program which generally covers physician's services and various outpatient services. A premium is charged for electing Part B coverage.

Supplemental Services

Additional services which can be purchased over and above the basic coverage of a health plan.


A separate facility (from a hospital) that provides outpatient surgical services.

Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)

This act defines the primary and secondary coverage responsibilities of the Medicare program and also the provisions to be used by health plans in their contracts with the HCFA (Health Care Financing Administration).

Temporary Disability Benefits (TDB)

Legislated benefits payable to employees for nonoccupational disabilities under TDB laws in certain states. See also Disability Benefits Law.

Temporary Partial Disability

A condition where an injured party's capacity is impaired for a time, but he is able to continue working at reduced efficiency and is expected to fully recover.

Temporary Total Disability

A condition where an injured party is unable to work at all while he is recovering from injury, but he is expected to recover.

Terminally Ill

A term which refers to the status of a person who will normally die within 6 months of a specific illness or sickness. Often refers to the terminally ill requirement for hospice care.

Termination Date

Date that a group contract expires or an individual is no longer eligible for benefits.

Tertiary Care

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

Therapeutic Alternatives

Alternate drug products which may be different in chemical content, but provide the same effect when administered to patients.

Therapeutic Equivalence

Different drugs which will control a symptom or illness exactly the same as other drugs used to control that illness.

Third Party Administrator (TPA)

A firm which provides administrative services for employers and other associations having group insurance policies. The TPA in addition to being the liaison between the employer and the insurer is also involved with certifying eligibility, preparing reports required by the state and processing claims. TPA's are being used more and more with the increase in employer self-funded plans.

Third-Party Payor

This refers to any organization such as Blue Cross/ Blue Shield, Medicare, Medicaid, or commercial insurance companies which is the payor for coverages provided by a health plan.

Time Limit on Certain Defenses

One of the uniform individual accident and sickness provisions required by state law to be included in every Individual Health Policy. It sets a limit on the number of years after a policy has been in force that an insurer can use as a defense against a claim the fact that a physical condition of the insured existed before the policy was issued, but was not declared at that time.

Total Disability

A degree of disability from injury or sickness that prevents the insured from performing the duties of any occupation from remuneration or profit. The definition in any given case depends on the wording in a covering policy.

Travel Accident Insurance

A form of Health Insurance limiting coverage to accidents occurring while the insured is traveling.


The provision of health care by one or more health care providers. Treatment includes any consultation, referral or other exchanges of information to manage a patient's care. The HIPAA Privacy Notice explains that the HIPAA Privacy Rule allows Partners and its affiliates to use and disclose protected health information for treatment purposes without specific authorization.

Treatment Facility

Any facility, either residential or nonresidential, which is authorized to provide treatment for mental illness or substance abuse.

Trend Factor

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


A method of ranking sick or injured people according to the severity of their sickness or injury in order to ensure that medical and nursing staff facilities are used most efficiently.

Unallocated Benefit

A benefit providing reimbursement of expenses up to a maximum but without any schedule of benefits as such.


People with public or private insurance policies that do not cover all necessary health care services, resulting in out-of-pocket expenses that exceed their ability to pay. See cost shifting.


Entity that assumes responsibility for the risk, issues insurance policies and receives premiums.


The act of reviewing and evaluating prospective insureds for risk assessment and appropriate premium.

Unemployment Compensation Disability Insurance (UCD)

Health Insurance that covers off-the-job accidents and sickness. It does not cover disability resulting from an injury or sickness covered by Workers Compensation Insurance. See also Disability Benefits Law.

Uniform Billing Code of 1992 (UB-92)

This code is scheduled to be implemented on October 1, 1993 . It's a federal directive which states how a hospital must provide their patients with bills, itemizing all services included and billed on each invoice.

Uniform Provisions

A set of provisions regarding the operating conditions of individual Health policies developed in a model law recommended by the National Association of Insurance Commissioners and required, with minor variations by almost all jurisdictions, and permitted in all jurisdictions.


People who lack public or private health insurance.

Untimely Submission

A medical claim must be submitted within the time frame given by the insurance company or the claim will be denied.

Urgent Care

Health care provided in situations of medical duress that have not reached the level of emergency. Claim costs for urgent care services are typically much less than for services delivered in emergency rooms.

Usual and Customary (U&C) Charge

A term used to refer to the commonly charged or prevailing fees for health services within a geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community. "Usual and Customary (R&C)" essentially means the same thing as "Reasonable and Customary (R&C) Charge."


This refers to how much a covered group uses a particular health plan or program.

Utilization and Review Committee

A committee composed of medical personnel whose purpose it is to monitor the health care services and supplies provided to Medicare patients.

Utilization Review

A cost control mechanism by which the appropriateness, necessity, and quality of health care is monitored by both insurers and employers.

Vision Care Coverage

A health care plan usually offered only on a group basis which covers routine eye examinations, and which may cover all or part of the cost of eyeglasses and lenses.

Waiting Period

The period of time between the beginning of a disability and the start of Disability Insurance benefits. Also called Elimination period.

Waiver of Coverage

A section on the enrollment form which states that an employee was offered insurance coverage but opted to waive this coverage.

Well-Baby Care

Preventative health services, including immunizations, for young children within an age range specified by the health plan.


A dynamic state of physical, mental, and social well-being; a way of life which equips the individual to realize the full potential of his/her capabilities and to overcome and compensate for weaknesses; a lifestyle which recognizes the importance of nutrition, physical fitness, stress reduction, and self-responsibility. Wellness has been viewed as the result of four key factors over which an individual has varying degrees of control: human biology, environment, health care organization and lifestyle. Preventive medicine associated with lifestyle and preventive care that can reduce health- care utilization and costs. "Wellness" programs became popular with the advent of managed care in the 1980s, with the philosophy and business idea that health plans needed to emphasize keeping their beneficiaries well. However, there has been a drop off in these programs in the 1990s as health plans recognize the difficulty in assessing efficacy and they found that subscribers tend to change plans regularly, thus reducing benefit of keeping one population "well".

Wellness Office Visit

A physician’s office visit which is not prompted by sickness or injury.

Worker's Compensation Insurance

Insurance coverage for work-related illness and injury. All states require employers to carry this insurance.

We do not offer every plan available in your area. Currently we represent five organizations which offer fifty-three products in your area. Plan availability is based on the county in which you reside. Please contact, 1-800-MEDICARE, or your local State Health Insurance Program (SHIP) to get information on all of your options.