¨ Indemnity plan - A type of
medical plan that reimburses the patient and/or provider as expenses are
incurred.
¨ Conventional indemnity plan - An
indemnity that allows the participant the choice of any provider without effect
on reimbursement. These plans reimburse the patient and/or provider as expenses
are incurred.
¨ Preferred provider organization
(PPO) plans - An indemnity plan where coverage is provided to participants
through a network of selected health care providers (such as hospitals and
physicians). The enrollees may go outside the network, but would incur larger
costs in the form of higher deductibles, higher coinsurance rates, or no
discounted charges from the providers.
¨ Exclusive provider organization
(EPO) plan - A more restrictive type of preferred provider organization
plan under which employees must use providers from the specified network of
physicians and hospitals to receive coverage; there is no coverage for care
received from a non-network provider except in an emergency situation.
¨ Health maintenance organization
(HMO) - A health care system that assumes both the financial risks
associated with providing comprehensive medical services (insurance and service
risk) and the responsibility for health care delivery in a particular
geographic area to HMO members, usually in return for a fixed, prepaid fee.
Financial risk may be shared with the providers participating in the HMO.
¨ Group Model HMO - An HMO
that contracts with a single multi-specialty medical group to provide care to
the HMO’s membership. The group practice may work exclusively with the HMO, or
it may provide services to non-HMO patients as well. The HMO pays the medical
group a negotiated, per capita rate, which the group distributes among its
physicians, usually on a salaried basis.
¨ Staff Model HMO - A type of
closed-panel HMO (where patients can receive services only through a limited
number of providers) in which physicians are employees of the HMO. The
physicians see patients in the HMO’s own facilities.
¨ Network Model HMO - An HMO
model that contracts with multiple physician groups to provide services to HMO
members; may involve large single and multispecialty groups. The physician
groups may provide services to both HMO and non-HMO plan participants.
¨ Individual Practice Association
(IPA) HMO- A type of health care provider organization composed of a group
of independent practicing physicians who maintain their own offices and band
together for the purpose of contracting their services to HMOs. An IPA may
contract with and provide services to both HMO and non-HMO plan participants.
¨ Point-of-service (POS) plan -
A POS plan is an "HMO/PPO" hybrid; sometimes referred to as an
"open-ended" HMO when offered by an HMO. POS plans resemble HMOs for
in-network services. Services received outside of the network are usually
reimbursed in a manner similar to conventional indemnity plans (e.g., provider
reimbursement based on a fee schedule or usual, customary and reasonable
charges).
¨ Physician-hospital organization
(PHO) - Alliances between physicians and hospitals to help providers attain
market share, improve bargaining power and reduce administrative costs. These
entities sell their services to managed care organizations or directly to
employers.
Managed care plans - Managed care plans generally
provide comprehensive health services to their members, and offer financial
incentives for patients to use the providers who belong to the plan. Examples
of managed care plans include:
¨ Health maintenance organizations
(HMOs),
¨ Preferred provider organizations
(PPOs),
¨ Exclusive provider organizations
(EPOs), and
¨ Point of service plans (POSs).
Managed care provisions - Features within health
plans that provide insurers with a way to manage the cost, use and quality of
health care services received by group members. Examples of managed care
provisions include:
¨ Preadmission certification -
An authorization for hospital admission given by a health care provider to a
group member prior to their hospitalization. Failure to obtain a preadmission
certification in non-emergency situations reduces or eliminates the health care
provider’s obligation to pay for services rendered.
¨ Utilization review - The
process of reviewing the appropriateness and quality of care provided to
patients. Utilization review may take place before, during, or after the
services are rendered.
¨ Preadmission testing - A
requirement designed to encourage patients to obtain necessary diagnostic
services on an outpatient basis prior to non-emergency hospital admission. The
testing is designed to reduce the length of a hospital stay.
¨ Non-emergency weekend admission
restriction - A requirement that imposes limits on reimbursement to
patients for non-emergency weekend hospital admissions.
¨ Second surgical opinion - A
cost-management strategy that encourages or requires patients to obtain the
opinion of another doctor after a physician has recommended that a
non-emergency or elective surgery be performed. Programs may be voluntary or
mandatory in that reimbursement is reduced or denied if the participant does
not obtain the second opinion. Plans usually require that such opinions be
obtained from board-certified specialists with no personal or financial
interest in the outcome.
Maximum plan dollar limit - The maximum amount
payable by the insurer for covered expenses for the insured and each covered
dependent while covered under the health plan. Plans can have a yearly and/or a
lifetime maximum dollar limit. The most typical of maximums is a
lifetime amount of $1 million per individual.
Maximum out-of-pocket expense - The maximum dollar
amount a group member is required to pay out of pocket during a year. Until
this maximum is met, the plan and group member shares in the cost of covered
expenses. After the maximum is reached, the insurance carrier pays all covered
expenses, often up to a lifetime maximum. (See previous definition.)
Medical savings accounts (MSA) – Savings accounts
designated for out-of-pocket medical expenses. In an MSA, employers and
individuals are allowed to contribute to a savings account on a pre-tax basis
and carry over the unused funds at the end of the year. One major difference
between a Flexible Spending Account (FSA) and a Medical Savings Account (MSA)
is the ability under an MSA to carry over the unused funds for use in a future
year, instead of losing unused funds at the end of the year. Most MSAs allow
unused balances and earnings to accumulate. Unlike FSAs, most MSAs are combined
with a high deductible or catastrophic health insurance plan.
Minimum premium plan (MPP) – A plan where the
employer and the insurer agree that the employer will be responsible for paying
all claims up to an agreed-upon aggregate level, with the insurer responsible
for the excess. The insurer usually is also responsible for processing claims
and administrative services.
Multiple Employer Welfare Arrangement (MEWA) – MEWA
is a technical term under federal law that encompasses essentially any
arrangement not maintained pursuant to a collective bargaining agreement (other
than a State-licensed insurance company or HMO) that provides health insurance
benefits to the employees of two or more private employers.
Some MEWAs are sponsored by associations that are local,
specific to a trade or industry, and exist for business purposes other than
providing health insurance. Such MEWAs most often are regulated as employee
health benefit plans under the Employee Retirement Income Security Act of 1974
(ERISA), although States generally also retain the right to regulate them, much
the way States regulate insurance companies. They can be funded through
tax-exempt trusts known as Voluntary Employees Beneficiary Associations (VEBAs)
and they can and often do use these trusts to self-insure rather than to
purchase insurance policies. Other MEWAs are sponsored by Chambers of Commerce
or similar organizations of relatively unrelated employers. These MEWAs are not
considered to be health plans under ERISA. Instead, each participating
employer’s plan is regulated separately under ERISA. States are free to
regulate the MEWAs themselves. These MEWAs tend to serve as vehicles for
participating employers to buy insurance policies from Statelicensed insurance
companies or HMOs. They do not tend to self-insure.
Multi-employer health plan – Generally, an employee
health benefit plan maintained pursuant to a collective bargaining agreement
that includes employees of two or more employers. These plans are also known as
Taft-Hartley plans or jointly-administered plans. They are subject to federal
but not State law (although States may regulate
any insurance policies that they buy). They often self-insure.
Premium - Agreed upon fees paid for coverage of
medical benefits for a defined benefit period. Premiums can be paid by
employers, unions, employees, or shared by both the insured individual and the
plan sponsor.
Premium equivalent - For self-insured plans, the
cost per covered employee, or the amount the firm would expect to reflect the
cost of claims paid, administrative costs, and stop-loss premiums.
Primary care physician (PCP) - A physician who
serves as a group member's primary contact within the health plan. In a managed
care plan, the primary care physician provides basic medical services,
coordinates and, if required by the plan, authorizes referrals to specialists
and hospitals.
Reinsurance – The acceptance by one or more
insurers, called reinsurers or assuming companies, of a portion of the
risk underwritten by another insurer that has contracted with an employer for
the entire coverage.
Self-insured plan – A plan offered by employers who
directly assume the major cost of health insurance for their employees. Some
self-insured plans bear the entire risk. Other self-insured employers insure
against large claims by purchasing stop-loss coverage. Some self-insured
employers contract with insurance carriers or third party administrators for
claims processing and other administrative services; other self-insured plans
are selfadministered. Minimum Premium Plans (MPP) are included in the
self-insured health plan category. All types of plans (Conventional Indemnity,
PPO, EPO, HMO, POS, and PHOs) can be financed on a self-insured basis.
Employers may offer both self-insured and fully insured plans to their
employees.
Stop-loss coverage – A form of reinsurance for
self-insured employers that limits the amount the employers will have to pay
for each person’s health care (individual limit) or for the total expenses of
the employer (group limit).
Third party administrator (TPA) – An individual or
firm hired by an employer to handle claims processing, pay providers, and
manage other functions related to the operation of health insurance. The TPA is
not the policyholder or the insurer.
Types of health care provider arrangements
¨ Exclusive providers -
Enrollees must go to providers associated with the plan for all non-emergency
care in order for the costs to be covered.
¨ Any providers - Enrollees
may go to providers of their choice with no cost incentives to use a particular
subset of providers.
¨ Mixture of providers -
Enrollees may go to any provider but there is a cost incentive to use a
particular subset of providers.
Usual, customary, and reasonable (UCR) charges -
Conventional indemnity plans operate based on usual, customary, and reasonable
(UCR) charges. UCR charges mean that the charge is the provider’s usual fee for
a service that does not exceed the customary fee in that geographic area, and
is reasonable based on the circumstances. Instead of UCR charges, PPO plans
often operate based on a negotiated (fixed) schedule of fees that recognize
charges for covered services up to a negotiated fixed dollar amount.
