DEFINITIONS OF HEALTH INSURANCE TERMS
- This is common in self-insured health care plans.
- Once any deductible amount and coinsurance are paid, the insurer is responsible for the rest of the reimbursement for covered benefits up to allowed charges: the individual could also be responsible for any charges in excess of what the insurer determines to be “usual, customary and reasonable”.
- Coinsurance rates may differ if services are received from an approved provider (i.e., a provider with whom the insurer has a contract or an agreement specifying payment levels and other contract requirements) or if received by providers not on the approved list.
- In addition to overall coinsurance rates, rates may also differ for different types of services.
- There may be separate copayments for different services.
- Some plans require that a deductible first be met for some specific services before a copayment applies.
- Some plans may have separate deductibles for specific services. For example, a plan may have a hospitalization deductible per admission.
- Deductibles may differ if services are received from an approved provider or if received from providers not on the approved list.2
- Association Health Plans – This term is sometimes used loosely to refer to any health plan sponsored by an association. It also has a precise definition under the Health Insurance Portability and Accountability Act of 1996 that exempts from certain requirements insurers that sell insurance to small employers only through association health plans that meet the definition.
- 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) plan – 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 nondiscounted 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.
- 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.