Consumer's Insurance Glossary
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A & H, A &S Accident
& Health or Accident & Sickness. Once commonly used as generic
designations for the entire field, now called Health Insurance.
Actual Cash Value The sum
of money required to pay for damages or lost property, computed
on the basis of replacement value less its depreciation by obsolescence
or general wear.
Actuary A specialist in the
mathematics of insurance who calculates rates, reserves, etc. (Americanism.
In most other countries the individual is known as a "mathematician.")
Actuarial Statistical calculations
used to determine insurance rates and premiums, based on projections
of utilization and costs for a defined risk.
Adjuster An individual usually
representing the insurance company and acting for the company in
working on agreements as to the amount of a loss and the liability
of the company in same.
Administrative Costs Costs
related to utilization review, insurance marketing, medical underwriting,
agentsí commissions, premium collection, claims processing, insurer
profit, quality assurance programs and risk management.
Administrative Services Only (ASO)
See Third-Party Administrator.
Admitted Company An insurance
company authorized and licensed to do business in a given state.
Adverse Selection This occurs
when a planís health insurance population, usually due to age or
health status, has a significantly higher utilization of health
care services than an average population. The result is costs exceeding
premiums or fees collected. Also occurs when a programs eligibility
criteria or rating structure causes it to be populated with insureds
with higher losses than expected.
Age Limits The ages below
or above which the insurance company will not issue a given policy
or renew a policy in force.
Agent Any person appointed
by an insurer to solicit applications for insurance on its behalf.
With authorization, an agent may effectuate insurance contracts.
An agent may collect premiums on insurance so applied for or effectuated.
(from the RCW 48.17.010)
Apportionment The division
of loss among insurance companies when two or more cover the same
Assigned Risk A risk which
underwriters do not care to insure, but because of state law or
otherwise, the insured must be protected and the insurance is therefore
handled through the state, or a bureau and assigned to companies.
Basic Health (BH) This plan
was created in 1987 to provide low-cost, limited benefits in high
unemployment areas of the state. Under the 1993 Health Services
Act, the BH was expanded to statewide and its benefits were improved.
Beneficiary A person eligible
to receive benefits under an insurance policy.
Benefit Package Also known
as a Benefit Schedule. The list of covered services offered by an
HCSC, HMO or insurance plan.
Binder (Or Binding Receipt)
- In lines other than life and (usually) health, a binder is an
acknowledgment (usually from the agent) that the insurance applied
for is in force whether or not premium settlement has yet been made
or the policy issued. In life and health insurance, binders are
not issued, but if the premium settlement is made with the application,
what is often erroneously referred to as a binder or "binding
receipt" is issued. Actually, this is a conditional binding
Book of Business The term
insurers use to refer to the sum of their various plans and types
of insurance products sold to consumers.
Broker (1) An individual
who for compensation solicits, negotiates or procures insurance
or the renewal or continuance thereof on behalf of insureds or prospective
insureds. (2) One who solicits, negotiates, or procures the making
of contracts of insurance on behalf of the insured, other than himself
or another broker, and who may render services incidental to these
functions, except as an employee of an insured. (To this definition,
the Commission on Insurance Terminology adds this comment: "By
law, may be made agent of the insurer (insurance company) for certain
purposes such as delivery of policy or collection of premium.")
Business Interruption Insurance
- A type of policy that pays for loss of earnings when operations
are curtailed or suspended because of property loss.
Cancelable A contract of
insurance that may be terminated by the insurance company or insured
at any time. Most insurance is cancelable.
of contract of insurance in force by voluntary act of the insurance
company or insured, effected in accordance with provisions in the
contract or by mutual agreement.
Capitation A per-member monthly
payment made in advance to a managed care insurer covering contracted
services. The insurance provider agrees to provide specified services
to eligible members of a plan for this fixed, predetermined payment
for a specified length of time (usually a year), regardless of how
many times the member uses the services. No additional payment is
made to the provider for services that exceed the agreed-upon amount-per-member.
In such a product, the rate may be the same for all members or adjusted
for age and gender, based on actuarial projections of medical utilization.
Carrier An insurance company
which "carries" the insurance. (The term "insurance
company" or "insurer" are preferred because of the
possible confusion of "carrier" with transportation terminology.)
Carve-out Services separately
designed and contracted to an exclusive, independent provider by
a managed care plan.
Case Management Coordination
of patient care to ensure appropriate care and reductions in costs
of providing services. Physician case managers coordinate such elements
as referrals to consultants, specialists, hospitals, ancillary providers
and services. This is intended to eliminate misutilization of facilities
and resources, fragmented services and to provide continuity of
services and intensity of services appropriate to the patientís
needs over time.
Cash Value The amount of
cash that is due the insured who surrenders a LIFE (and, extremely
rarely) or HEALTH policy. Such surrender with termination of all
insurance benefits is often called "cashing out."
Chartered Property and Casualty Underwriter
(CPCU) A designation granted by the American Institute
for Property and Liability Underwriters upon successful completion
of a series of examinations and experience requirements in the fields
of insurance, plus accounting, financing, economics, management,
Claim The demand for benefits
as provided by the policy.
Claims Review The process
of analyzing a managed care plan enrolleeís health care service
claims before reimbursement to validate their medical necessity
and ensure the costs are not excessive.
Clause A term used to identify
a particular part of a policy or endorsement.
Closed Formulary See drug
CLU Chartered Life Underwriter,
a designation granted after examination and experience requirements
by the American College of Life Underwriters.
Co-Insurance In health insurance,
it is a provision that the insured and the carrier share losses
in agreed proportion. Also known as "percentage participation."
In managed health care, it refers to the portion of the cost of
care for which the individual is responsible, usually determined
by a fixed percentage. This often applies after a specified deductible
is met. In property and casualty insurance, the insured shares proportionally
in losses when the amount of insurance is less than a specified
percentage of the property insured.
Collision Coverage Physical
damage protection for the insuredís own automobile(s) for damage
resulting from collision with another object. This is a part of
most automobile insurance policies.
Commission That portion of
the premium retained by the agent or broker as compensation for
sales, service, and distribution of insurance policies.
Community Rating A method
of establishing the level of premiums for health insurance in which
the premium is based on the average of actual or anticipated services
used by all subscribers in a specific geographic area (or the entire
state). Under pure community rating, premiums also would not vary
for different groups or with such variables as a groupís claims
experience, age, sex, occupation or health status. (Modified community
rating may allow slight variances for some of these factors.) The
intent of community rating is to spread costs evenly across an entire
population, rather than set premiums according to individual or
small group experiences.
Composite Rate A uniform
premium applicable to all those eligible in a subscriber group,
regardless of the number of claimed dependents. This is common among
plans purchased by large employer groups.
Comprehensive Health Insurance
Sometimes called "Comprehensive Major Medical." A form
of health insurance that combines the coverage of Major Medical
and Basic Medical Expense contracts into one broad contract that
provides coverage for almost all types of medical expense with few
internal limits, usually subject to a small deductible for some
or all expenses and to a percentage participation clause (sometimes
called "co-insurance") applicable to all or some of the
Comprehensive Personal Liability Policy
(CPL) A personal liability contract. It provides liability
insurance coverage for the individual and family needs arising out
of numerous personal activities and situations, such as the ownership
of residential property, ownership of pets, sports activities and
many other everyday activities.
Concurrent Review Review
of a procedure or hospital admission made by a health care professional
(usually a nurse) other than the individual providing the care.
Contract Bond A guarantee
of the faithful performance of a contract and the payment of all
labor and material bills incident thereto. In those situations where
two bonds are required, one to cover performance and the other to
cover payment of labor and material, the former is known as a PERFORMANCE
bond and the latter as a PAYMENT bond.
Coordination of Benefits (COB) -
This determines the amount payable by each insurer when the claimant
is covered under two or more group health plans. Total reimbursement
should not exceed 100 percent of the cost of care.
Co-Payment A co-payment is
a patientís share of a health-care bill. It usually is a small amount
- $5 or $10 per office visit. Health-care reform advocates say its
primary function is to remind consumers that health care is not
free - and to discourage them from seeking unnecessary care.
Cost Sharing The general
set of financing arrangements whereby the consumer must pay out-of-pocket
to receive care, either at the time of initiating care or during
the provision of services, or both. This also can occur when an
insured pays a portion of the monthly premium for his health insurance.
Cost Shifting When an insurer
charges one group of health care purchasers more to make up for
the underpayment of others.
Coverage Scope of the protection
provided under a contract of insurance.
Credentialling The review
of a health care practitionerís credentials, e.g. training, experience,
demonstrated ability, to determine if that provider meets the carrierís
internal criteria for clinical privileging.
Credit Insurance Insurance
on a debtor in favor of a lender intended to pay off a loan or the
balance thereon if the insured dies or is disabled (usually called
"CREDIT LIFE" policy).
Debit The collectable premium
accounts assigned to one industrial or combination agent.
Declaration Page (Dec Sheet) - The
portion of an insurance policy containing the information regarding
the risk. It identifies the parties to the contract and the subject
Decreasing Term Policy Generally,
a rider which is attached to cash value policies or other term policies.
The protection decreases each year or month in accordance with a
schedule. Also sold as MORTGAGE Protection policy.
Deductible The part of the
insuredís expenses or loss that must be paid before insurance coverage
Deferred Annuity An annuity
whose benefits begin at some designated future date (as contrasted
to an annuity where benefits begin at once, called an IMMEDIATE
Diagnosis-Related Groups (DRG) -
This refers to predetermined reimbursements. DRGs were originally
designed to facilitate utilization review, and are also used to
analyze patient case mix in hospitals and to determine reimbursement
Direct Writer An insurance
company which sells its policies through salaried employees (licensed
agents) who represent it exclusively, rather than through independent
local agents, who represent more than one company.
Disability Income Insurance - A
form of health insurance that provides periodic payments to replace
income lost when the insured is unable to work as a result of sickness
Drug Formulary A list of
selected pharmaceuticals and their appropriate dosages that will
be covered by a health plan. In a "closed formulary,"
physicians are required to prescribe from that list of drugs.
Earned Premium That portion
of a premium for which the policy protection has already been given
during the now-expired portion of the policy term.
Elimination Period A loosely-used
term sometimes designating the "waiting period" and sometimes
the "probationary period."
Endorsement A form attached
to the policy bearing the language necessary to change the terms
of the policy to fit special circumstances.
Endowment Insurance A form
of life insurance payable to the insured if living at the end of
the endowment period or to a beneficiary if the insured dies before
the endowment date. (Inasmuch as a whole life policy pays the face
amount at the ultimate age of the mortality table used in calculating
the rate for it, age 100 on the CSO Table, it is sometimes said
that whole life is "endowment at 100." However, while
perhaps a descriptive explanation of a WHOLE LIFE policy, it is
actuarially incorrect to refer to a whole life policy as a form
of Endowment insurance.)
Early and Periodic Screening, Diagnosis
and Treatment (EPSDT) Covers screening and diagnostic
services to determining physical or mental defects in patients under
age 21, as well as health care and other measures to correct or
ameliorate any defects and chronic conditions discovered.
ERISA The Employee Retirement
Income Security Act of 1974. This law, which dealt primarily with
pensions and retirement plans, includes a section exempting self-funded
employer and union health plans from state regulation.
Exclusions Clauses in a health
insurance contract that deny coverage for certain conditions, treatments,
supplies or risks, such as acts of war. In property and casualty
contracts, certain events or circumstances also may be excluded
Exclusive Provider Organization (EPO)
A managed care organization similar to PPOs in that physicians
do not receive capitated payments, but members may only choose medical
care from network providers. A patient seeking care outside the
EPO network would not be reimbursed for the cost of that treatment.
See also Group Model HMO.
Experience The loss record
of an insured, a class of coverage, or of an insurance company.
Experience Rating A method
used by insurers to determine the premium to be charged based on
the actual utilization of individual large groups. Federal qualification
guidelines for HMOs do not permit this rating method, but it is
common in other health insurance plans.
Exposure (1) State of being
subject to the possibility of loss. (2) Extent of risk as measured
by payroll, gate receipts, area, or otherwise. (3) Possibility of
loss to a risk being caused by its surroundings.
Face The first page of a
Face Amount In a life insurance
policy, the death benefit stated on the first page of the policy.
Federally Qualified HMOs - Health
maintenance organizations (HMOs) that meet certain federal requirements
designed to protect consumers, such as providing a broad range of
basic health services, financial solvency, and a system to monitor
the quality of care. The qualification process is administered by
the Health Care Financing Administration (HCFA, pronounced "Hick-fah")
in the U.S. Department of Health and Human Services (DHHS).
Fee A charge or price for
Fee Disclosure Physicians
and caregivers discussing their charges with patients prior to treatment.
Fee-for-Service The traditional
payment method in U.S. health care, when patients pay doctors, hospitals
and other providers for the services rendered at the time of that
service, and then seek reimbursement for those costs from their
private insurers or the government, if eligible for such a program
(e.g. Medicare). The patient is charged according to a fee schedule
set for each service and or procedure provided.
Fiduciary A person who occupies
a position of special trust and confidence (for example, in handling
or supervising the affairs or funds of another).
Fiscal Intermediary An organization
that contracts with health care providers to process health insurance
claims. It may also provide consulting services or serve as a communication
center for providers. A Health Care Services Contractor (HCSC).
Form An insurance policy
itself or riders and endorsements attached to it.
Fraternal An insurance company
organized under a special section of the state insurance code, characterized
by a lodge or social system, and issuing insurance only to members.
Gatekeeper A primary care
physician responsible for overseeing and coordinating all aspects
of a patientís medical care in managed care plans to reduce health
care utilization and costs. Managed care patients cannot receive
referrals to specialty care or hospital admission (except for emergency
room service when the patient believes an emergency exists) without
pre-authorization from a gatekeeper.
General Agent An insurance
company representative in a given territory, entrusted with the
task of supervising the companyís business within that territory.
He may appoint local agents whom he services. A true general agent
is an independent contractor compensated on a commission basis.
In practice, in the life and health fields, he may receive certain
expense subsidies from the company for office operation and training
of new agents.
Grace Period A period of
time (commonly 30-31 days) after premium-due date during which a
policy remains in force without penalty even though the premium
due has not been paid.
Group Contract A contract
of insurance made with an employer or other entity that covers a
group of persons identified as individuals by reference to their
relationship to the entity. A GROUP CONTRACT may be life insurance,
health insurance, or an annuity. There are some applications in
the property-liability field.
Group Insurance Insurance
policy or health services contract covering a group of employees
(and often their dependents) under a single contract issued to an
employer or other group by an HCSC, HMO or other insurer.
Group Model HMO There are
two types: closed panel and the contract model. Closed panel HMO
deliver medical services in the HMOís health center or clinics by
providers who belong to a legally separate medical group paid a
negotiated monthly capitation fee. Its providers are salaried and
generally prohibited from carrying on any fee-for-service practice.
In the second type, the HMO contracts with an existing independent
group of physicians to deliver medical care at their facilities
to HMO members for a prepaid fee. Such a medical group may also
offer health services on a fee-for-service basis. The medical group
generally contracts with more than one HMO.
Guaranteed Insurability Rider -
A rider that may be attached to a health or life insurance policy,
which permits the insured, to purchase additional insurance at one
or more specified "option dates," without providing new
evidence of insurability at that time.
Guaranteed Renewable A contract
that the insured has the right to continue in force by the timely
payment of premiums for a substantial period of time, as set forth
in the contract, during which period the insurance company has no
right unilaterally to make any change in a provision of the contract
while the contract is in force, other than a change in the premium
rate for classes of insured. (In commenting on this definition,
the Committee on Health Insurance Terminology of the American Risk
and Insurance Association adds: "The term guaranteed continuable
is synonymous with guaranteed renewable. Guaranteed renewable should
be distinguished from non-cancelable.") An NAIC - National
Association of Insurance Commissioners - definition specifies that
the policy must be renewable to at least age 50 or, if issued after
age 44, for at least five years.
Health Care Financing Administration (HCFA)
The U.S. Department of Health and Human Services (DHHS) agency
renamed to the Centers for Medicare and Medicaid Services (CMS)
that administers federal health financing and related regulatory
programs, principally Medicare, Medicaid, and Peer Review Organization
programs. The contracting agency for HMOs that provide Medicare
managed care plans.
Health Insurance Insurance
against loss by sickness or bodily injury.
Health Maintenance Organization (HMO)
A legal entity that provides health care
in a geographic area, and which accepts responsibility to provide
directly or by contract an agreed-upon set of health services to
a defined, voluntarily-enrolled group of individuals. HMOs are reimbursed
through a pre-determined, fixed, periodic prepayment made by or
on behalf of each subscriber without regard to the amount of actual
Health Plan A generic term
referring to a specific benefit package offered by an insurer.
"Hold Harmless" Clause
- found in managed care contracts in which the HMO and its physicians
hold each other not liable for malpractice or corporate malfeasance
if either is found liable. This clause is also common for insurance
carriers. State law requires this type of clause to prohibit health
care providers from billing patients if their managed care company
Homeowner Policy A "package"
or multi-line policy providing the protection needed by most homeowners.
The policy provides property insurance, including theft, with very
broad coverage on both the building and the contents. Liability
insurance is also provided. There are basically six homeowner forms
available in most states, and they are numbered 1 through 6. Homeowner
6 is used for owners of condominium units. Homeowner 5 provides
the broadest protection. Homeowner 4 is for use by tenants as it
excludes building coverage. Homeowner 3, 2, and 1 are similar to
Homeowner 5 except that they provide progressively less coverage
Hospital Benefits Benefits
payable when an insured is hospitalized.
Incurred but not reported (IBNR)
- The liability for the claim cost related to services performed
within the contractual period but not yet reported to the insurance
carrier, HMO or HCSC.
Indemnify To restore the
victim of a loss, in whole or in part, by payment, repair, or replacement.
(To this definition, the Commission on Terminology adds the following
comment: "To the extent that the obligation of the insurer
is to do other than make good losses, the insurance contract is
not one of indemnity. The term indemnity or indemnify should not
be used to apply to an obligation other than to make good loss.")
Independent Practice Association/Organization
(IPA/IPO) An HMO contracting with a physician organization
which in turn contracts with individual physicians to provide health
services to its members. IPA physicians practice in their own offices
and also see fee-for-service patients. The IPA is reimbursed on
a capitated basis. The IPA may reimburse its physicians on a capitated
or modified fee-for-service basis when physicians charge agreed-upon
rates to the HMO patients and then bill the IPA.
Individual Market - The portion
of the health insurance industry consisting of individuals and their
dependents who purchase coverage directly from a carrier - -approximately
five percent of the entire market. Those in the individual market
usually buy their own coverage because they are not eligible for
employee-sponsored or government coverage, such as Medicare, Medicaid
or the Childrenís Health Insurance Program (CHIP).
Installment Refund Annuity - Promises
to continue the periodic payments after the death of the annuitant,
until the combined benefits paid to the annuitant and his beneficiary
have equaled the purchase price of the annuity.
Insurable Interest Any interest
in a subject of insurance or any legal relation to it of such a
nature that a certain happening might cause monetary loss to the
Insurance (1) A contract
whereby one undertakes to indemnify another or pay a specified amount
upon determinable contingencies. (2) A device for the transfer of
the risks of individual entities to an insurance company, which
agrees, for a consideration, to assume to a specified extent, losses
suffered by the insured.
(To this definition, the Commission on Terminology adds this comment:
"Notice might be taken of such characteristics of insurance
as equitable contributions by insured, pooling or risks, and effecting
of transfer by contract, but these are not felt to be an important
part of the definition, however important they may be for an extended
explanation of the business.")
Insurance Commissioner The
elected state official with the authority to enforce the provisions
of the stateís insurance code and to make reasonable rules and regulations
to implement provisions of the code; to conduct investigations,
examinations and hearings related to those enforcement activities.
Insurance Policy Broadly,
the entire written contract of insurance. More narrowly, the basic
written or printed document, as distinguished from the forms and
endorsements added thereto.
Insured The party to an insurance
agreement to whom, or on behalf of whom, the insurance company agrees
to indemnify for losses, provide benefits, or render service. (To
this definition the Commission on Terminology adds the comment:
"Like Insurer, the term Insured is functional and unmistakable.
Therefore, it is preferred to such terms as Policyholder.")
In pre-paid hospital service plans, the insured is called the subscriber.
Joint Life Policy Pays the
insurance when the first of two or more covered persons die.
Key Man (Key Employee) Insurance
Policy - An insurance policy on the life of a key employee whose
death would cause the employer financial loss, owned by and payable
to the employer. In health insurance, the term KEY EMPLOYEE A &
H policy is also used to designate salary continuation insurance
payable to a key employee or to a medical benefits plan, payable
to that employee, the employer paying all or part of the premium.
Lapse Termination of a policy
because of failure to pay the premium. In life insurance, the term
is sometimes confined to non-payment before the policy has developed
any non-forfeiture value, being called termination if premium failure
is after non-forfeiture values develop or surrender if cash value
Level Premium Insurance Life
insurance, the premium for which remains at the same level (amount)
throughout the life of the policy (except as reduced by any policy
Liability Insurance Insurance
that pays and renders service on behalf of an insured for loss arising
out of his responsibility, due to negligence, to others imposed
by law or assumed by contract.
Liability Limits The sum
or sums beyond which a liability insurance company does not protect
the insured on a particular policy, similar to limit of liability.
Life Insurance Insurance
on human lives including endowment benefits, additional benefits
in event of death or dismemberment by accident or accidental means,
additional benefits for disability, and annuities.
Lifetime Policy (1) A policy
guaranteed renewable or non-cancelable to age 65 (or sometimes later).
(2) A policy paying disability benefits for life.
Limit of Liability The maximum
amount that an insurance company agrees to pay in case of loss.
Limitations Exclusions, exceptions,
or reductions of coverage contained in an insurance policy.
Limits (1) Maximum amount
of benefit payable for a given situation or occurrence. (2) Ages
below or above which the insurance company will not issue new policy
or above which it will not continue a policy in force.
Long-Term Disability (1)
A disability having a duration longer than a short-term disability,
the exact duration being variable and a matter of reference; more
commonly anything longer than 90 days. (2) A form of group disability
insurance paying benefits for more than the customary 13 to 26 weeks;
more commonly, benefits of five yearsí duration or more, but again
depending on terms of reference.
Loss Any diminution of quantity,
quality or value of property. With reference to policies of indemnity,
this term means a valid claim for recovery thereunder. In its application
to liability policies, the term refers to payments made on behalf
of the insured.
Loss Ratio The percentage
of losses to premiums, usually losses incurred to premiums earned.
The amount of the premium dollar returned to the insured as claims
payments and other benefits.
Major Hospitalization Policy or Insurance
A type of health insurance that provides benefits for most
of the costs of hospitalization up to a high limit, subject to a
large deductible. Such policies may contain internal maximum limits
and percentage participation clauses. They are distinguished from
major medical by the fact that they pay only in event of hospitalization.
Major Medical Insurance A
type of health insurance that provides benefits for most types of
medical expenses incurred up to a high limit, subject to a large
deductible. Such contracts may contain internal limits and a percentage
participation clause (sometimes called co-insurance clause). A major
medical policy pays expenses both in and out of the hospital.
Managed Care Managed care
is a philosophy of health care coverage that streamlines health
services and creates a health-care system that includes both the
financing and delivery of services to the consumer. It also takes
more responsibility for maintaining subscribersí health, not just
curing them once they are sick. It lowers costs by matching the
patient with appropriate care as efficiently as possible. Different
insurance carriers use different kinds of managed care. Although
the philosophy is popularly associated with Health Maintenance Organizations
(HMOs), other kinds of carriers also employ it.
Managed Care Organization (MCO)
- Any type of organizational entity providing managed care, such
as an HMO or an HCSC providing services via a preferred provider
Mandated Benefits Where
state law requires certain benefits be included in any major medical
Market Share That part of
the market potential a company has captured, usually expressed as
a percentage of the market potential.
Maturity The date at which
the face amount of a life insurance policy comes due either by reason
of death or endowment.
Maximum Allowable Charge - The amount
set by the insurer as the highest amount to be charged for a particular
Medical Cost Ratio (MCR) - Compares
the cost of providing service to the amount paid for the service.
Medical Group Practice As
defined by the American Group Practice Association, the American
Medical Association and the Medical Group Management Association:
"provision of health care services by a group of at least three
licensed physicians engaged in a formally organized and legally
recognized entity sharing equipment, facilities, common records
and personnel involved in both patient care and business management."
Medical Loss Ratio Cost of
health care services provided as a percentage of premium revenues.
See underwriting loss.
Medical Underwriting Screening
prospective health care plan members out of the plan on the basis
of health or pre-existing medical condition.
Medically Necessary Covered
services required to preserve and maintain the health status of
a member or eligible person in accordance with the areaís standards
of medical practice.
Medicare Risk Contract A
contract between a managed care plan and HCFA to provide services
to Medicare beneficiaries for a fixed monthly payment. Requires
all services to be provided on an at-risk basis.
Medicare Supplement Voluntary
private insurance coverage purchased by Medicare enrollees covering
the cost of services not reimbursed by Medicare.
Member Enrollee, beneficiary,
insured. Includes those enrolled or subscribed to a health insurance
plan and their eligible dependents.
Morbidity - Sickness A morbidity
table shows the incidence of occurrence of sickness.
Morbidity Rate Actuarial
term for the likelihood of medical expenses occurring.
Mortality - Death A mortality
table shows the incidence of occurrence of death.
Multi-Specialty Group A group
of doctors representing various medical specialties working together.
NAIC National Association
of Insurance Commissioners. An association of state insurance commissioners,
active in discussions of regulatory problems and in the formation
and recommendation of uniform practices and legislation.
NALU National Association
of Life Underwriters. An organization of life insurance agents having
state and local associations throughout the country.
NFIP A government program
offered by the U.S. governmentís Federal Emergency Management Administration.The
National Flood Insurance Program is able to pool policy premiums
throughout the United States. With the full faith and credit of
the Federal Government it can offer reasonable rates for flood damage
NCQA National Committee for
Quality Assurance. A non-profit organization created to improve
patient care and health plan performance in partnership with managed
care plans, purchasers, consumers and the public sector.
Network Model HMO An HMO
that contracts with two or more independent group practices to provide
health services. Solo practices may be included, but it is primarily
organized around groups. This HMO model is commonly used by HCSCs.
Non-Forfeiture Values Those
values in a life (or health, including long-term care) insurance
policy that the policy owner does not forfeit even if he ceases
to pay premiums: cash value, loan value, paid-up value, or extended
Open Enrollment A period
of time when eligible subscribers may enroll in, or transfer between
available programs providing health care coverage. Federal HMO regulations
require that HMOs which meet certain criteria conduct annual open
enrollments for periods of not less than 30 days.
Open Panel Private physicians
contract with a plan to provide care in their own offices.
Ordinary Life (1) All life
insurance policies not classifiable as Industrial or Group. (2)
A continuous premium, whole life policy (also sometimes called Straight
Outcomes Management The result
of a medical or surgical intervention. It is thought that a database
of outcomes experience can give caregivers a better understanding
of which treatments consistently result in better outcomes for patients.
Outcomes management may lead to development of clinical protocols.
Outlier In an HMOís utilization
review: one who does not fall within the norm, using either too
many or too few services. Anyone whose utilization differs two standard
deviations from the mean on a bell curve is termed an "outlier."
Also used to describe a patient who varies significantly from other
patients, such as a longer or shorter length of stay, leaving against
medical advice, etc.
Out-of-Area Benefits Coverage
allowed to managed care plan members for emergency situations if
temporarily outside their HMO or MCOís prescribed service area.
Out-of-Area Services Services
received by insurance plan enrollees when they are outside their
planís established geographic area of service as defined in the
contract and service agreement. Usually not covered unless a delay
would adversely affect the memberís health.
Outpatient Services Medical
and other services provided by a hospital or other qualified facility,
such as a mental health clinic, rural health clinic, mobile X-ray
unit or free-standing dialysis unit. Those services include physical
therapy, diagnostic X-ray and laboratory tests.
Paid-Up Life insurance on
which all premiums have been paid but that has not yet matured by
death or endowment, such as LIMITED PAYMENT policy on which the
premium-paying period has been completed or the insurance paid for
by using the cash value under the paid-up non-forfeiture option.
Participating Provider A
provider who has contracted with a health care service contractor,
HMO, PPO, IPA or other managed care organization to provide health
Peer Review Evaluation of
a physicianís performance by other physicians, usually within the
same geographic area and medical specialty.
Performance Standards The
standards an individual health care provider is expected to meet
to achieve the desired quality of care. Volume of care also may
be covered, e.g. office hours, office visits per week or month,
on-call days, surgical procedures per year, etc.
Per Member Per Month (PMPM) - Refers
to the cost or revenue from each plan member for a month. Indicates
revenue, expenses or utilization of services.
Physician-Hospital Organizations (PHOs)
For-profit or not-for-profit. Their strength is in their
knowledge of medicine and health, investment in medical technology
and understanding of their communities. PHOs now face the challenge
of realigning financial incentives and their ability to assume and
Point-of-Service Plan (POS) - Incorporates
features of both HMOs and PPOs, encouraging but not requiring members
to choose a primary care physician. As in HMOs, primary care physicians
act as "gatekeepers" to other health care services. However,
members may visit non-network providers, but pay higher deductibles
Policy Dividend The return
of the overcharge in a participating premium. It represents the
difference between the premium charged and actual experience.
Policyholder Literally, the
person who has possession of the policy. Thus the term is non-functional
as commonly used. (See comment under INSURED.)
Policy Owner The person who
has the right to exercise the rights and privileges in the policy
contract. Such person may or may not be the insured, depending on
policy ownership and assignment, if any.
Pooling Combining risk.
Practice Parameters - Strategies
for patient management developed to assist physicians in clinical
decision-making. Practice parameters may also be called practice
options, practice guidelines, practice policies or practice standards.
(American Medical Association definition)
Preauthorization A method
to monitor and control utilization of a medical service by evaluating
need prior to it being performed.
Preadmission Review Review
of claims for inpatient admission prior to hospital admission in
order to assure medical necessity.
Pre-Existing Condition A
condition of health or physical condition that existed before the
policy was issued. Prior to 1993, insurance coverage was denied
or significantly delayed on the basis of pre-existing conditions.
In some states, however, carriers cannot use health screening
to reject applications.
Preferred Provider Organization (PPO)
A health care arrangement between purchasers of care such
as employers and insurance companies and providers offering benefits
at a reasonable cost using incentives, such as lower deductibles
and copays to get members to use providers within a network. Use
of non-preferred physicians would involve a higher cost. Preferred
providers must agree to specified fee schedules and are required
to comply with certain utilization and review guidelines.
Preferred Risk An insurance
classification indicating a risk that is superior to the average
risk on which the rate has been calculated. They are usually eligible
for a reduced rate.
Premium (1) Part of the consideration
for the insurance, by whatever name called. (2) The periodic payment
made to keep a policy in force. Premium and rate are sometimes incorrectly
used interchangeably. Technically, rate is the amount charged for
a given unit of insurance coverage, and premium is the sum of the
unit rates for a given policy. (3) In annuities, the purchase payment.
Pre-Paid Hospital Service Plan -
The common name for Health Maintenance Organization plan (HMO).
It provides comprehensive health care, usually by salaried personnel,
for members who pay a flat fee for the services, whether out-patient
or hospital treatment is needed.
Prescription Benefit Managers (PBMs)
Monitor prescription claims for managed care organizations,
tracking the drugs and volumes of pharmaceuticals are prescribed
by the planís participating physicians.
Primary Care Primary Care
is the first care a patient receives. It is often a family physician,
although patients also may receive Primary Care from a nurse, a
paramedic, or other types of health-care providers, depending on
the situation. Managed care systems try to resolve as many health
problems as possible at this level.
Prior Authorization Managed
care procedure to control utilization of services by review and
approval of a medical service. See also preauthorization.
Producer Term commonly applied
to an agent, solicitor, or other person who sells insurance, producing
business for the company and for a commission (if so paid) for himself.
Progressive Rates A method
health plans use to implement new rates either monthly, quarterly
or semiannually. New or renewing subscribers or groups with anniversaries
falling within such periods are automatically subject to prevailing
rates in effect during those periods. These rates are generally
guaranteed for the full 12 months benefit year. This rate is said
to offer greater rate parity than a fixed rate throughout the fiscal
Proof of Loss A formal statement
made by the insured to the insurance company regarding a loss. The
purpose of the proof of loss is to place before the company sufficient
information concerning the loss to enable it to determine its liability
under the policy or bond.
Pro Rata (1) Distribution
of the amount of insurance in one policy, among the several objects
or places covered, in proportion to their value or to the amounts
shown. (2) The distribution of liability among the several insurance
companies having policies on the risk.
Providers Institutions and
individuals licensed to provide health care services (e.g. hospitals,
physicians, naturopaths, medical health clinicians, pharmacists,
Quality Assurance Internal
peer review process used to audit the quality of care provided.
Should include an educational mechanism identifying and preventing
discrepancies in care.
Rating Bands Limits the difference
between lowest and highest premium rates charged to a pool of groups
or individual subscribers.
Rating Bureau An organization
that classifies and promulgates rates and in some cases compiles
data and measures hazards of individual risks in term of rates in
a given territory.
Rebate Giving to the policy
owner some part of the agentís commission (or something of value)
as in inducement to buy. This is an illegal action.
Reinsurance Insurance for
insurers. A contract transferring all or part of a risk or liability
already covered under an existing contract. Allows an insurer to
protect itself against part or all of the losses incurred when honoring
all the claims of its members or subscribers. Also referred to as
Replacement Cost The cost
of replacing property without deduction for depreciation.
Reserves Restricted cash
investments or highly liquid investments intended to protect the
MCO against insolvency or bankruptcy.
Rider An amendment attached
to a policy that modifies the conditions of the policy by expanding
or decreasing its benefits or excluding certain conditions from
Risk (1) A chance of loss.
(2) A person or thing insured (Impaired or substandard risk: An
applicant whose physical condition or driving habits/record does
not meet the standard on which the rate is based.)
Risk Pool A pool of money
to be used for defined expenses. Commonly, if the money put at risk
is not expended by the end of the year, some or all of it is returned
to those managing the risk.
Risk Sharing Method used
by MCO and contracted provider to divide responsibility for financial
risk and rewards involved in caring for a planís members and assigned
to a specific provider.
Schedule (1) A list of specified
amounts payable for, usually, surgical procedure, dismemberments,
ancillary expenses or the like in HEALTH INSURANCE policies. (2)
The list of individual items covered under one policy as the various
buildings, animals and other property in PROPERTY INSURANCE or the
list of rings, bracelets, etc., insured under a JEWELRY floater.
Self-insurance The practice
of an employer or organization assuming responsibility for the health
care losses of its employees. Usually a fund is established against
which claims payments are drawn. Claims processing is often handled
through and administrative services contract with an independent
organization, usually an insurer.
SHIBA Statewide Health Insurance
Benefits Advisors program created in 1979 initially to assist senior
citizens and other Medicare beneficiaries with health insurance
issues at no charge. Now with a broader focus to assist health insurance
consumers statewide, using a corps of trained volunteers supported
by OIC staff and sponsored by local community-based organizations.
Single Payer This system
of health coverage would enroll all Americans in a government-run
program financed by taxes. This plan was scrapped when overall health-care
reforms were considered at the federal level in the early 1990s,
but bills that would implement a single-payer system remain alive
Special Limits Refers to
limitation in a homeownerís policy placed on losses for specific
items of property, such as gold and silver bullion, currency, securities,
letters of credit, manuscripts, passports, tickets, stamps, boats,
trailers, firearms and silver and goldware. To obtain full coverage,
additional coverage must be purchased.
Staff Model HMO A health
maintenance organization providing health services from a group
of physicians who are either staff employees of a professional group
practice which is an integral part of the HMO plan or are direct
employees of the HMO itself. Physicians in staff model HMOs are
usually prohibited from providing fee-for-service care.
Stop Loss That point when
a third party has reinsurance to protect against an overly large
single claim or excessively high aggregate claims during a given
period of time. Large employers who are self-insured may also purchase
reinsurance for stop loss purposes. See reinsurance.
Subrogation Requires an insured
person to assign any rights to recover damages to his insurer.
Surplus Line Coverage procured
in an unlicensed insurance company because of its unavailability
from an insurance company licensed in the state.
Term (1) Relating to a contract
of health insurance that makes no provision for renewal or termination
other than by expiration of the policy term. (2) Life insurance
issued for a term of years, after which it expires without value.
(3) The period for which the coverage runs, which is usually the
period for which the premium is paid in a HEALTH INSURANCE policy.
Usually used as policy term.
Third-Party Administrator (TPA)
An individual or company contracting with employers who want
to pay the cost of providing healthcare for their employees. TPAs
develop and coordinate self-insurance programs, process and pay
claims, may help locate stop loss insurance for the employer. They
also can analyze the effectiveness of the plan and utilization of
Underwriter (1) A person
trained in evaluating risks and determining what rates and coverages
that will be used for them. (2) An agent, especially a life insurance
agent, who might qualify as a "field underwriter." In
theory, the agent is supposed to do some underwriting before submitting
the case to the home office. Underwriter: i.e., to make a decision
on the basis of facts known on whether or not the risk is sound
and to report all facts known that might affect the rate.
UIM Underinsured motorist
coverage must be offered by automobile insurance companies as part
of an auto insurance policy. Consumers who do not want the coverage
must sign a waiver. This coverage protects an insured driver from
losses that should have been the responsibility of another driver,
but which are not covered at all, or not fully covered by the other
Underwriting Loss When the
cost of providing medical services, plus overhead, exceeds premium
income, or the amount of incurred losses and expenses exceeds earned
Unearned Premium That portion
of an advance premium payment that has not yet been used for coverage
written. Thus in the case of an annual premium, at the end of the
first month of the premium period, 11 months of the premium would
still be "unearned, etc."
Usual, Customary and Reasonable (UCR)
Health insurance plans pay a physicianís full charge if it
is deemed reasonable and does not exceed his or her usual charges
and amount customarily charged by other physicians practicing in
the area for the service.
Utilization Patterns of use
of a service or type of service within a specified time. Usually
expressed in rate per unit of population-at-risk for a given period.
Utilization experience multiplied by the average cost per unit of
service delivered equals capitated costs.
Utilization Review (UR) A
systematic means to review and control patientsí use of medical
care services as well as the appropriateness and quality of that
care. Usually involves data collection, review and/or authorization,
especially for services such as specialists, emergency room use
and hospitalization. Also known as utilization management or control.
Waiting Period A period of
time between the beginning of a disability and the date benefits
Waiver (1) A rider waiving
(excluding) liability for a stated cause of accident or (especially)
sickness. (2) Provision or rider agreeing to waive (forego) premium
payment during a period of disability. (3) The giving up or surrender
of a right or privilege that is known to exist. It may be effected
by the agent, adjuster, or insurance company employee or official
orally or in writing.
Withhold The portion of the
fee or monthly capitation payment to the provider that is held back
by the MCO until the cost of referral for hospital services has
been determined. A provider who exceeds utilization norms does not
receive the withheld amount. The amount returned depends on the
individual utilization by the provider, referral patterns through
the year, groups of physicians or the overall plan pool, and financial
indicators for the overall capitated plan.
Whole Life A life insurance
policy that runs for the whole life - that is, until death (except
that it will pay the face amount at the ultimate age on the mortality
table being used because, as far as that table goes, that age is
death for all surviving insureds). Premiums for a WHOLE LIFE policy
may be paid for the whole life or for a limited period during which
the higher premium charged pays up the policy.
Write In insurance terms,
to insure. It also means, to underwrite or to sell.
NOTE: Most of the terms, explanations
and definitions in this flyer were taken from various insurance
industry guides, reference books, dictionaries and the Commission
on Insurance Terminology, a group that tries to bring consistency
to the use of many of these terms.
Language and its use does not remain static. Meanings and word
usage can change over the years and from region to region. We do
not intend this to be a final statement on what various words mean,
but hope it will help the average person better understand insurance.