If you have ever been confused by the jargon used in
managed care or insurance policies, here are a few
definitions to help.
Note: These definitions are not tax advice. We recommend contacting licensed CPAs specializing in tax.
ACA / PPACA
The Patient Protection Affordable Care Act is referred to as ACA or PPACA. The ACA
(Affordable Care Act) is a 2310 page law encompassing all medical care in the US, but for
Veterans affairs, approved Limited Medical Plans and Medicare Supplemental plans. ACA
compliant plans mandate 10 essential benefits without annual benefit limits, tax credits for
individuals earning below 400% of Federal Poverty Level (FPL), and Cost Sharing for people
earning between 100%-250% of FPL. Cost sharing lowers deductibles and max-out-of-
pocket costs, and limits total annual health spend from 2% to a maximum of 9.5% AGI/MAGI.
Small employers are now offered tax credited plans through SHOP. Insurance is provided
by commercial carriers, not the government. See Eligibility for Advance Payment.
ACO - Accountable Care Organization
An organization allowed by CMS to enter into non-risk bearing and risk bearing contracts to
care for assigned Medicare and/or Medicaid lives. ACO’s generally provide full range of
medical services. Multiple ACO contracts are offered to medical provider groups. ACO Risk Contract/CMS Fact Sheet
Advanced Aggregate is reinsurance provided to ERISA exempt entities. Reinsurance over
multiple self funded employers is provided by advancing aggregated coverage recoveries for
risk between specific retention and a percentage of the fully funded and underwritten major
medical insurance premium.
An ACA legislated term defining eligibility for tax credits for individuals purchasing “On-
Exchange” or “On Marketplace” plans who earn between 100% - 400% of FPL.
Age Compression Rule
A regulation by HHS mandating premiums vary no more the 3:1 for all ages, including
Medicare Advantage plans. It also promulgates here to for unavailable health insurance to
individuals over age 65 who do not qualify for Medicare.
Aggregate Stop Loss/Reinsurance
Aggregate Stop Loss provides coverage against an entire population's budget overrun in a
calendar year. Coverage typically reimburses the policy owner when claims exceed 110
percent - 125 percent of the expected annual claim volume.
Aggregate Pharmacy Reinsurance
Aggregate Pharmacy Reinsurance is a program of coverage which shifts the financial risk of
pharmacy benefits from the employer, PBM or risk bearing entity to the reinsurer. Coverage
typically triggers at 110%-125% of the expected annual budgeted amount.
Adjusted Gross Income. The amount used by a single person to calculate tax credits on ACA
compliant plans for people earning between 100%- 400% of FPL. AGI is reduced by child
support and student loan interest.
Annual Benefit Limits
ACA law eliminates annual limits on 10 essential health benefits. Grandfathered INDIVIDUAL
may still have plan limits. Individuals are allowed to keep their grandfathered plan until Sept
2017 or after if their carrier is ACA compliant. All Group plans must be ACA
APM - Alternative Payment Models (contracts)
A term used by LAN to describe the identification, reporting and/or creation of new provider payment methodologies, and whose goals include increasing (private payers, providers, employers, state partners, consumer groups, individual consumers, etc) engagement, to drive lower (Medicare, Medicaid, Commercial, Workers Comp, Auto, etc) medical costs and better medical outcomes.
APTC - Applied Premium Tax Credit
A tax credit entitlement legislated by ACA that reduces the amount of monthly premium an eligible person must pay to buy commercial health insurance. Tax credit is applied to eligible insureds earning between 100% and 400% of FPL. Form 1095-A must be submitted annually with each tax return to qualify for the credit. The Form is provided by the commercial carrier and attached to the individual tax return to maintain eligibility for the tax credit.
See Treaty Reinsurance
Balance billing is the amount billed to the patient. It is the difference between out of network
(non contracted) provider billed charge and the policy reimbursement. Balance billing does not
attribute to deductibles or out of pocket expenses, and creates substantial liability for members
accepting out of network care.
The amount and limit of medical insurance provided within an insurance plan document, or
Summary of Benefits. Benefits are typically summarized by: Deductible , Co Insurance,
Copay, and out of pocket maximum. Additional benefits may also be part of the Package
such as Dental, Life, LTC, STD, etc at customer option.
Brokers are licensed agents who represent multiple carriers, and who are legally obligated to
serve their client’s best interest.
See Section 125 plans
In the context of medical second dollar risk contracts, it refers to deleted risk exposures like
Transplant, Neonatal, Cancer, ESRD, out-of-network risk, pharmacy, or any medical benefit
exclusion within a managed care agreement.
A process directed by a licensed nurse or physician, or an unlicensed specialist trained to
manage, coordinate, steer and direct efficacious and efficient care in conjunction with an
insured member’s physician. Goal is to increase patient well being and reduce cost.
An insurance triggered by a disease specific diagnosis, and that typically pays out directly to
the insured in a fixed lump sum in addition to primary medical coverage.
CHIP - Child Health Insurance Program
Medicaid insurance managed under HHS for minors of parents who typically earn below
100% of FPL. Premium costs charged to parents are subsidized according to income.
Centers for Medicare and Medicare Innovation
Chronic Care Management
A program of medical care usually directed at members with: asthma, diabetes, high blood
pressure, back pain, and/or high cost or chronic disease conditions. The goal of these
programs is to lower typical costs of treatment and improve medical outcome for the
Federal Law requiring employers with more than 20 employees to extend Medical Benefits to
severed employees leaving employment for up to 18 to 29 months. Costs for insurance are
born by the employee. Employers under 20 employees generally direct their employees to
Mini-Cobra in Florida allowing them access to various benefits.
An underwriting model not based on age or gender - used to price insurance premiums, and
generally applicable to groups over 50 lives. ACA regulations may govern some groups
under 50 lives. Speak with your agent. Carriers generally try to avoid community rating as it
tends to increase premium rates for employers who are not clearly over 50 lives.
Comparative Effectiveness Research aka Evidence Based Medicine
Federally funded and approved studies identifying specific medications, treatments or
therapies and their efficacy to improving health conditions versus existing treatment
paradigms. The goal is to improve health at lower cost. Both Carriers and Self Funded
employers are charged a tax to cover the cost of this Federal service.
Consumer Directed Health Plans aka High Deductible Health Plans - HDHP
Insurance plans characterized by high deductible and/or maximum out of pocket costs. ACA
has not limited primary components of these plans, thereby making all “preventive care”
insurable at no out of pocket costs. Historically, HSA’s and or HRA’s were higher deductible
plans that afforded employers lower premium. Recent law affording access to SHOP plans,
may render these types of plans obsolete due to new tax credits lowering net premium costs,
and lower mandated deductible offerings.
Cost Sharing (these are not alphabetically listed – please move them)
Under ACA, people earning below 250% of FPL are granted both tax credit and cost sharing.
Cost sharing refers to a reduced deductible and maximum out-of-pocket expenses. Cost
sharing excludes premiums, balance billing amounts for non-network providers, and
spending for non-covered services.
A Capitation is a fixed dollar amount per member per month (PMPM) paid to providers
regardless of medical utilization. This contract shifts the catastrophic financial risk from the
insurance company to the physician and/or hospital. Provider Excess Loss is purchased to
pay potential catastrophic claims and prevent insolvency.
A fixed hospital reimbursement by a carrier or Medicare covering all charges by diagnosis or
Diagnostic Related Group (DRG code). Most case rates provide for "outlier" codes which
allow additional reimbursement for extra sick patients.
A term used to describe concurrent or retroactive medical care review and Intervention.
Capital Aggregate Program
An aggregate reinsurance program offering two major features:
Aggregate reinsurance attaching at 100% (not 125%, as is typical).
Capital placed on the client's Balance Sheet of $1-$2 million. Capital is typically
priced 5% of placement.
The product offers very competitive alternative to venture capital that typically requires equity
assignment, 15%-20%+ return, repayment in less than three years, and 10% interest.
A Carry Forward is a negotiated endorsement to a policy allowing a member's medical
charges incurred in the last 31 days of the expiring policy year to accrue toward the new
policy year deductible.
A Charge Master is a price schedule typically classified by CPT-4 and ICD-9, IDS 10 or
RBRVS codes. All stop loss and reinsurance policies refer to a specific list to avoid any
confusion of the eligible covered charge amounts. Examples of such lists are MDR, HIAA,
RBRVS, DRG, etc.
A Career Limiting Move is defined as bankruptcy or insolvency. This can occur when stop
loss coverage is misunderstood by customers who fail to consider and understand their
primary, secondary reinsurance/insurance/provider contracts.
In Stop Loss, Co Insurance is the percentage of eligible charges reimbursed to the stop loss
policyholder after the deductible has been satisfied. In major medical insurance, Co
Insurance is percentage of eligible charges the individual policy holder is required to pay the
medical provider for services rendered after the deductible has been satisfied. In primary
medical insurance, co insurance can be the percentage of medical claims paid by the
insured up to the maximum allowed by ACA
Co-payment is a fixed (flat) dollar fee an individual insured pays each time he accesses care
from physicians, hospitals and medical services providers.
A Contingency Fee is compensation to the agent above the commission. This fee is not
usually discussed with the client. It is similar or identical to an underwriting profit or override
on profitable business sales. In larger brokerages, these "fees" are usually negotiated by
senior management, where the local agent is unaware the fees exist. RIMS recently
mandated a policy statement that these fees be clearly divulged by all agents to avoid the
appearance of impropriety.
Credit Life Reinsurance
Credit Life Reinsurance is coverage provided to insurance companies writing mortgage
payment insurance. It can take the form of Specific, Aggregate, Quota Share and/or Surplus
Relief depending on the needs of the insurance company being served.
A Declaration is an addendum to all stop loss and reinsurance policies which warrants all
members expected to exceed 50% of retention have been reported prior to binding
Sometimes referred to as Retention, a Deductible is the dollar amount exceeded before a
stop loss policy pays all or part of an eligible claim. In Stop Loss and Reinsurance, a
deductible accrues independently of any co insurance percentage.
A term generally used to identify an individual eligible for both Medicare and Medicaid.
Early Lock Down
A renewal feature offered by some carriers to renew stop loss coverage early, and avoid last minute potential lasers on sick employers who present illness within 60 days of renewal.
EHR – Electronic Health Record
A computer stored file consisting of a member’s personal medical information.
Eligibility: Method of Determining Eligibility for Insurance Affordability Programs
As part of the application process, the Marketplace determines an individual’s eligibility for advance payments of the premium tax credit and cost-sharing reductions based on projected household income relative to the FPL. Household income is the
sum of a tax filer’s MAGI, and the MAGI of the tax filer’s dependents who are included in the tax filer’s family and required to file a federal income tax return. Additionally, the Affordable Care Act requires all states to determine eligibility
for Medicaid and CHIP for the majority of individuals (essentially, all non-disabled, non-elderly individuals) based on their MAGI. MAGI is adjusted gross income within the meaning of the Internal Revenue Code, plus any excluded foreign earned
income, tax-exempt interest received or accrued during the taxable year, and non-taxable Social Security benefits. Assets are not considered in determining eligibility. This income methodology is the same for determining eligibility for advance
payments of the premium tax credit and cost-sharing reductions, and determining eligibility for Medicaid and CHIP, with the following exceptions:
Due to variances in the way insurance affordability programs determine eligibility based on immigration status and other non-financial factors, certain individuals may qualify for advance payments of the premium tax credit or cost-sharing reductions,
but may not be eligible for Medicaid or CHIP regardless of their income.
Medicaid and CHIP disregard certain rare types of income.
Medicaid and CHIP eligibility is primarily based on current monthly income, while eligibility for advance payments of the premium tax credit and cost-sharing reductions is based on projected annual household income Source Health Insurance Marketplace
2015 (Source Healthcare.com)
Eligibility for Advance Payments of the Premium Tax Credit
The following are eligibility criteria for advance payments of the premium tax credit.
Has an annual household income between 100% and 400% of the FPL (or between 0%
and 400% of the FPL if a lawfully present non-citizen who is ineligible for Medicaid by
reason of immigration status)
Cannot be claimed as a dependent by another individual (Note that advance payments of
the premium tax credit can be paid to reduce premium costs for coverage for tax
dependents, but the premium tax credit itself is available only to the tax filer.)
Does not file a tax return using the “Married Filing Separately” filing status (with
exceptions for certain abused or abandoned spouses)
Is part of a tax household that:
Will file a tax return for the plan year
Has at least one member who meets the eligibility criteria for enrollment in a QHP,
enrolls in a QHP offered through the Marketplace, and is not eligible for minimum
essential coverage (including employer-sponsored coverage that meets
affordability and minimum value standards, Medicaid, CHIP, Medicare, and certain
other forms of coverage), other than through the Individual Marketplace
The eligibility rules for advance payments of the premium tax credit are the same for same-sex spouses as opposite-sex spouses. Advance payments of the premium tax credit are not available for the purchase of catastrophic coverage.
Eligibility for advance payments of the premium tax credit is based on projections of household income, family size, and who in the family is eligible for other minimum essential coverage.
Eligibility for the premium tax credit, however, is based on actual household income and family size as shown on the tax return. (Source Healthcare.com)
Eligibility for Cost-sharing Reductions
The following are eligibility criteria for cost-sharing reductions.
Meets the eligibility criteria for enrollment in a QHP and for advance payments of the premium tax credit
Has an annual household income between 100% and 250% of the FPL, OR an annual household income between 100% and 300% of the FPL for members of federally recognized Indian tribes or shareholders of Alaska Native Corporations
Is not enrolled or eligible for government-sponsored coverage, employer-sponsored coverage that meets affordability and minimum value standards, or another type of minimum essential coverage
Is enrolled in a Silver level plan through a Marketplace (does not apply to members of federal
recognized Indian tribes or shareholders of Alaska Native. (Source Health Marketplace)
Cost sharing means any expenditure required by or on behalf of an enrollee with respect to essential health benefits (EHB), including deductibles, coinsurance, copayments, or similar charges. Cost sharing excludes premiums, balance billing amounts
for non-network providers, and spending for non-covered services. (Source Healthcare.com)
Eligibility for catastrophic plans under ACA
In addition to the level of coverage plans, issuers in the individual market can offer catastrophic plans. Eligibility for catastrophic plans is limited to:
Individuals under age 30 before the plan year begins
Individuals who have a certification from the Marketplace that they are exempt from the responsibility requirement because they do not have an affordable coverage option, or because they qualify for a hardship exemption (Source Healthcare.com)
Employer Mandate – aka Play or Pay
ACA mandate requiring employers with more than 50 full time equivalent full-time-employees
(FTEs) to buy medical insurance for their employees, or Pay $2,000 per head (after 30 FTE’s
“deductible”). FTE is defined as an employee working more than 30 hours. ACA requires
employers with sister corporations to count all their allied companies employees toward the
50 FTE mandate.
ERISA: Employee Retirement Income Security Act
The ERISA Act provides federal laws and regulations pertaining to the operation of self
funded health plans for single employers, unions, trusts, and associations. ERISA plans are
effectively immune to state insurance laws and regulations regarding assumption of risk and
solvency standards. However, Plans sponsored by municipalities may be regulated by the
domiciled state. These plans may include Life, Health, Dental, etc as part of the Group
plan(s) offerings. The purchase of Specific and Aggregate reinsurance is optional, but
usually done to transfer the risk of unpredictable catastrophic claims.
Episode of Care
A term used to denote care delivered from beginning to end of treatment. Episode of care is
the vernacular being used by Payors attempting to fashion reimbursements schedules or
contracts with providers inclusive of all services delivered over a specified period, or by
medical outcome desired.
Early Retiree Reimbursement Program. $63 (2014) PMPM charge to employers for the
EPO: Exclusive Provider Network
A network of physicians and hospitals offered to members for In Network care. EPOs
typically do not insure care received out of network, and look similar or identical to HMO Gatekeeper
Essential Health Benefits
10 categories of unlimited insurance coverage defined under ACA that create a Qualified
Health Plan. Categories include: Maternity & Newborn care, Hospitalization, Emergency
Services, Pharmacy, Laboratory, Pediatric Vision & Dental, Rehabilitative Services and
devices, Emergency Services and Preventive/Chronic disease medical treatment.
Exchange aka Marketplace
An online site accessing ACA compliant medical and dental plans that is managed/funded by
the federal government (HHS). Some states did not create their own commercial insurance
exchange, and relegate administration to the federal government.
Experience Credit aka Premium Refund aka Minimum Premium aka Profit Commission aka
Terminal liability aka Alternate Funding aka Experience Refund policy.
A premium rebating feature that returns excess premium when claims are lower than a
negotiated loss ratio typically under 70%.
Excess and Surplus Clause
This is a standard Clause that means coverage is afforded after all other available
insurances have been exhausted. It can also be associated with language stating coverage
being applied to all medical charges the client is at risk for unless specifically excluded by
Excess of Loss
Excess of Loss is a type of Stop Loss or Reinsurance coverage that triggers after a specific
and or aggregate deductible is satisfied. These policies take many forms, and insure many
types of risk. This coverage may employ a Specific deductible or variations within an
aggregating specific deductible. It is “second dollar” coverage.
Expected Claim Value
The underwritten expected annual claim value used to rate specific and aggregate insurance
A process that meets minimum standards set forth under ACA/HHS regulation related mostly
to coverage exclusions or insurance denials. ACA details greater consumer appeal rights for
denied or under-reimbursed medical claims. Self Funded (ERISA) plans are held to a
different standard than Individual plans, mostly limited to review of insurance eligibility.
Facultative reinsurance is coverage where a Reinsurer evaluates a specific risk on a case-
by-case basis. Typically, the primary insurer has no obligation to submit NEW risks to the
reinsurer, and the reinsurer is free to accept or reject any risks submitted by the primary
insurer or ceding company. Facultative reinsurance can also be referred to as Pro Rata or
Excess of Loss coverage. Typically, the reinsurer accepts the same percentage of claim
liability as billed premium. Each policy is different.
Fee For Service
Fee For Service is the full billed charge a provider invoices an insurer for services rendered.
A Fee Schedule is an explicitly detailed schedule used by the carrier to determine the eligible
amount charged. In stop loss, the RBRVS charge master is used for re-pricing physician
fees, and the Reasonable & Customary schedule is typically used in pricing the hospital
reimbursement. The fee schedule used dramatically effects eligible and reimbursable
Finite Reinsurance is defined by the Reinsurance Association of America as "a highly
structured reinsurance contract where structured elements reduce the amount of risk
assumed by reinsurers to the point that it may not meet the accounting requirements of risk
transfer." Finite reinsurance is typically coverage transferring little or no risk, and is designed
to pay known losses, or improve issues related to cash flow from irregular market conditions
involving interest rates, and asset values. It typically improves financial ratios related to
compliance, and capital surplus reserves. There are many types of finite loss development
coverages. The essence of coverage may amount to a line of credit to pay known losses
today and reimburse the reinsurer by amortized future premium payments. NAIC has
recently agreed on a uniform policy form. New York is currently investigating these contracts
to determine if the coverage was improperly used to improve the values of publicly traded
First Dollar Risk
A dollar amount most underwriters consider a likely cost per calendar year for each insured
member. Second Dollar risk is typically medical claims risk above $50,000.
Fronting is the leasing of an authorized insurance policy form in an individual state.
Sponsoring carriers may elect to assume all, part, or none of the risk being assumed.
Fronting carriers may, or may not act as reinsurers on the program. A fronted and
reinsurance assignment is typically a program of transferring over an existing book ($1+M) of
insurance into an existing authorized policy form, thus creating new market for risk. These
programs are established to create or grow strong books of business, and to share in
underwriting profits. Assumption of “some” risk by the sponsoring agency is usually required
to assure a true risk partnership and comfort reinsurers.
Fully Disabled Limitation
A Fully Disabled Limitation is a condition of a self funded stop loss policy that excludes
members not actively at work, and/or who might be in the hospital at time of “disclosure”..
This provision is typically waived by the carrier by proper claims declaration.
Full Time employee
A term defined under ACA meaning an employee working more than 30 hours per week. It
is calculated by summing all part time employee hours and dividing by 30hrs to determine a
FTE for purposes of ACA employer-employee count being above or below 50 FTE. Under
ACA, the number is used to assess ACA tax penalties for employers employing over 50
FTEs. Employers over 50 FTE not providing ACA compliant medical insurance to their
employees get fined $2,000 per employee (after the first 30 FTE exemptions).
FTE – Full Time Equivalent
An employee working more then 30 hours a week. It should be noted that ACA law
calculates part time employees working under 30 hours a week – summed and in total to
determine if an employer has over 50 full time employee “equivalents” and is subject to either
a $2,000 or $3,000 penalty tax for non compliance.
A GA is a General Agent for a single carrier. A GA is bound legally to represent the best
interest of their appointing carrier, and sometimes earn commissions, overrides and/or profit
A Grace Period is the number of days past the premium due date the premium will be
accepted before canceling the policy for non-payment of premium. A typical grace period is
30 days. Marketplace plans have an ACA mandated 90 day grace period.
A term used to identify medical plans requiring a primary care physician referral requirement
before accessing specialty physician care.
INDIVIDUAL Plans started before 3/23/10 are allowed to remain in effect until September
2017. Grandfathered plan members do not get fined 2.5% for ACA non compliance. Many
Grandfathered plans have materially less coverage than ACA compliant plans.
Group plans issued after 1/1/16 are ACA compliant. Grandfathered plans are exempted from
ACA mandated changes like unlimited benefits for 10 essential health benefits.
Grandfathered plans are typically prohibited from making any changes that increase MOOP.
Group Health Plan
A plan sponsored by an employer and requiring a minimum of 50% employer premium contribution, and 70-75% of employee participation, and that is guarantee issue without underwriting and outside of OEP.
Guarantee Issue / Guarantee Renewability
A policy feature offering insurance issuance without additional underwriting or exclusion of preexisting medical condition. ACA offers guarantee issue policies during OEP and SEP only each year.
A Health Maintenance Organization (HMO) is a state-designated insurance entity authorized
to sell commercial, Medicare or Medicaid health insurance in certain counties. HMO's are
known for emphasizing preventative medicine, and paying their doctors and hospitals a fixed
dollar “capitation” for each member assigned to a provider group. An HMO is typically
separated from a PPO or Indemnity Health Insurance by two major things: a capitated
primary care physician (PCP), and required referral from a PCP for specialty physician
Health Insurance Issuer
Health insurance issuer means an authorized insurance company licensed to sell insurance
in a state, and is subject to state law that regulates insurance (within the meaning of section
514(b)(2) of the Employee Retirement Income Security Act (ERISA)). This term does not
include a group health plan. (Source Healthcare.com)
Health Insurance Portability and Accountability Act of 1996 (HIPPA)
A law that sets standards for securing privacy of personal health information, and affording
people changing jobs guaranteed insurance without preexisting medical condition exclusion
or waiting period.
New & increasing tax ($11.3 B) on Fully-Insured medical carriers, but not ERISA plans.
HRA Health Reimbursement Account
A tax exempt account used to pay eligible health expenses, typically paired with high deductible plans, and that gets funded by the employer.
HRA Health Resources Account
HRA accounts are used to assist employees in paying typical deductible, co insurance and other eligible out-of-pocket medical expenses during a calendar plan year. These funds are deposited by employers and/or employees each year Pretax, and can be spent on eligible medical costs by typically using an assigned Debit card. Total annual deposits are regulated and limited per calendar year. Unlike Section 125 plans, unused HRA account balances do not roll over to a new policy year, and therefore are referred to as “use it or lose it”. See Section 125 plans. . Tax considerations and regulations are many, and must be confirmed with Licensed CPA’s or attorneys.
HSA – Health Savings Account
A tax exempt account used to pay for eligible health care services, and that gets funded by an employee, and or employer. Individuals can also fund a tax exempt HSA. These accounts must pair with higher deductible plans eligible under IRS quidelines.
Integrated Delivery Systems (IDS) are physician, hospital and insurance company joint
ventures which are authorized to sell health insurance in a state. Sometimes simple
unorganized Physician and Hospital groups refer to themselves as integrated despite their
inability to coordinate care, manage their physicians or reduce cost.
An Irrevocable Letter of Credit is a bank document guaranteeing funds on accounts payable
to the obligee in the event a contractor is unable to meet their obligations.
Internal Revenue Services
An Independent Practice Association (IPA) is typically a group of physicians who organize themselves into a contracting entity to care for an HMO's and PPO's members. It can also be a licensed HMO owned by its member physicians.
LAN - Health Care Payment Learning and Action Network
A HHS-CMS department assigned with tracking & communicating alternative (non FFS) medical provider reimbursement contract successes in lowering cost and maximizing evidence based medicine outcomes. “CMS is proud to achieve the 30% target almost a year ahead of schedule. Moreover, true transformation of our health system cannot be done through Medicare alone, and so CMS looks forward to continuing to work with partners across the country to achieve the goals of tying 30% of spending to APMs by the end of 2016 and 50% by the end of 2018 for the entire U.S. health care system.” “The Health Care Payment Learning and Action Network will bring together private payers, providers, employers, state partners, consumer groups, individual consumers, and many others to accelerate the transition to alternative payment models.” “HHS has set a goal (PDF) of tying 30 percent of Medicare fee-for-service payments to quality (PDF) or value through alternative payment models by 2016 and 50 percent by 2018. HHS has also set a goal of tying 85 percent of all Medicare fee-for-service to quality or value by 2016 and 90 percent by 2018.” (source: Health Care Payment Learning and Action Network (LAN))
Long Term Care - LTC
A policy that insures Activities of Daily Life that are considered “custodial, and excluded
under typical medical insurance policies.
Long Term Care Insurance
An insurance policy triggered by a member’s inability to perform three or more activities of
daily life (ADL). ADL’s can include: bathing, shopping, transporting, toileting, check writing,
cleaning, cooking, housework, banking, etc. These are explicitly defined in long term care
policies. Long term care is considered custodial and not acute care, and is not insured by
most major medical or Medicare plans beyond the period defined in the policy for
rehabilitation. Coverage is generally of two types: lump sum to spend as needed, or lump
budget doled out by a daily limit schedule (i.e. $250 per day up to $150,000 limit).
Mandated Quality Reporting
ACA promulgated Federal Government position as umpire regarding Evidence Based
Medicine (EBM) to certify efficacy of care standards for given alleged treatments. Carriers
and self funded employers are charged a tax each year to fund NQOI management.
Minimum insurance benefits allowed in an insurance policy that are required by statute for
compliance. EHB are an example of ACA mandated benefits.
Maximum Per Diem
This term is used to convey the maximum reimbursement of hospital charges a policy holder
will recover each day. It is a figure compared to the average cost per day derived by dividing
the total charges by the length of stay. Almost all HMO reinsurance and PEL policies have
this provision that can tend to reduce coverage.
A state health insurance program for people earning under 100% of FPL, and eligible for
Medicaid. Medicaid is different in each state. Medicaid can have about 15 categories of
eligible people, and coverage. Typically, the federal government gives 50% of a state’s
Medicaid budget. Under ACA, Medicaid eligibility was expanded from 100% to 133% of FPL
for eligibility in states electing to expand Medicaid eligibility. 13 states elected not to expand
Medicaid under ACA
A voluntary state expansion of Medicaid eligibility offered under ACA by the Federal
Government for three years. The provision allows poor people access to free or less
expensive Medicaid insurance by increasing income cut-off eligibility from 100% to 133% of
A program that the Supreme Court allowed individual (13) states to opt out, despite the
federal government funding the first three years of added cost.
Under the Affordable Care Act, states have the option to expand Medicaid eligibility to cover
non-elderly, non-pregnant adults ages 19-64 with a household MAGI at or below 138% of the
FPL. This is known as "Medicaid expansion."
However, some states have chosen not to expand Medicaid eligibility. Regardless of whether a state
chooses to expand its Medicaid eligibility, all state Medicaid programs:
Use MAGI as the income methodology for the majority of applicants (generally, all non-elderly, non- disabled populations)
Do not consider assets in determining eligibility for individuals whose financial eligibility is based on MAGI
Streamline income-based rules, systems, and verification procedures (Source Healthcare.com)
A MEWA is a Multiple Employer Welfare Association. It is a protected class of health
insurance regulated by the Department of Labor under ERISA that provides various
exemption from state insurance regulation. Practically speaking, most states despise
MEWA’s and will legally challenge them regardless of ERISA standing. Of the protected
classes ERISA legislation governs: (Associations, Trusts, Self funded Employers and
Unions), MEWAs are rare. The over-reaching purpose of self funding any of these
organizations is to reduce the cost of providing insurance benefits to employees. Self funded
MEWAs offer many small employers a group structure to command greater buying power.
But, because each member employer is small, they may not be capitalized to sustain
unexpected or unpredictable deductible losses which is one reason states dislike MEWA’s.
A Fully Insured Health Plan MEWA may not be federally required to possess a state issued
Certificate of Authority. However there is long history of many states aggressively moving to
eliminate them unless the MEWA’s reinsurance meets “their” specific coverage standard.
Material legal assistance is required to set these up and maintain them successfully within
state guidelines despite ERISA exemption.
The purchase of Specific and Aggregate reinsurance is usually required to transfer the
majority of risk to an approved insurance carrier. Historically, placement of MEWA stop loss
is the hardest part of the program
A Managing General Underwriter (MGU), sometimes called an MGA -- Managing General
Agent, is an independent facility authorized by a carrier to rate, bind and issue policies.
MGU's are legally bound to represent the best interests of their sponsoring carrier. They
typically share in contingency fees and overrides on profitable business.
MiniMed or Limited Medical Insurance Plans
MiniMed or Limited Medical Insurance Plans
MiniMed is non ACA compliant insurance offering a limited medical benefit typically under
$50,000 a year. It typically limits hospital, pharmacy, surgical and physician charges to a
maximum amount or per diem. Vision, Mental, Dental and Pharmacy benefits may be
included within the insured benefit schedule, or as a discounted network access benefit or
feature. The program is generally purchased by groups unable to afford traditional major
Medical Loss Ratio. A legislated percentage a carrier must pay in claims for their insured to avoid mandatory premium refunds to their customers. ACA sets MLR for Individual, and Medicare Advantage at 80%, and 85% for group insurance. MLR is typically calculated as claims divided by paid premium (including commissions).
Most Favored Nations
A Most Favored Nations clause in a managed care contract guarantees that the lowest charge master will be used when filing claims.
MSR Minimum Savings Rate
MSR is the percentage of claims saved under an ACO Shared Savings contract period (typically three years), and is used to convey how efficient and effective medical care was delivered under budget, MSR denotes a Shared Savings provider bonus. See MSSP.
MSSP - Medicare Shared Savings Program
A contract offered by the federal government that shares savings from the successful management of Medicare or Medicaid members with physicians and or hospitals who are able to manage care under the expected budget for that population. These contracts are typically over a three year term.
Multiple Loss Medical Reinsurance
Multiple Loss Medical Reinsurance is a feature found in high deductible employer stop loss policies. It provides additional coverage for medical charges incurred from the same trauma, or within a 50-mile radius, or within a period of 7 days. I.e.
On a traditional $500,000 specific policy, the deductible drops from $500,000 to $10,000, and pays a benefit up to $490,000. Coverage is defined in terms of a maximum, minimum and 3 life warrants.
An Out of Pocket Maximum (OOP) is the annual total liability an individual, or family must
pay before the plan pays 100% of all medical charges, including the deductible. Premium is
not part of OOP.
A type of medical insurance plan offering access to specialty physician
care without the requirement of a primary care physician. Plans requiring referral
from a primary care provider to access specialty care are called Gatekeeper
An informal term used to describe a licensed or Certificate holding “admitted” carrier in a
particular state or country. These carriers are both eligible and authorized in states. Surplus
lines carriers are eligible, but not authorized to conduct insurance business in a state.
A Pharmacy Benefit Manager is a company specializing in the administration of commercial,
Medicare, Medicaid and/or Workers Compensation pharmacy benefits. A PBM may also be a
specialized entity in high dollar Rx such as factor agents for hemophiliacs, cancer infusion,
dietary feeding, and an array of infusion therapies.
Per Diem Contracts
Per Diem Contracts are contracts reimbursing hospitals a flat amount per day for specified
hospital services. Per Diems are common stop loss and reinsurance coverage limitations
consisting of average daily maximum allowable amount per day. Per diem contracts can
also be vender related pricing sold to various self funded employers or carriers offering
insurance in an area.
Per Diem Maximum
A Per Diem Maximum is typically an in-patient hospital coverage in a stop loss or
reinsurance contract limiting the carrier's exposure per day for eligible charges. It is generally
required in all Provider Excess and HMO reinsurance policies. Special care should be taken
to understand how large claims incurred within a small number of days are affected.
Expressed as either a Maximum Daily Limit or Average Maximum Daily Limit, this coverage
usually reduces the total eligible hospital charges reimbursable in the policy. The Average
Daily Maximum Limit is richer coverage and should be sought.
Physician Hospital Organizations (PHO) are physician and hospital joint ventures typically
organized to attract members from HMOs and self-insured employers. Many PHO’s become
employed doctor practices acquired by hospitals or larger multispecialty groups.
Prepaid Health Plans (PHP) sometimes referred to as MPHP's (Medicaid Prepaid Health
Plans) or LHSO's (Limited Health Services Organizations), are state-approved organizations
which accept a capitation for services rendered to Medicaid members. An LHSO can be just
about any special state-authorized entity approved to insure a limited risk, i.e., psychiatry
HMO, dental HMO, etc. It is possible to include commercial and or Medicare lives as
permitted by law/regulation.
A Provider Maintenance Organization is a state or federally authorized physician and/or hospital owned entity that owns an HMO. These entities typically enjoy a three year period of not having to come up with the minimum state mandated solvency
capitalization required of traditionally licensed HMO's. They may also enjoy a start up period requiring lower reserve requirements (i.e. In GA a PHSCC, Federally a PSO).
Portfolio Aggregate Reinsurance
Portfolio Aggregate Reinsurance is coverage that responds when the expected claims value
on a book or "portfolio" of coverage exceeds a specified percentage above the Expected
claim value, typically between15%-25%. It is a layer of protection to the primary insurer for a
catastrophic year on a specific block of business intended to cap the maximum probable loss
on a book of business. Coverage typically responds at 115%-125% of the expected claims
A Point Of Service (POS) Plan is a program of commercial or Medicare health insurance
which offers the customer two options of how they can receive care-in-network and/or out-of-
network plan care. In-plan care allows members to save 30-40 percent of out-of-pocket
expenses when they receive care from a provider within the panel of contracted providers.
Point of service plans are designed to provide members greater choice of medical provider
selection. POS typically insure out of network care, and are not the same as HMO, EPO, or
“National Network” offered plans.
Physician Incentive Plan Guidelines
These are federal mandates requiring physician groups with less than 25,000 members to purchase stop loss.
Professional Employer Organizations - PEO's
A corporation that derives its income from providing traditional Human Resource services (i.e., employee benefits) to a client employer on an outsourced basis. The PEO corporation may be the same employer, and lease the employees back to itself.
The PEO can be a completely separate corporation selling their outsourced HR services to multiple employers in the area too. Less expensive liability and health insurance are typically attributes of "leasing" one's own employees. If the health
insurance is to be provided on a partially self funded basis, either an ERISA or MEWA type plan is typically used.
A Provider Sponsored Organization (PSO) is a federal designation given to physician and hospital groups which accept capitation for services rendered to enrolled Medicare members.
HHS and IRS mandated medical cost, and detail reporting aka Patient Centered Outcomes
Research (PCORI). The $2.17 Tax per enrollee for this federal “umpire on efficacy of care”
are charged to Carriers and self funded employers, and set to expire Sept 30,2019.
Quota Share or (Pro Rata)
Quota Share reinsurance sometimes referred to as "Proportional" or "Pro Rata" is coverage providing a specified percentage of premiums, expenses and claims losses between the primary insurer (ceding company) and the Reinsurer. Risk transfer can
assume up to 100% of the total premium risk. It is typically a first dollar coverage, where the reinsurer receives the same percentage of premium as it funds claims.
Reinsurance is an insurance which provides coverage for catastrophic medical charges
incurred by a plan member. Generally, the three types of medical reinsurance are HMO
reinsurance, Workers Compensation reinsurance, and CHAMPUS/Tricare reinsurance.
Reinsurance applies to re-insuring an insurance policy.
A Run Out is the amount of time after the policy year to notify the carrier of pending claims. New claimants presented after the deadline are ineligible for reimbursement. The Run Out can be significantly affected by the conditions of claim payment
at the end of the Run Out term.
Second Dollar Risk
A reinsurance or stop loss slang term used to denote medical claims per person per year
over $50,000. The amount is subjective the coverage type and underwriting organization rating the
Section 125 plans
< Medical benefit plans employers can establish to pay for eligible insurances with pretax funds, and thereby save approximately 7.65% of payroll taxes. Many eligibility rules and regulations apply to maintaining tax preferred funding of employee benefits. Section 125 plans are different from HRA accounts. Section 125 account balances NOT spent on eligibile medical expenses during the policy year DO roll over to subsequent years, and can be used in retirement too. Tax considerations and regulations are many, and must be confirmed with Licensed CPA’s or attorneys./dd>
Single Employer Trust or Association Health Plan
The association health plan is a self funded ERISA major medical group insurance that is exempt from community rating. Advantages include an advanced aggregate reinsurance coverage, lower agent & TPA fees, favorable experience discounts and other
significant savings. Minimum program requirements include 1,000 lives and retention at $50,000. Pooling of first dollar risk among multiple employers is prohibited. Favorable experience is rewarded by refunding unused premium and discounting future
premium. A single employer trust offers a middle ground between the higher risk of traditional self funding, and the higher cost of a fully insured benefit while providing a fixed monthly premium easily budgeted by the employer.
Specific Stop Loss/Reinsurance
Specific Stop Loss is insurance which pays for medical charges above a selected deductible for an individual person per policy year.
Steerage refers to managed care procedures that direct members inside a contracted network of providers. Sometimes referred to as repatriation, Steerage also refers to the effectiveness of utilization review functions to get out-of-area members
back into the local contracted network. This is especially important to the management of transplant, burn, rehabilitation and neonatal patients.
Stop loss is an insurance which provides reimbursement for catastrophic medical claims incurred by a self-funded employer's employee or by a capitated HMO member. There are two primary types of medical stop loss - employer stop loss and provider
stop loss (provider excess loss).
Subrogation is the right of recovery of one party against another party. This can refer to the
rights of the HMO or provider group to recover additional monies from a second insurance
policy. In managed care, it refers mostly to an obligation of the provider group to use all legal
remedies to repay the reinsurer for any claims paid, and whatever else they can collect.
Surplus Relief or Finite Reinsurance
Surplus Reinsurance is coverage that effectively transfers premium from the primary insurer to the Reinsurer thereby improving capital reserve ratios and financial ratings. Typically, these reinsurance agreements are in the form of a Quota Share
arrangement with profit sharing reverting back to the primary insurance carrier for a risk charge. Coverage typically responds at 125%+ of the expected claims value.
Sometimes referred to as a Contract Basis, or Contract Period - Term refers to the policy
year and claims submission period deadline. A typical stop loss term is for a 12/18 period.
Here the policyholder's claimant has 12 months to accrue the claim, and 6 months after the
policy year to report it to the carrier. Policies can be written on either a "Reported" or "Paid"
bases. The Reported bases is richer coverage. Other Terms are 12/12, 12/15 and 12/24.
Treaty Reinsurance (Automatic reinsurance)
Treaty reinsurance is reinsurance of specified types or classes of insured exposures that are
automatically "ceded” or accepted by the Reinsurer within the terms of the reinsurance
contract or "treaty" without evaluation of each individual exposure. The reinsurance takes
effect as soon as the primary insurance is sold. Treaty reinsurance is a general term used to
discuss several types of coverages that can include profit sharing features.
TQM Total Quality Improvement
A quality insurance vernacular which is the same or similar to Total Quality Improvement,
Medical Pathways, Critical pathways, Quality Improvement, etc, and whose goal is to lower costs,
and improve outcome of medical care delivery.
Uncollateralized Surety Bonds
This type of financial guarantee bond is placed between the capitating HMO and the provider group as a safeguard against insolvency or bankruptcy. Different from the standard types of surety bonds which require 75% collateral, approved provider
groups do not have to freeze their assets through an ILC. It is priced at 2% of face.
Benefit offerings paid for by employer and/or employees. Sometimes referred to as “Ancillary Benefits” these insurances typically insure: Life, Dental, Short term Dissability, Long term care, Critical Illness, Accident only, Cancer, Cardiac,stroke/transplanct, long term disability, Hospital lump sum per diem GAP, etc.