Definitions

Wading through technical terms can often times be a time-consuming and draining process.  Here is a quick guide to the terminology, giving you easy access to a more complete understanding of the plans and services available.

Adjusted Community Rating
The process of determining a group’s premium rate in which an HMO adjusts the standard or pure community rate premium by adding or subtracting an amount that reflects the group’s past claims experience.

ASO (Administrative Services Only)
A self-funded plan contracts with an insurance company for services such as claims processing and stop-loss coverage.

Board Certification
A physician who is board certified has pursued advanced training in his or her specialty and has passed a qualifying examination; a physician who is board eligible has received the training but has not taken or passed the exam.

Capitation
A payment structure in which an HMO pre-pays a provider a flat amount for each member’s medical care, usually on a monthly basis.

Closed-Panel HMO
A type of HMO in which physicians must either belong to a special group of physicians that has contracted with the HMO or must be employees of the HMO. Generally, medical services are delivered in an HMO-owned health center.

Coinsurance
A term used to describe the enrollee’s share of cost. The insurer pays a fixed percentage of the enrollee’s medical expenses, and the enrollee pays the balance.

Community Rating
The process of determining a group’s premium rate in which the HMO sets premium rates based on the average cost of providing care to the HMO’s enrollees.

Copayment
A flat, set amount—for example, $5 or $10—that must be paid at the time of service for certain medical services.

Credentialing
The process of reviewing a provider’s qualifications to be sure they meet the criteria established by a managed care organization.

Deductible
The part of the individual’s health care expenses that the patient must pay before coverage from the insurer begins.

Direct Contracting
Individual employers or business coalitions contract directly with providers for health care services with no HMO or PPO intermediary. This enables employers to include in the plan the specific services preferred by their employees.

Discounted Fee-For-Service
A payment structure in which physicians are paid a certain percentage of their normal fees.

EPO (Exclusive Provider Organization)
A managed care organization usually made up of a group of physicians, one or more hospitals and other providers who contract with an insurer, employer or other sponsoring group to provide discounted medical services to enrollees. It is similar to a PPO in that it allows the patient to go out of network for care; however, the patients will not be reimbursed if they do so.

Experience Rating
The rating method used by most traditional indemnity insurers, which uses the group’s claims experience to establish premium rates.

Fee-For-Service
A payment structure in which the insurer will either reimburse the group member or pay the provider directly for each medical expense incurred by the member and covered by the group contract.

Formulary
A list containing the names of certain prescription drugs that an HMO covers when dispensed to its members who have drug coverage.

Fully Insured Plan
A group health care plan funding arrangement in which the group policy-holder makes monthly premium payments to the organization that provides the health care coverage, and the insurer bears the responsibility of guaranteeing claims payments.

Gatekeeper
A term used to describe one role of a primary care physician in an HMO or other managed care network that requires its members to have their care provided, arranged or authorized by the members’ primary care physicians.

Group Model HMO
This type of closed-panel HMO generally is made up of one or more physician group practices that are not owned by the HMO but operate as independent partnerships or professional corporations. Instead of employing the doctors and paying them salaries, the HMO contracts with the group practice to provide or arrange covered services for each HMO member who is a patient of the group. Generally medical services are delivered in an HMO-owned health center or satellite clinic.

Group Practice Without Walls
A legal entity formed by a network of physicians who maintain their individual practice locations. The Group Practice Without Walls acquires the assets of the practices and provides administrative services.

HEDIS (Health Plan Employer Data and Information Set)
The NCQA’s standardized set of performance measures for HMOs.

HMO (Health Maintenance Organization)
A health care delivery system that provides comprehensive services for subscribing members in a particular geographic area. Most HMO care is provided through a managed network made up of doctors, hospitals and other medical professionals selected by the HMO. HMO enrollees are required to obtain care from this network of providers in order for their care to be covered, except in cases of emergency. All the care that members may need is paid for by a single monthly fee, plus nominal copayments. Generally, there are five types of HMOs: Staff Model, Group Model, IPA, Network Model and Mixed Model.

IDS (Integrated Delivery System)
A network of hospitals, physicians and other medical services, along with an HMO or insurance plan, formed to cost-effectively provide a population with a full “continuum of care”—from prevention through check-ups, tests, surgery, rehabilitation, long-term and home-care—and is accountable for costs, quality of care and customer satisfaction.

Indemnity Insurance
Also known as traditional health insurance, it pays a certain percentage of the charges billed by the provider, and the patient is responsible for the balance.

IPA (Independent Practice Association)
A confederation of physicians and other providers assembled for the purpose of contracting with payors. Participating providers must accept the fee schedules negotiated by the IPA, but typically may continue to see patients covered by other plans.

IPA Model HMO
A type of open-panel HMO that typically includes large numbers of individual private practice physicians. Under this structure, physicians practice in their own offices.

Managed Care
The integration of both the financing and delivery of health care within a system that seeks to manage the accessibility, cost and quality of that care.

MCO (Managed Care Organization)
Refers to any type of organizational entity providing managed care, such as an HMO, PPO, etc.

MSO (Management Services Organization)
Typically owned by hospitals, MSOs contract with physicians (individually or in groups) to provide administrative and practice-management services.

Mixed Model HMO
A type of HMO that combines certain characteristics of two or more HMO models.

NCQA (National Committee for Quality Assurance)
An independent, non-profit organization that assesses and reports on HMO quality.

Network Model HMO
A type of HMO that contracts with a number of IPAs and/or medical groups to form a physician network. This allows an HMO to market its services in a broader geographic area.

Open-Panel HMO
A type of HMO in which any physician or provider who meets the HMO’s specific standards can contract with the HMO to provide services to the members.

PCP (Primary Care Physician)
A physician, usually family practitioner, who serves as a group member’s personal physician and first contact in a managed care system.

PHO (Physician Hospital Organization)
An organizational entity that is formed between hospitals and physicians that allows for cooperative activity, while allowing for a level of independence to the participating parties. The PHO functions as a contracting representative in negotiations with HMOs and other managed care organizations.

PO (Physician Organization)
The PO is a managed care contracting entity owned by and composed exclusively of physicians. The PO tends to be more tightly controlled in terms of members and adherence to treatment protocols than an IPA. POs typically share information systems, claims-processing procedures, financial data, medical records and other technical support functions.

POS (Point Of Service) Plan
A type of managed care plan that allows members to choose whether to seek medical care within the plan’s network or seek medical care out of the network at the point of service; i.e., at the time services are rendered.

PPO (Preferred Provider Organization)
A select, approved panel of physicians, hospitals and other providers who agree to accept a discounted fee schedule for patients an to follow utilization review and preauthorization protocols for certain treatments.

PSN (Provider Sponsored Network)
These range from loose alliances between physicians to legal entities formed between hospitals and physicians for the purposes of managed care contracting.

PSO (Provider Sponsored Organization)
A term used in Medicare reform legislation to define a provider sponsored health plan that would be licensed to provide coverage of the Medicare benefits package.

Providers
Institutions and individuals that are licensed to provide health care services; for example, hospitals, physicians, pharmacists, etc.

Self-Funded or Self-Insured Plan
A group health care plan funding arrangement in which the organization sponsoring the plan takes complete financial responsibility for making all claim payments and paying all related expenses.

Staff-Model HMO
A type of closed-panel HMO in which the physicians are salaried employees of the HMO. Medical services in staff models are delivered at HMO-owned health centers.

Stop-Loss Insurance
Insurance coverage that enables sponsors of self-funded group health care plans to place a dollar limit on their liability for paying claims.

TPA (Third-Party Administrator)
An administrative organization other than the employee benefit plan or health care provider that collects premiums, pays claims and/or provides administrative services.

Utilization
The frequency with which a benefit is used.

Utilization Review
A utilization management method intended to reduce the occurrence of unnecessary or inappropriate hospitalizations of patients.

Withhold
When a percentage of payment to the provider is held back by the HMO until the cost of referral or hospital services has been determined. Physicians exceeding the amount determined as appropriate by the HMO lose the amount held back.