Insurance Glossary

Listed below are some terms you may run across in dealing with insurance companies.

Accredited (Accreditation): A “seal of approval” for health care facilities. Being accredited means that a facility has met certain quality standards, usually determined by the Joint Commission on Accreditation of Healthcare Organizations. Other standards are set by private, nationally recognized groups that check on the quality of care at health care facilities.

Administrative Services Only (ASO): An arrangement in which an employer hires a third party to deliver employee benefit administrative services. These services typically include health claims processing and billing. The employer bears the risk for health care expenses under an ASO plan; the third party does the paperwork.

Admitting Physician: The doctor responsible for admitting you to a hospital or other inpatient health facility.

Admitting Privileges: The right granted to a doctor to admit patients to a particular hospital. Doctors can lose these if they do not follow hospital policies and procedures.

Allowables: There is an amount of money that most insurance companies allow for an item or service. In most cases, the insurance company pays the allowable minus deductibles, coinsurance, or co-payments.

Ambulatory Care: All types of health services that do not require an overnight hospital stay.

Ambulatory Payment Classifications (APCs): A per-visit payment for a service rendered to a Medicare beneficiary in the hospital outpatient department. For a cancer patient, APCs may be paid for chemotherapy administration, the chemotherapy drug, and an X-ray, if they all happen on the same day.

Ancillary Services: Services, other than those provided by a physician or hospital, which are related to a patient’s care, such as laboratory work, X-rays, and anesthesia.

Any Willing Provider Laws: Legislation that requires health care plans to accept into their PPO and HMO networks any provider willing to agree to the network’s terms and conditions.

Appeal: Request made to a payer to reconsider a decision, such as a claim denial or denied prior authorization request. Most appeals must be submitted in writing within a specified period. Appeals are an important part of getting paid for medically necessary services.

Assignment of Benefits: When an insured person assigns benefits, he or she signs a document allowing the hospital or doctor to collect health insurance benefits directly from the health insurance company on behalf of the patient. Otherwise, the insured person pays out of pocket for the treatment and is later reimbursed by the health insurance company.

Average Selling Price (ASP): The method Medicare uses to pay for injectable drugs. This method of pricing restricts oncologists from making a profit on the drugs they give you for cancer. They add 6 percent to ASP to cover drug handling and mixing.

Average Wholesale Price (AWP): The average price of drugs, set by the drug companies. Many insurance companies pay for cancer drugs using average wholesale price.

Beneficiary: A person (you, if you are the patient) eligible for benefit under a health insurance policy.

Benefit: Amount payable by the insurance company to a claimant, assignee, or beneficiary when the insured suffers a loss or has a claim.

Benefit Cap: Total dollar amount that a payer will reimburse for covered health care services during a specified period, such as one year. You do not want benefit caps in your policy, if possible.

Board Certified: A physician who has passed examinations given by a medical specialty group and who has, as a result, been certified as a specialist in a specific area of practice.

Capitation: Capitation represents a fixed monthly dollar amount that a health maintenance organization (HMO) pays to a group of health care providers who have contracted with the HMO. The amount of this fixed dollar payment depends on the number of HMO enrollees who have chosen this group of health care providers for “primary care” services under the HMO plan. It is usually paid on a per-member, per-month basis. This means if you have 100,000 members and you are paid $1 per member per month, your group gets $100,000 per month. This fixed dollar amount does not vary with how much HMO enrollees use (or don’t use) services offered by this group of HMO providers. That is why this is sometimes known as decapitation. Not all HMOs use capitation payments.

Care Plan: A written plan for one’s health care by the attending physician for a particular level of care.

Carrier: A contractor with Medicare who processes Part B claims on behalf of CMS.

Case Management: A process whereby an insured person with specific health care needs is identified, and a plan that efficiently uses health care resources is designed and implemented to achieve the optimum (least expensive) patient outcome. Case managers are usually employed by the insurance companies as gatekeepers.

Case Manager: A nurse, doctor, or social worker employed or contracted by an insurance company who approves all services according to a care plan approved by an insurance company.

Catastrophic Illness: A very serious and costly health problem that could be life threatening or cause life-long disability. The cost of medical services alone for this type of serious condition could cause financial hardship if insurance does not completely cover it. This can also refer to a threshold of a patient’s out-of-pocket costs.

Centers for Medicare and Medicaid Services (CMS): This is the central office for Medicare, Medicaid, and SHIPs. This is where the policies passed by Congress are implemented for these programs.

Certificate of Coverage: A document given to an insured person that describes the benefits, limitations, and exclusions of coverage provided by an insurance company. This should be read very carefully when you get cancer.

Claim: Form submitted to a payer (by a health care provider or patient) to request payment for items or services. The physician claim is a CMS-1500, and the hospital claim is the UB-92.

Clinical Practice Guidelines: Reports written by experts who have carefully studied whether a treatment works and which patients are most likely to be helped by it. There are many guidelines of this nature for cancer and the side effects of treatment.

Coinsurance: Cost-sharing arrangement between an insured person and the health insurance company in which the insured person is required to pay a percentage of the cost for the health care services received. Coinsurance typically applies after satisfaction of a deductible. For example, 20 percent co-insurance may apply after a $500 deductible has been satisfied.

Concurrent Review: Concurrent review involves monitoring medical treatment and progress toward recovery, once a patient is admitted to a hospital, to ensure timely delivery of services and to confirm the necessity of continued inpatient care. This monitoring is under the direction of medical professionals. Concurrent review is a component of utilization review, developed to ensure that patients do not stay in the hospital too long. It is basically an expensive program that is rarely used these days.

Consolidated Omnibus Budget Reconciliation Act (COBRA): The Consolidated Omnibus Budget Reconciliation Act of 1985, commonly known as COBRA, requires group health plans with 20 or more employees to offer continued health coverage for employees and their dependents for 18 months after the employee leaves the job. Longer durations of continuance are available under certain circumstances. If a former employee opts to continue coverage under COBRA, the former employee must pay the entire premium, plus a 2 percent administration charge. Sometimes, individual policies are a better value than COBRA, depending upon how good the employer benefits are.

Coordinated Care: This links all the treatments or services necessary to obtain an optimum level of medical care required by a patient and provided by appropriate providers.

Coordination of Benefits (COB): A provision in the contract that applies when a person is covered under more than one health insurance plan. It requires that payment of benefits be coordinated by all plans to eliminate overinsurance or duplication of benefits. No insurance company wants you or your doctor to be paid too much.

Co-payment: Co-payment is a predetermined fee, in addition to what health insurance covers, that an individual pays for health care services. For example, a PPO may require a $25 co-payment for normal services delivered during a physician office visit.

Cost Sharing: This occurs when participants in a health care plan share in the cost of medical care. Deductibles, coinsurance, and co-payments are examples of cost sharing. Cost sharing is a euphemism for out-of-pocket payments.

Covered Benefit: A health service or item that is included implicitly or explicitly in a health plan and that is partially or fully paid for by the health plan.

Covered Charges/Expenses: Most insurance plans, whether they are PPOs or HMOs, do not pay for all services. Some may not pay for prescription drugs. Others may not pay for mental health care. Covered services are those medical procedures for which the insurer agrees to pay. They are listed in the policy.

Covered Person: An individual who meets eligibility requirements and for whom premium payments are paid for specified benefits of the contractual agreement. Sometimes there is a waiting period between the time you are employed and the time your insurance actually covers you.

Credentialing: The process used by health insurance companies to examine and verify the medical qualifications of health care providers who want to participate in the PPO or HMO network.

Creditable Coverage: Any previous health insurance coverage that can be used to shorten the preexisting-condition waiting period. See HIPAA.

Critical Access Hospital : A small facility that gives limited outpatient and inpatient hospital services to people in rural areas.

Current Procedural Terminology (CPT): A system of terminology and coding developed, owned, and operated by the American Medical Association (AMA); used for describing, coding, and reporting medical services and procedures. It is used mostly for physician and hospital outpatient services.

Custodial Care: Personal care such as bathing, cooking, and shopping that is not covered by many health insurance plans.

Deductible: Cost-sharing arrangement between an insured person and health insurance company. The insured person will be required to pay a fixed dollar amount of covered expenses each year before the health insurance company will reimburse for covered health care expenses. Generally, an insured person is responsible for a deductible each calendar year.

Deductible Carry-Over Credit: Charges applied to the deductible for services during the last three months of a calendar year that may be used to satisfy the following year’s deductible. This is rarely applied.

Defensive Medicine: Use of unnecessary treatments, procedures, or other medical services by doctors to minimize the threat of a malpractice lawsuit or to get insurance companies to realize that services are medically necessary.

Denial of Claim: Refusal by a health insurance company to honor a request by an individual (or his or her provider) to pay for health care services obtained from a health care professional or facility. It is important to distinguish between a rejected claim and an actual denial of service.

Dependent: A covered person who relies on another person for support or obtains health coverage through a spouse or parent who is the covered person under a health plan.

Designated Facility: A facility that has an agreement with a health insurance plan to render approved services. Organ transplants are the most common example. The facility may be outside a covered person’s geographic area.

Diagnosis-Related Groups (DRGs): This is the way Medicare and some other plans pay for inpatient care. It is a per-discharge payment based on your diagnosis or the major procedure performed while you were in the hospital.

Discharge Planning: Medical personnel of a health plan working with the attending physician and hospital staff to assess alternatives to hospitalization, evaluate appropriate settings for care, and arrange for the discharge of a patient, including planning for subsequent care at home or in a skilled nursing facility. 

Disenrollment: Ending a person’s coverage with a health plan either because of the termination of employment or the patient’s selection of another plan.

Effective Date: The date health insurance coverage begins.

Eligible Dependent: A dependent of a covered person (spouse, child, or other dependent) who meets all requirements specified in the contract to qualify for coverage and for whom premium payment is made.

Employee Assistance Programs (EAPs): Mental health counseling services that are sometimes offered by insurance companies or employers. Typically, individuals or employers do not have to directly pay for services provided through an employee assistance program.

Enrollee: The person who is the primary insured. Under an individual or family policy, this person is the applicant. Under an employer-sponsored group health policy, this person is the employee.

Episode of Care: The health care services provided during a certain period of time, usually during a hospital stay.

Exclusion Period: A period of time when an insurance company can delay coverage of a preexisting condition. Sometimes this is called a preexisting-condition waiting period.

Exclusions and Limitations: Medical services that are either not covered or are limited in benefit by a health insurance policy.

Explanation of Benefits (EOB): Statement sent by health plans to persons who have submitted a claim to the health plan. The EOB details the charges for the services received, the amount the health insurance company will pay for those services, and the amount the insured person will be responsible for paying. EOBs are purposefully cryptic so as to not reveal why something was not paid or exactly what was paid for individual services.

Fee-for-Service: A payment system for health care in which the provider is paid for each service rendered rather than a prenegotiated amount for each patient or group of patients.

Fee Schedule: A listing of fees used by health plans to pay doctors and other providers.

First Dollar Coverage: Refers to not having to meet a calendar year deductible before receiving reimbursement or payment for a medical service.

Formulary: A list of certain drugs and their proper dosages. Under most health plans, better benefits are provided for formulary drugs than are provided for nonformulary drugs, which means that you will probably have a bigger co-payment for nonformulary drugs.

Full-Time Student: Under a health plan, an eligible dependant child student (typically age 19 or older) who meets the health plan’s criteria of “full time.” Such criteria typically include minimum credit hour requirements (such as 12 credit hours in a semester) and a maximum age (age 23 is typical).

Gag Rule Laws: Special laws that make sure that health plans let doctors tell their patients complete health care information. This includes information about treatments not covered by the health plan.

Gatekeeper: A primary care physician or other provider in a managed care environment who is responsible for managing the patient’s overall care and who must authorize all specialist referrals. In most health maintenance organizations (HMOs), the secondary care is not covered by insurance if the primary care physician does not approve it. Gatekeepers may also be other clinical people who approve payment.

Grievance: Request made to a health plan to reconsider coverage of a health care service that the health plan has not interpreted to be a covered benefit.

Group Health Plan: A health plan that provides health coverage to employees and their families and is supported by an employer or employee organization.

Guaranteed Issue: Under guaranteed issue, a health insurance company or HMO must issue coverage to an applicant regardless of prior medical history. In Illinois and Indiana, small employers (defined as 2 to 50 employees) cannot be refused coverage for their employees regardless of the medical history of one or more employees.

HCFA Common Procedure Coding System (HCPCS): Name given to CPT codes (Level I), alphanumeric codes (Level II), and local codes (Level III) used by payers and providers for billing purposes. Within the industry, most refer to Level II national codes as HCPCS (Hic-Pics) codes.

Health Care Provider: A doctor, hospital, laboratory, nurse, or anyone who delivers medical or health-related care.

Health Employer Data and Information Set (HEDIS): A set of standard performance measures that provides information about the quality of a health plan. These measures are used to compare managed care plans in terms of quality of services.

Health Insurance Portability and Accountability Act (HIPAA): A law passed in 1996, also called the Kassebaum-Kennedy law, which expanded health care coverage for individuals who have lost their job or moved from one job to another. HIPAA protects persons who have preexisting medical conditions and/or problems getting health insurance coverage as a result of their past or present health status. It also protects patient privacy and prevents fraud.

Health Maintenance Organization (HMO): Prepaid health plans that cover doctor visits, hospital stays, emergency care, surgery, preventive care, checkups, lab tests, X-rays, and therapy. In an HMO, one must choose a primary care physician who coordinates all care and makes referrals to any specialists who may be required. In an HMO, one must use the doctors, hospitals, and clinics that participate in the plan’s network. No benefits are paid for nonemergency benefits provided outside the HMO network.

Health Savings Account (HSA): Operating similarly to IRAs, HSAs are tax-advantaged savings accounts for health care services. A person must enroll in a qualified high-deductible health plan (HDHP) before he or she can establish an HSA.

High-Deductible Health Plan (HDHP): A person must be enrolled in a qualified HDHP before establishing a health savings account (HSA). Not all high-deductible health plans qualify for purposes of establishing HSA eligibility. A qualified HDHP benefit design must conform to various federally mandated requirements, such as a minimum $1,000 deductible and a lack of first-dollar benefit provisions.

Home Health Care: Services provided at home to aged, disabled, sick, or convalescent individuals not needing institutional care. The most common types of home care are visiting nurse services and speech, physical, occupational, and rehabilitation therapy. These services are provided by home health agencies, hospitals, or other community organizations. To get Medicare coverage for home health care, the agency must be certified by Medicare.

Hospice Care: Care for the terminally ill and their families, in the home or another nonhospital setting that emphasizes alleviating pain rather than a medical cure. Cancer patients should be familiar with their hospice benefits because once you elect to receive them, it might be more difficult to receive any curative care.

Hospital Care: Reimbursement for both inpatient and outpatient medical care expenses incurred in a hospital. Inpatient benefits include charges for room and board, charges for necessary services, and supplies (sometimes referred to as hospital extras, other hospital extras, miscellaneous charges, and ancillary charges). Outpatient benefits include surgical procedures, rehabilitation therapy, and physical therapy.

Hospital-Surgical Coverage: A form of health insurance that offers coverage of certain costs related to hospitalization and surgical procedures. A hospital-surgical plan does not cover other types of medical services, such as physician office visits and outpatient prescription drugs. It is considered substandard coverage.

Incurral Date: The date on which health care services are provided to a covered person. The incurral date, not the date on which the insurance company pays a health care claim, is the critical date in determining health insurance benefits. For example, a health insurance company will not pay a claim for health care services incurred prior to the effective date of the health insurance coverage.

Indemnity Health Plan: Indemnity health insurance plans are also called “fee-for-service.” These are the types of plans that primarily existed before the rise of HMOs and PPOs. With indemnity plans, the individual pays a predetermined percentage of the cost of health care services, and the health plan pays the other percentage. For example, an individual might pay 20 percent for services and the insurance company 80 percent. The fees for services are defined by the health care providers and vary from physician to physician and hospital to hospital.

Independent Practice Association (IPA): An IPA is a type of HMO in which care is provided by independent physicians who contract with the HMO. This contrasts with the “staff model” HMO, in which physicians are employees of the HMO.

Inpatient Care: Health care that you get when you stay overnight in a hospital, unless you are a short-stay (or 23-hour) patient.

Insured: A person who has health insurance coverage under a health insurance plan.

International Classification of Diseases, 9th Revision, Clinical Modification (ICD-9-CM): Coding system maintained by the National Center for Health Statistics and the Centers for Medicare and Medicaid Services (CMS). This coding system differentiates diagnostic conditions and is used by hospitals, governments, health insurance plans, and health care providers around the world.

Lifetime Maximum: A cap on the benefits paid for the duration of a health insurance policy. Many policies have a lifetime limit of $5 million, which means that the insurer agrees to cover up to $5 million in covered services over the life of the policy. Once the $5 million maximum is reached, no additional benefits are payable.

Limited Policy: A policy that covers only specified accidents or sicknesses—for example, a cancer policy.

Major Medical: Health insurance coverage for expenses associated with hospital confinements, surgeries, and/or medical conditions requiring a broad range of medical services and supplies.

Managed Care: An organized way to manage costs, use, and quality of the health care system focused mainly on cost. The major types of managed care plans are health maintenance organizations (HMOs) and preferred provider organizations (PPOs).

Medicaid: Federal and state health insurance program for low-income individuals who meet established eligibility criteria (programs vary from state to state).

Medical Necessity: Medical information justifying that the service rendered or item provided is reasonable and appropriate for the diagnosis or treatment of a medical condition or illness.

Medically Necessary: Many insurance policies will pay only for treatment that is deemed “medically necessary” to restore a person’s health. For instance, many health insurance policies will not cover routine physical exams, plastic surgery for cosmetic purposes, or other things that they consider to be not reasonable and necessary for a designated diagnosis.

Medical Savings Account (MSA): A tax-advantaged personal savings account used in conjunction with a high-deductible health policy. Individuals can contribute money to this account on a pretax basis to set aside money for qualified medical care and expenses, including annual deductibles and co-payments.

Medicare: Federal health insurance program for the elderly (age 65 and older), certain disabled individuals, and those with end-stage renal disease. Medicare is administered by the Centers for Medicare and Medicaid Services (CMS), formerly the Health Care Financing Administration (HCFA).

Medicare Supplement: A supplemental insurance policy to help cover the difference between approved medical charges and benefits paid by Medicare. Some of these plans are also known as Medigap plans.

Medigap: A supplemental insurance policy to help cover the difference between approved medical charges and benefits paid by Medicare. These plans are also known as Medicare Supplement plans. Not all Medigap plans cover the same services, and they are not all priced equally.

National Association of Insurance Commissioners (NAIC): A national organization of state officials charged with regulating insurance. NAIC was formed to promote national uniformity in insurance regulations. This has not been a terribly successful effort.

National Committee for Quality Assurance (NCQA): A national group responsible for devising and monitoring quality measurements and standards for health care entities.

National Drug Code (NDC): Numerical coding system for drug identification. NDC numbers are assigned by the Food and Drug Administration (FDA) and are typically used by bill payers for the drugs provided to health care beneficiaries.

Network: Groups of physicians, hospitals, and other health care providers working with the health plan to offer care at negotiated rates.

Network Provider: A physician, hospital, or other provider of medical services that has agreed to participate in a network, to offer services at negotiated rates, and to meet other negotiated contractual provisions. Also called a participating provider.

Noncancelable Policy: A policy that guarantees you can receive insurance, as long as you pay the premium. It is also called a guaranteed renewable policy.

Open Enrollment: A period each year during which employees have an opportunity to change their employer-provided health care coverage. They usually can choose among various plans from different health insurance providers.

Out-of-Network: Health care services received outside the HMO or PPO network.

Out-of-Plan: This phrase usually refers to physicians, hospitals, or other health care providers who are considered nonparticipants in an insurance plan (usually an HMO or PPO). Depending on an individual’s health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or may be covered at a reduced benefit level.

Out-of-Pocket Costs: Insured health care costs for which one is responsible, because of the application of deductibles, coinsurance, and co-payments.

Out-of-Pocket Maximum: Total dollar amount an insured person will be required to pay for covered medical services during a specified period, such as one year. The out-of-pocket maximum may also be called the stop-loss limit or catastrophic expense limit.

Participating Provider: A health care provider who has been contracted to render medical services or supplies to insured persons at a prenegotiated fee. Providers include hospitals, physicians, and other medical facilities that are part of a PPO or HMO network. For Medicare patients, a participating provider is one who always accepts assignment of benefits from Medicare and does not bill the patient.

PDP: A prescription drug plan that offers the standard Medicare Part D drug package and may also offer other types of drug coverage.

Policy: The insurance agreement or contract.

Portability: The ability of an individual to transfer from one health insurer to another health insurer with regard to preexisting conditions or other risk factors.

Preadmission Review: A review of an individual’s health care status or condition before admission to a hospital or inpatient health care facility. Preadmission reviews are often conducted by case managers or insurance company representatives (usually nurses).

Preadmission Testing: Medical tests that are completed for an individual before admission to a hospital or inpatient health care facility.

Preauthorization: Under a preauthorization provision of a health insurance policy, the insured (or his or her provider) must contact the health insurance company before a hospitalization or surgery and must receive authorization for the service.

Precertification: This is a requirement that an insured person (or his or her provider) calls the health insurance company to advise them that a doctor has stated that certain medical treatment is required. This call must be made before the patient receives treatment from the doctor or hospital. A health insurance policy will normally list the medical conditions that require precertification. When precertification is not received, benefits will be reduced or possibly not paid.

Pre-existing Condition: A health problem that existed before the date your insurance became effective. Each health insurance company uses its own particular definitions of pre-existing condition. However, the following statement is in line with most insurance company provisions: “A pre-existing condition is a medical condition that would cause a normally prudent person to seek treatment during the 12 months before the beginning of coverage.”

Preferred Provider Organization (PPO): A network of health care providers with which a health insurer has negotiated contracts for its insured population to receive health services at discounted costs. Health care decisions generally remain with the patient, as he or she selects providers and determines his or her own need for services. Patients have financial incentives to select providers within the PPO network.

Pregnancy Care: Federal maternity legislation, enacted in 1978, requires that employers engaged in interstate commerce who have 15 or more employees provide the same benefits for pregnancy, childbirth, and related medical conditions as for any other sickness or injury. This includes all employers who are, or become, subject to Title VII of the Civil Rights Act of 1964.

Premium: The amount you, your employer, or both of you pay in exchange for health insurance coverage.

Preventive Care: An approach to health care that emphasizes preventive measures and health screenings such as routine physicals, well-baby care, immunizations, diagnostic lab and X-ray tests, Pap smears, mammograms, and other early detection testing. The purpose of offering coverage for preventive care is to diagnose a problem early, when it is less costly to treat, rather than late in the stage of a disease when it is much more expensive, or too advanced to treat.

Primary Care Physician (PCP): Under a health maintenance organization (HMO) plan, the primary care physician is usually an insured person’s first contact for health care. This is often a family physician, internist, or pediatrician. A primary care physician monitors patient health, treats most patient health problems, and refers patients to specialists if necessary.

Prior Authorization: Review of need for health care items or services before services are rendered or products are provided. This refers to a decision made by the health plan to cover or not cover the charges before the services are provided. It also means that services may be denied before they are delivered. If you do not get prior authorization when it is required, services will be denied after they are delivered.

Provider: Any person (doctor or nurse) or institution (hospital, clinic, or laboratory) that provides medical care.

RBRVS: The fee schedule that Medicare and many other payers use to pay for physician services. It is based on the resource consumption of the procedure or service delivered to the patient. RBRVS stands for the Resource-Based Relative Value System.

Reasonable and Customary (R&C) Charge: A term used to refer to the commonly charged or prevailing fees for health services within a geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community. Reasonable and customary charge essentially means the same thing as  usual and customary (U&C) charge.

Referral: An OK from the primary care physician for the patient to see a specialist or get certain services. In many HMO plans, the insured person needs to get a referral before getting care from anyone except the primary care physician. If the referral is not received, the HMO may not cover resulting expenses.

Risk: For a health insurance company, risk is the chance of loss, the degree of probability of loss, or the amount of possible loss. For an individual, risk represents such probabilities as the likelihood of surgical complications, medication side effects, exposure to infection, or the chance of suffering a medical problem because of a lifestyle or other choice. For example, an individual increases his or her risk of getting cancer if he or she chooses to smoke cigarettes.

Schedule of Benefits and Exclusions: A health insurance listing of the benefits that are covered under the policy guidelines as well as services that are not provided under the policy.

Second Surgical Opinion: This is an opinion provided by a second physician when one physician recommends surgery to an individual. Most health insurance policies cover second surgical opinions. Some actually require them.

Self-Insured (or Self-Funded): The self-insured employer assumes risk for health care expenses in a plan that is self-administered or administered through a contract with a third-party organization. This form of coverage is regulated by the Employee Retirement Income Security Act of 1974. Hence, self-insured health plans fall under federal, rather than state, regulation. This means self-insured plans are not subject to many state insurance laws that protect patients.

Service Area: The area where a health plan accepts members. For HMOs, it is also the area where services are provided. A health plan may terminate coverage for persons who move out of the plan’s service area.

Skilled Nursing Facility: A licensed institution that provides regular medical care and treatment to sick and injured persons. Daily medical records are kept, and patients are under the care of a licensed physician.

Special Benefit Networks: Provider networks for particular services, such as mental health, substance abuse, or prescription drugs.

Staff Model: Staff model is a type of HMO in which care is provided by physicians who are employees of the HMO. This contrasts with the independent practice association (IPA) HMO, in which independent physicians contract with the HMO.

State Insurance Department: An administrative agency that implements state insurance laws and supervises (within the scope of these laws) the activities of insurance companies operating in the state. This is a good place to send complaints if your insurance company violates your rights.

State-Mandated Benefits: Benefits for a variety of medical conditions that a given state requires of health insurance policies sold in that state.

Stop-Loss Provisions: A limit in a health insurance policy that provides for 100 percent payment of expenses after total patient out-of-pocket expenses exceed a certain contractual dollar amount. A great benefit for cancer patients.

Third-Party Payer: Any payer of health care services other than the insured person. This can be an insurance company, HMO, PPO, or the federal government.

Underwriting: The act of reviewing and evaluating prospective insured persons for risk assessment and appropriate premium.

Usual and Customary (U&C) Charge: The commonly charged or prevailing fees for health services within a geographic area. A fee is generally considered to be reasonable if it falls within the parameters of the average or commonly charged fee for the particular service within that specific community. U&C essentially means the same thing as reasonable and customary. Generally, these are known only to the paying insurance company.

Utilization Review: A mechanism by which the appropriateness, necessity, and quality of health care services are monitored by both insurers and employers.

Waiting Period: A period of time when the health plan does not cover a person for a particular health problem.

Well-Baby Care: Preventive health services, including immunizations, for young children within an age range specified by the health plan.

Wellness Office Visit: A physician’s office visit that is not prompted by sickness or injury, but may be paid for by your insurance company.

Workers Compensation: Insurance that employers are required to have to cover employees who get sick or injured on the job.