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Glossary

So many terms are being used in discussions of our health care system and the coming changes. Here, we help sort out what the terms actually mean.

“834”

Accountable Care Organization (ACO)

Actuarial value

Advanceable tax credit

Age band

Affordable Care Act

Annual limit

Any willing provider

Auto-renewal

Balance Billing

Basic health plan (BHP)

Bending the curve, or bending the cost curve

Block grant

“Cadillac” health plan

Capitation/Capitated Payment

Catastrophic plan

Center for Medicare and Medicaid Services (CMS)

Center for Consumer Information and Insurance Oversight

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

Copay, co-insurance

Community rating

Coordination of benefits

Cost shifting

Defensive medicine

Defined benefit vs. defined contribution

Disproportionate share hospital

Doughnut hole (or Donut hole)

Dual eligibles

Effectuate

Employee choice

Employer mandate

Essential health benefits

Exchanges

Full-time worker

Grandfathered plans

Grandmothered plans

Habilitation services

Health insurance exchanges/marketplaces

Individual mandate

MACPAC

Medicaid

Medical device excise tax

Medical loss ratio (MLR)

Medicare

MEDPAC

Minimum essential coverage

Navigators

Network/Closed network

Off-exchange enrollment

Patient Protection and Affordable Care Act

Plan Year

Post-claims underwriting

Premium shock

Premium Stabilization

Premium support

Private option

Qualified Health Plan

Rate review

Readmission

Rehabilitation services

Reinsurance

Rescission

Risk Adjustment

Risk Corridors

Self-insured  plan

Sequestration

Small Business Health Option Program (SHOP)

Tax reporter

Third-party payer

Uncompensated care

Underinsured

Underwriting

Usual, Customary and Reasonable (UCR)

Value-based Hospital Purchasing

Wrap-around benefits

“834”

This is the electronic file that is exchanged between a health care payer and an insurer. In the context of the Affordable Care Act, it’s how the health care exchanges let the insurers know that someone has enrolled in a health plan. At this writing (Oct. 2013) there are widespread reports of errors, duplication, and confusion. The “834”s aren’t new and must be HIPAA compliant. They are formally called “EDI Benefit Enrollment and Maintenance Set (834).” For lots of details, see this CMS document.

Accountable Care Organization (ACO)

There is no single agreed upon definition for an ACO; models are still evolving, and even Medicare is contemplating a few variants. But basically an ACO is an organization that links (physically or virtually) physicians, hospitals and other providers, and provides more coordinated and integrated care. An ACO is supposed to emphasize primary care and be accountable for the cost of care and the quality of care. Within the Medicare model being introduced, the beneficiary can choose a doctor inside or outside the ACO, unlike an HMO.

Actuarial value

The average share of medical costs that a health plan will cover for a beneficiary population. The covered individual pays the rest. The metal tiers on the exchange reflect different actuarial values.

Advanceable tax credit (or tax credit)

The health law gives subsidies to certain low- and middle-income people purchasing insurance in the exchanges through tax credits that are available when the insurance premium is due, meaning the buyer doesn’t have to wait until a tax return in the next calendar year.

Age band

The Affordable Care Act bans insurers from charging older people more than three times as much as younger people in the small group and individual markets. Some groups, including major insurers, want to push it to a five to one ratio – but critics say that will crowd out older and sicker people from the insurance markets, undermining the law’s goals.

Affordable Care Act

(also known as Patient Protection and Affordable Care Act)
Became law on March 23, 2010. Main provisions – the state-based health insurance exchanges and the subsidies for low and moderate income people to buy insurance – go into effect in 2014, and an estimated 32 million people will gain coverage by 2019. Dozens of lesser known programs are in effect or starting up before 2014 and most states (including some fighting health reform in court) are developing implementation plans.

Annual limit

Some health plans have a yearly limit on what they will pay, either in total costs or for services such as prescriptions or hospitalizations. After hitting the limit, the beneficiary must pay the costs for the rest of the year.

Any willing provider

Some states require a managed care organization to accept any provider, such as a doctor or hospital, into the network. This may broaden the choice of consumers facing narrow networks, but insurers say it undermines efforts to control costs.

Auto-renewal

Health care plan enrollees are automatically signed up again for the next year, unless they opt out or proactively choose a different plan. Under the ACA, this can happen in the exchanges and in employer health plans, although the precise rules have not been finalized for the business setting as of mid-2014.

Balance Billing

When a health care provider bills the patient for the difference between what the provider charges and what the insurers says is the allowed amount.  This isn’t allowed if it’s a preferred provider (in-network) and a covered service. (note –it’s not balanceD billing)

Basic Health Plan (BHP)

Under ACA, people under 133 percent of poverty will be absorbed in Medicaid, and other low (and some middle) income people will get subsidies to get health insurance on the state insurance exchange. But states have another option – the Basic Health Plan – for covering people with incomes between 133 and 200 percent of poverty – the group above the new Medicaid limits but still quite low-income. The basic plan will be outside the state insurance exchange, include the essential benefits, and be subsidized. The federal government will pay the states 95 percent of what it would have paid had they been subsidized through the exchanges.

Bending the curve

A phrase that means changing the trajectory of health care cost growth – making it grow more slowly. It’s usually used as part of a discussion about ways of using payment and delivery system reform to create a more efficient health care system, with more sensible incentives, that will slow spending growth.

Block grant

A lump sum usually given to a state or local government for a specific purpose. There can be some requirements attached to the grant, but in the current Medicaid debate (spring 2011), the gist is to give the money to the states with few strings attached. That would give the governors great flexibility in who to cover and what benefits to offer, changing the nature of the Medicaid entitlement.

“Cadillac” health plan

An employee health benefit plans where  coverage exceeds a certain dollar threshold. The portion above a certain annual level ($10,200 for individuals and $27,500 for self and spouse or family coverage) will be  subject to a 40 percent  excise tax starting in 2018.

Capitation/Capitated Payment  

When a health care provider is paid a fixed or per capita amount for each enrolled patient, regardless of how much medical care each person actually receives.

Catastrophic plan

A catastrophic plan is just what it sounds like; it’s a high deductible plan that kicks in when medical expenses mount. The catastrophic plans in the ACA exchanges also cover preventive care and some primary care.

Centers for Medicare and Medicaid Services (CMS)

(formerly Health Care Financing Administration, HCFA)
Part of the Department of Health and Human Services, this federal agency runs Medicare, Medicaid and the Children’s Health Insurance programs. It now includes centers, or offices, responsible for key elements of health reform.

Center for Consumer Information and Insurance Oversight

Created by the health reform law, CCIIO is an office within CMS which oversees medical loss ratio rules, the state insurance exchanges that will be set up in 2014, and the temporary high risk insurance pools.

COBRA (Consolidated Omnibus Budget Reconciliation Act of 1985)

This allows someone who loses a job to keep the group coverage for 18 months. The beneficiary pays the whole cost - the employer and the employee portions – plus a small administrative fee. It may become less popular now that people who lose a job have the option of getting covered through the ACA exchanges (and a job loss often allows someone to enroll outside of the usual open season).

Copay, Co-insurance

A copay is a fixed fee for each health care service, i.e. $15 for primary care, $50 for a specialist (it varies from plan to plan and certain preventive services are now free under the law).  Co-insurance is a percentage --  the patient, for instance, could pay 20 percent and the plan 80 percent (subject to out-of-pocket limits). copays tend to be for in-network providers, co-insurance for out of network – but all these arrangements vary from plan to plan.

Community rating

Right now insurers can charge people based on gender, their health status (pre-existing conditions), age or other factors – if they cover them at all. After 2014, “community rating” will be limited. Older people can be charged three times a much as younger people (in some states it’s much higher now) and there is no extra charge for women of child-bearing years or people who have been sick. Smokers can be charged more and participation in wellness programs can affect premiums. There will also be some geographic variation and, of course, families will pay more than individuals.

Coordination of benefits

In the event of coverage from two sources (e.g., Medicare plus supplementary coverage, or two employer plans, which occurs when two people in the family have coverage) the insurers will "coordinate benefits," meaning they will determine which insurer is the primary payer and which is secondary payer.

Cost shifting

A doctor, clinic or hospital may “cost shift” so that people who are covered make up the losses for charity care, uncompensated care or lower payments from other health plans. For example, someone with a generous employer-sponsored health plan may be overpaying to cover costs of the uninsured or of people on health plans that pay less to providers.

Defensive medicine

When doctors or other health providers order tests or screening or even treatments that may not be necessary in order to protect themselves from later malpractice suits. It contributes to overuse (and the risk of harm from unnecessary treatments) and higher health care costs — although there is disagreement among experts as to how much. In a 2010 Health Affairs article, the cost was pegged at $55.6 billion in 2008 dollars, or 2.4 percent of total health care spending. Others put it higher.

There's also a lot of debate about whether how much over-treatment and over-screening is motivated by fear of lawsuits — defensive medicine — and how much arises from other reasons. That includes how doctors are trained. The default is often "do more," not "do less and then do more if you have to." It's also how doctors are paid in the fee for service system; more treatment brings in more money, and whether the treatment is necessary or beneficial is largely irrelevant.

Defined benefit vs. defined contribution

When a health plan, whether through a private employer or a government program like Medicare or Medicaid, promises specified benefits (even if the costs can fluctuate, benefits are guaranteed), it's a defined benefit, and an entitlement. Under Medicare and Medicaid, the government by law has to spend the money to provide benefits for everyone eligible for — or entitled to — these programs. Beneficiaries may have cost sharing, but the benefit is not capped or limited. Most private health plans are still defined benefits — the employer pays a certain percentage of the premium, and the employee pays the rest.

The shift toward a defined contribution — which is what many Republicans want to see happen for Medicare and Medicaid — is a limited, set, fixed amount toward health coverage, whether through a voucher or another form of payment. Beneficaries may have their choice of health plans, but the contribution is fixed. That means the government or employer has fixed financial liability. In the world of employer sponsored insurance, it means that the employer gives the employee a fixed amount and the employee then goes and buys insurance. (This is how the small business exchange works in Utah.)

Disproportionate share hospital

This refers to a hospital that has a disproportionate share of low-income payments as defined by standards set in Medicare and Medicaid. Hospitals get “dsh” payments to help compensate for the cost and the health status of patients.

Doughnut hole (or Donut hole)

A coverage gap in the Medicare drug benefit, during which beneficiaries pay all the costs until another level of coverage kicks in. The health law gradually fills it in.

Dual eligibles

The health reform law creates a new Federal Coordinated Health Care Office (aka "Office of Duals") at the Centers for Medicare and Medicaid Services to improve quality and efficiency of care for the "dual eligibles," low-income people who qualify for both Medicare and Medicaid. They tend to be poorer and sicker than the rest of the population and use more health care resources. 

Read more: ‘Dual eligibles’ pingpong between programs, getting stuck along the way

Effectuate

Insurers use this word to describe finalizing enrollment. Coverage has been effectuated once someone signs up, selects a plan on the ACA exchange, pays the premium, and has the policy finalized.

Employee choice

Small businesses are supposed to decide how much they will contribute to workers’ health coverage, and then let the employees choose a plan through the exchange, instead of having the employer choose it. That option has been delayed a year in the federally operated exchanges but most of the state exchanges are aiming to go ahead with it in 2014.

Employer mandate

The requirement that businesses with more than 50 workers offer affordable coverage. The deadline, originally in 2014, has changed. Businesses with 50 to 99 workers will have a mandate, but it’s been postponed again. It’s now effective in 2016.

Larger businesses with 100 or more workers (most of which already offer fairly comprehensive coverage to workers) only need to cover 70 percent of workers in 2015. The earlier requirement to cover 95 percent won’t apply until 2016.

Essential health benefits

A set of benefits created by the health reform law that will ensure that a plan covers comprehensive services. All plans, inside and outside of the state-based exchanges, will have to offer at least this much coverage.

Read more: Friday brings IOM’s report on defining essential health benefits

Full-time worker

According to the Affordable Care Act, an employee who works an average of at least 30 hours per week is considered a full time worker and eligible for coverage. (And part time would be fewer than 30 hours per week.)

Grandfathered plans

A group health plan that began – or an individual health insurance policy that was purchased – on or before March 23, 2010. These plans are exempt from many of the requirements under the ACA. They may lose their “grandfathered” status if they are changed to reduce benefits or add costs to beneficiaries. New employees or family members can still be added to these plans.

Grandmothered plans

Plans that were slated to be canceled in 2014 but were instead extended have been dubbed “grandmothered” plans. They are different than the “grandfathered” plans, which haven’t changed substantially since the health law was passed and don’t have to comply with key parts of the law.

Exchanges

See HEALTH INSURANCE EXCHANGES

Habilitation services

The essential benefits requirements of the health law include both habilitation and rehabilitation services. Rehabilitation helps a patient regain a lost ability; habilitation helps them develop an ability that they never had (i.e. a child with developmental delays who isn’t walking or talking when expected). It can include physical, and occupational therapy, and speech and language pathology. It can be inpatient or outpatient. (See also: Rehabilitation services.)

Health insurance exchanges/marketplaces

New marketplaces where individuals and small businesses can purchase health insurance, with new rules and consumer protections laid out in the health reform legislation. States have some leeway in how they design their exchanges, but if a state does not set up the exchange, the federal government will run the state marketplace. States can have one exchange for small business and another for individuals, or they can merge them.

Individual mandate

A law that requires individuals to have health insurance, or face a penalty. Dispute over whether mandate is constitutional is basis of many of the lawsuits about health reform. 

MACPAC

An advisory committee on Medicaid and the Children’s Health Insurance Program, MACPAC was established in a 2009 law and expanded and funded in the health reform law.  It reviews state and federal policies and makes recommendations to Congress, HHS and the states on matters related to Medicaid and children’s access to care.

Medicaid

Created in 1965, joint state-federal program provides health care for the low-income and disabled. It also covers long term care, such as nursing homes, for low-income elderly. Currently covers about 60 million people.

Medical device excise tax

One way the health care law is financed is through a sales tax on medical devices – a 2.3 percent tax that went into effect on Jan. 1, 2103. The industry is fighting to repeal it, saying it’s a “job killer.” The manufacturer pays the tax – not the consumer. Most simple devices that a consumer would buy at a retail store (i.e. a thermometer) are exempt. There are some other exemptions including glasses, hearing aids and wheelchairs.

Medical loss ratio (MLR)

Portion of the insurance premium that goes to pay medical costs, versus administrative overhead (and profit). Under the ACA, it’s 80 cents on the dollar for individual and small-business plans (which have higher overhead and marketing costs). For larger businesses, it’s 85. A few states are seeking waivers, and a handful have received them because it was likely that insurers would flee the state if forced to meet the new rules too quickly. Plans that don’t meet the threshold would have to give customers rebates.

Medicare

Federal health program for all Americans starting at age 65, and some of the disabled. Part A covers hospital care, Part B is doctors, labs and other outpatient treatment, Part C covers those who choose to get covered in private Medicare Advantage Plans, and Part D is prescription drug coverage.

MEDPAC

The Medicare Payment Advisory Commission is an independent Congressional agency established in 1997 to advise Congress on Medicare payment issues, including physicians, hospitals and Medicare Advantage plans.

Minimum essential coverage

A health plan that meets the individual mandate requirement, including exchange plans, employer-sponsored insurance, or a government plan like Medicaid. See this IRS fact sheet for more information.

Navigators

Navigators are supposed to help educate people about their options under the health law, including what subsidies they can get, and help people enroll in a qualified health plan. Navigators  also can connect them to ombudsmen or other resources when problems arise.  They have to meet certain conflict of interest and training/certification rules.

Network/Closed network

Health plans contract with doctors, hospitals, labs and other health care providers to supply in-network care for lower costs. Many of the health plans in the new exchanges are expected to have “narrow networks” or a relatively limited set of providers to choose from, although they still have to satisfy Affordable Care Act requirements about coverage and access. Patients have to pay more – sometimes much  more – for out-of-network care.

Off-exchange enrollment

Enrollment in the individual market in plans outside the exchange. Most meet ACA requirements.

Patient Protection and Affordable Care Act

See AFFORDABLE CARE ACT

Plan Year

The date that a health plan begins. Some of the new rules under the health law may go into effect on a certain date, but individual health plans may not have to comply until their next “plan year.” Example: the contraceptive coverage rule starts Aug. 1.  Plans may not have to offer the coverage until their plan year, whether that be October, January, etc.

Post-claims underwriting

When an insurer investigates someone’s health history after a health plan has been sol d- and usually after a claim has been filed. This can lead to cancellation of a policy or “rescission.” The ACA makes rescission illegal (except in the case of fraud or intentional misrepresentation). Also see Recission.

Premium shock

This is a term being heard frequently in the run up to the start of enrollment in the exchanges. It’s used mostly by critics of the health law to describe what they expect to be soaring insurance prices, particularly for younger, healthier people.

Premium Stabilization

The Affordable Care Act has three tools to try to encourage health plans to participate in the new state-based exchanges, to discourage insurers from trying to find ways of avoiding covering people in poor health, and to try to stabilize premiums and spread risk in case some health plans do end up with more high-cost beneficiaries than others. They are risk adjustment, risk corridors and reinsurance (see separate glossary entries) Reinsurance and the risk corridors are for the first three years of the exchanges (2014-16) Risk adjustment is permanent.

Premium support

Proposal to give people a voucher or coupon to help pay for health insurance. At the moment, it’s most often used in the context of Medicare. There are several variants of premium support. Some would make it an alternative to traditional Medicare, some would make it a substitute for traditional Medicare. (The House-passed budget would make it a substitute, with the voucher unlikely to keep up with the rising health care costs) Premium support lets the federal government cap its Medicare spending, but the costs could get shifted to individuals.

Private option

Remember the debate over the “public option” in the health law?  Now some states are pursuing what’s been dubbed the “private option.” That means that some conservative states are looking at ways of taking federal expansion money and using it to buy low-income people private health insurance, rather than putting them in traditional Medicaid.  They have to do so in ways that are acceptable to HHS though.

Qualified Health Plan (QHP)

An insurance plan that is certified by the exchange/marketplace. It has to meet all the legal requirements such as providing essential health benefits and cost-sharing limits.

Rate review

Process through which state insurance officials review  proposed premium  increases. Some states can approve or disapprove rates, others can just review and seek information about them.

Readmission

This is usually used as shorthand for when a patient returns to the hospital within 30 days. (Patients of course can return after 30 days, but the policy right now is focused on the first month.)

Rehabilitation services

The essential benefits requirements of the health law include both habilitation and rehabilitation services. Rehabilitation helps a patient regain an ability or function for daily living that they lost, such as mobility after a stroke or accident. It can include physical and occupational therapy, speech and language pathology. (See also: Habilitation services.)

Reinsurance

This is what it sounds like – insurance for the insurers. Reinsurance provides a backstop so an insurer doesn’t end up with deep losses. To make the exchanges work, the government has an interest in reinsuring the health plans and limiting their financial exposure so that they are willing to participate in the exchanges – and don’t try to game the system and  avoid covering people with preexisting conditions or health risks.  CMS has projected reinsiurance will keep premiums in the exchanges 10  percent to 15 percent lower.

Rescission

Retroactive cancellation of health insurance policy, usually after someone files a claim. The health law outlaws this (except in the case of fraud or intentional misrepresentation). Also see Post-claims underwriting

Risk Adjustment

This is a way of spreading the financial risk that insurers bear – in and out of the exchanges – and encouraging them to offer a variety of health plans with stable premiums. Basically a health plan that enrolls a lot of healthy, low-risk individuals will shift some money (under a government formula) to a health plan that enrolls a lot of sicker, more expensive and high-risk beneficiaries. There are elaborate formulas for measuring and evaluating the relative risks. Because the money goes from one insurer to another, it’s deficit neutral – meaning it doesn’t add to the government’s costs. The states can establish their own risk adjustment programs if they are running exchanges, or they can use the federal system.

Risk Corridors

As there will be a lot of  uncertainty for insurers in the exchanges the first few years, the risk corridors enable the federal government to share the risk with the health plans. If a health plan has costs that are at least 3 percent lower than expected, they turn some of the money over to HHS. And those that have higher costs than expected will get payments from HHS to offset part of it. If it’s in between – within that corridor – no money is transferred.

Self-insured plan

This means a company (traditionally a large company but, more recently, smaller businesses, too) that pays the health costs of the employees (and, if applicable, dependents.) It hires an insurance company to handle enrollment, claims and creating a network, but it pays the actual medical bills and it assumes the risk. It usually has reinsurance to limit that risk.

Sequestration

Automatic budget cuts. It can be across the board, or some programs or agencies can be exempted or partially shielded from cuts.

SHOP Exchanges

The Small Business Health Options Program (SHOP) will provide insurance coverage for businesses in every state.  They will be open to businesses with up to 100 employees (and may be expanded in future years).  They are supposed to offer a variety of plan options, although the choices will be limited in the first year in some states.

Tax reporting

Beginning with the W-2s for 2012, the year-end income tax forms include the value of the employer’s contribution to the worker’s health plan. This does not mean the payment is taxable – that hasn’t changed. But the disclosure rule aims to give people more information about the true cost of health insurance. This IRS page explains it in more detail.

Third-party Payer

An insurer or government program that pays medical bills for a patient or “first party” given care by a hospital, doctor or other “second party.”

Uncompensated care

When clinics, hospitals or doctors provide care without pay – from an insurer, the patient, or a government program such as Medicaid. This can include charity care or bad debt when the provider tries and fails to collect the payment due.

Underinsured

People who have insurance but either face very high deductibles or skimpy benefits (or both) are considered underinsured. The Commonwealth Fund estimated that, as of 2010, 29 million U.S. adults were underinsured. Many skimp on care, including preventive care.

Usual, Customary and Reasonable (UCR)

This is the amount paid for a certain medical service, and it often varies geographically. It’s based on what providers usually charge, and health plans use it to determine their “allowable” payments.

Underwriting

Health insurers in the small group and individual markets use “underwriting” – weighing an individual’s health status, “pre-existing conditions” and risk factors – to decide whether to offer coverage and how much to charge. In health plans sold in the exchanges starting in 2014, underwriting won’t be allowed although some rate variations will be allowed based on age and tobacco use.

Value-based Hospital Purchasing

A Medicare initiative that rewards hospitals with incentive payments for the quality of care they provide.

Wrap-around benefits

Low-income people who qualify for various government programs may also qualify for wrap-around benefits – meaning some extra help to plug in coverage gaps or pick up costs so they don’t come out of pocket. These extra benefits “wrap around” the health plan the individual is in.

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