DEFINITIONS OF HEALTH INSURANCE TERMS

DEFINITIONS OF HEALTH INSURANCE TERMS

In February 2002, the Federal Government’s Interdepartmental Committee on
Employment-based Health Insurance Surveys approved the following set of definitions
for use in Federal surveys collecting employer-based health insurance data. The BLS
National Compensation Survey currently uses these definitions in its data collection
procedures and publications. These definitions will be periodically reviewed and updated
by the Committee.

ASO (Administrative Services Only) –
An arrangement in which an employer hires a
third party to deliver administrative services to the employer such as claims processing
and billing; the employer bears the risk for claims.
♦
This is common in self-insured health care plans.
Coinsurance
- A form of medical cost sharing in a health insurance plan that requires an
insured person to pay a stated percentage of medical expenses after the deductible
amount, if any, was paid.
♦
Once any deductible amount and coinsurance are paid, the insurer is responsible
for the rest of the reimbursement for covered benefits up to allowed charges: the
individual could also be responsible for any charges in excess of what the insurer
determines to be “usual, customary and reasonable”.
♦
Coinsurance rates may differ if services are received from an approved provider
(i.e., a provider with whom the insurer has a contract or an agreement specifying

payment levels and other contract requirements) or if received by providers not
on the approved list.
♦
In addition to overall coinsurance rates, rates may also differ for different types
of services.
Copayment
- A form of medical cost sharing in a health insurance plan that requires an
insured person to pay a fixed dollar amount when a medical service is received. The
insurer is responsible for the rest of the reimbursement.
♦
There may be separate copayments for different services.
♦
Some plans require that a deductible first be met for some specific services
before a copayment applies.
Deductible
- A fixed dollar amount during the benefit period - usually a year - that an
insured person pays before the insurer starts to make payments for covered medical
services. Plans may have both per individual and family deductibles.
♦
Some plans may have separate deductibles for specific services. For example, a
plan may have a hospitalization deductible per admission.
♦




Deductibles may differ if services are received from an approved provider or if
received from providers not on the approved list.

Flexible spending accounts or arrangements (FSA)

- Accounts offered and
administered by employers that provide a way for employees to set aside, out of their
paycheck, pretax dollars to pay for the employee’s share of insurance premiums or
medical expenses not covered by the employer’s health plan. The employer may also
make contributions to a FSA. Typically, benefits or cash must be used within the given
benefit year or the employee loses the money. Flexible spending accounts can also be
provided to cover childcare expenses, but those accounts must be established separately
fro m medical FSAs.

Flexible benefits plan (Cafeteria plan) (IRS 125 Plan) –
A benefit program under
Section 125 of the Internal Revenue Code that offers employees a choice between
permissible taxable benefits, including cash, and nontaxable benefits such as life and
health insurance, vacations, retirement plans and child care. Although a common core of
benefits may be required, the employee can determine how his or her remaining benefit
dollars are to be allocated for each type of benefit from the total amount promised by the
employer. Sometimes employee contributions may be made for additional coverage.

Fully insured plan
- A plan where the employer contracts with another organization to
assume financial responsibility for the enrollees’ medical claims and for all incurred
administrative costs.

Gatekeeper
- Under some health insurance arrangements, a gatekeeper is responsible for
the administration of the patient’s treatment; the gatekeeper coordinates and authorizes all
medical services, laboratory studies, specialt y referrals and hospitalizat ions.
Group purchasing arrangement

– Any of a wide array of arrangements in which two or
more small employers purchase health insurance collectively, often through a common
intermediary who acts on their collective behalf. Such arrangements may go by many
different names, including cooperatives, alliances, or business groups on health. They
differ from one another along a number of dimensions, including governance, functions
and status under federal and State laws. Some are set up or chartered by States while
others are entirely private enterprises. Some centralize more of the purchasing functions
than others, including functions such as risk pooling, price negotiation, choice of health
plans offered to employees, and various administrative tasks. Depending on their
functions, they may be subject to different State and/or federal rules. For example, they
may be regulated as Multiple Employer Welfare Arrangements (MEWAs).