Common Terms In Managed Care
CAPITATION - A method of reimbursing providers, under which an MCO pays a provider a fixed amount per month for each enrollee regardless of the number of services rendered, if any.
CASE MANAGEMENT - A process whereby enrollees with specific health needs are identified by the managed care organization and a plan of treatment is set up and monitored to achieve optimum patient outcome in a cost-effective manner.
COINSURANCE - A provision in the insurance policy that requires the enrollee to pay a fixed percentage of the eligible medical expenses, in excess of any deductible.
COPAYMENT - A provision in the insurance policy that requires an enrollee to pay a flat fee for a specified service.
CREDENTIALING - A process of review to accept a provider who applies to be a participating provider in a managed care organization’s network. Specific criteria and prerequisites are applied in determining initial and ongoing participation in the network.
DEDUCTIBLE - The portion of eligible medical expenses that an enrollee must pay before the insurance policy will make any benefit payments.
DRUG FORMULARY - A listing of prescription medications which are preferred for use by the managed care organization. The physician is requested or required to prescribe Formulary drugs unless there is a valid medical reason to use a nonformulary drug. There may be higher cost sharing for nonformulary drugs.
EMPLOYEE RETIREMENT INCOME SECURITY ACT of 1974 (ERISA) - Federal law that sets regulatory standards for employer plans.
ENROLLEE - means a person who has contracted for or who participates in a managed care plan for himself or his eligible dependents who participate in a managed care plan.
FEE FOR SERVICE - A method of reimbursing providers, under which an MCO pays a provider a fee for each service provided.
FULLY INSURED PLAN - A plan that is backed by an insurance policy that provides benefits for a premium.
GATEKEEPER PLAN - A plan that requires an enrollee to first seek treatment from that person’s chosen primary care physician before seeing a specialist. The primary care physician is required to make any referrals to specialists for the services to be covered under the plan.
HEALTH CARE FINANCING ADMINISTRATION (HCFA) - The federal agency responsible for administering the Medicare program, including Medicare risk contracts with HMOs, and overseeing each state’s administration of the Medicaid program.
HEALTH MAINTENANCE ORGANIZATION (HMO) - A company that provides, offers or arranges for coverage of health services needed by plan members for a fixed, prepaid premium. In Connecticut, such organizations are licensed as health care centers.
INDEMNITY PLAN - An insurance plan in which the enrollee is reimbursed at a specified level for covered expenses.
INDIVIDUAL PRACTICE ASSOCIATION (IPA) - An association of physicians that contracts with a managed care organization to provide health care services.
MANAGED CARE - A system of health care delivery that attempts to manage the access, cost and quality of health care by monitoring how and in what manner services are provided.
MANAGED CARE ORGANIZATION (MCO) - An insurer, health care center, hospital or other organization delivering a managed care plan.
MANAGED HEALTH CARE PLAN - An insured health plan that uses utilization review and a network of participating providers.
MEDICAL LOSS RATIO - The ratio of incurred claims to earned premium, which represents what percent of the premium that is applied to medical expenses.
NCQA ACCREDITATION - National Committee on Quality Assurance is a not-for-profit organization that reviews quality and performance measures of HMOs, thereby providing an external standard of accountability.
NETWORK PLAN - A plan that requires an enrollee to seek care from a provider who is under contract with the managed care organization to receive the highest level of benefits. This would also include a plan that provides additional coverage for services done by providers outside of the network. The out of network option generally provides coverage at a lower level of benefits at an additional premium to the base plan.
PARTICIPATING PROVIDER - A provider who has contracted with a managed care organization to deliver medical services to enrollees for an agreed upon fee.
POINT-OF-SERVICE PLAN (POS) - A network plan that offers coverage, at a lower level of benefits, for an enrollee to seek treatment from a non-participating provider.
PREFERRED PROVIDER ORGANIZATION (PPO) - An independent network of providers that contracts with a managed care organization to provide health services. A PPO cannot market insured health insurance policies on its own unless it obtains a license as an insurer or health care center.
PREFERRED PROVIDER ORGANIZATION PLAN - A plan that requires an enrollee to obtain services from a network of participating providers to receive the highest level of benefits. A enrollee may seek services out of network at a lower level of benefits.
PRIOR AUTHORIZATION - The process of obtaining prior approval as to the appropriateness of a service or plan of treatment.
PROVIDER - A physician, hospital, nursing home, pharmacy, lab or any individual or group that provides a health care service.
REASONABLE AND CUSTOMARY FEE - The commonly charged or prevailing fees for health services in a specific geographic area. Indemnity plans generally provide coverage for services based on the reasonable and customary fees. In addition to any deductible or coinsurance amount, an enrollee would be responsible for paying the provider the difference between the billed charge and the reasonable and customary charge if the billed charge was higher.
REFERRAL - The request to a managed care organization by a primary care physician for an enrollee to receive care from a specialist, a nonparticipating provider or facility.
SELF INSURED PLAN - A group plan offered by an employer in which the employer takes on the risk of claims. The employer will generally contract with a third party, often an insurance company, to handle the administration of the plan. Such plans are not regulated by the Insurance Department, but rather fall under federal Employee Retirement Income Security Act (ERISA) guidelines.
UTILIZATION REVIEW - The prospective or concurrent assessment of the necessity and appropriateness of health care services and treatment plans. Requests for clarification of covered services under an insurance policy are not considered utilization review.
UTILIZATION REVIEW COMPANY - A company, organization or other entity licensed in Connecticut to perform utilization review. Agencies of the federal and state government are not considered utilization review companies under Connecticut General Statute.