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MEPS Insurance Component

Glossary of Health Insurance Terms


Table of Contents

I. Terms That Appear in the MEPS-IC Questionnaires

ACTIVE EMPLOYEE
ACTUARIAL VALUE
CAFETERIA PLAN – See Flexible Benefits Plan
COBRA
COINSURANCE
COPAYMENT
DEDUCTIBLE
DOMESTIC PARTNERS
EMPLOYEE-PLUS-ONE COVERAGE
EMPLOYEE PRE-TAX CONTRIBUTIONS TO HEALTH INSURANCE
EXCLUSIVE PROVIDER ORGANIZATION (EPO) PLAN
FAMILY COVERAGE
FLEXIBLE BENEFITS PLAN (Full Cafeteria Plan)
FLEXIBLE SPENDING ACCOUNT (FSA)
FULL-TIME EQUIVALENT (FTE)
GATEKEEPER
GRANDFATHERED HEALTH PLANS
HEALTH MAINTENANCE ORGANIZATION (HMO)
HEALTH SAVINGS ACCOUNT (HSA)
HEALTH REIMBURSEMENT ARRANGEMENT (HRA)
OPTIONAL COVERAGE (Single service plans)
POINT-OF-SERVICE PLAN (POS) (Also called open-ended HMO OR HMO/PPO hybrid)
PREFERRED ("IN-NETWORK"/PARTICIPATING) PROVIDER
PREFERRED PROVIDER ORGANIZATION (PPO) PLAN
PREMIUM
PREMIUM EQUIVALENT
PRIVATE EXCHANGE
PURCHASED PLAN (Also called a fully-insured plan)
SELF-INSURED PLAN
SINGLE COVERAGE
SMALL BUSINESS HEALTHCARE TAX CREDIT
SMALL BUSINESS HEALTH OPTIONS PROGRAM (SHOP)
SPECIALTY DRUGS
STOP-LOSS COVERAGE
THIRD PARTY ADMINISTRATOR (TPA) / ADMINISTRATIVE SERVICES ONLY (ASO)
TYPICAL PAY PERIOD

II. Additional Terms That Appear in the MEPS-IC Tables

AVERAGE WAGE QUARTILES
ANY-PROVIDER PLAN
CIVILIAN
DIVISION (CENSUS division)
ESTABLISHMENT
EXCLUSIVE-PROVIDER PLAN
FIRM
FOR PROFIT, INCORPORATED
FOR PROFIT, UNINCORPORATED
HIGH DEDUCTIBLE HEALTH PLAN (HDHP)
INDUSTRY CATEGORIES
INDUSTRY GROUPING
LOW-WAGE EMPLOYEE
MANAGED CARE PLAN
METROPOLITAN STATISTICAL AREA (MSA)
MIXED-PROVIDER PLAN
NONPROFIT
OUT-OF-POCKET MAXIMUM
PERCENTILES
PRIVATE SECTOR
STATE AND LOCAL GOVERNMENTS (PUBLIC SECTOR)
SPECIALIST PHYSICIAN
TABLE I SERIES (NATIONAL ESTIMATES BY FIRM SIZE)
TABLE V SERIES (STATE BY INDUSTRY GROUPINGS)
UNION PRESENCE

III. Other Health Insurance Terms of Relevance

ASSOCIATION HEALTH PLANS
CONVENTIONAL INDEMNITY PLAN
COVERED PERSONS
EXCLUSIVE PROVIDER ORGANIZATION (EPO) PLAN
GROUP MODEL HMO
GROUP PURCHASING ARRANGEMENT
HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA)
HEALTH MAINTENANCE ORGANIZATION (HMO)
INDEMNITY PLAN
INDIVIDUAL PRACTICE ASSOCIATION (IPA) HMO
MANAGED CARE PLANS
MANAGED CARE PROVISIONS
MINIMUM PREMIUM PLAN (MPP)
MULTI-EMPLOYER HEALTH PLAN
MULTIPLE EMPLOYER WELFARE ARRANGEMENT (MEWA)
NETWORK MODEL HMO
NON-EMERGENCY WEEKEND ADMISSION RESTRICTION
PHYSICIAN-HOSPITAL ORGANIZATION (PHO)
POINT-OF-SERVICE (POS) PLAN
PREADMISSION CERTIFICATION
PREADMISSION TESTING
PREFERRED ("IN-NETWORK"/PARTICIPATING) PROVIDER
PREFERRED PROVIDER ORGANIZATION (PPO) PLAN
SECOND SURGICAL OPINION
STAFF MODEL HMO
USUAL, CUSTOMARY, and REASONABLE (UCR) CHARGES
UTILIZATION REVIEW



Terms used in the MEPS-IC questionnaires are listed first in alphabetical order. Additional terms used in the MEPS-IC tables follow in the second section. In the Last section, additional relevant health insurance terms are defined.


I.  Terms That Appear in the MEPS-IC Questionnaires

ACTIVE EMPLOYEE - A person who was employed full- or part-time in 2017 regardless of whether the employee was considered permanent, temporary, or seasonal. Include owners and officers of the organization. Exclude individuals who were contract laborers, retirees, laid off, or left employment prior to the survey year.

ACTUARIAL VALUE - The percentage of medical expenses paid by the plan, rather than out-of-pocket by a typical group of enrollees. As plans increase in actuarial value, they would cover a greater share of enrollees’ medical expenses overall.

CAFETERIA PLAN - See Flexible Benefits Plan.

COBRA - Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Part of this law requires employers to continue offering health coverage for enrollees and their dependents for a period of time after an enrollee leaves the firm. Typically, the enrollee pays the entire monthly premium when covered by COBRA. COBRA coverage for State and local governments was transmitted through the Public Health Service Act and may also be referred to as PHSA coverage or PHSA (COBRA) coverage.

COINSURANCE - A fixed percentage that an enrollee pays for medical expenses after the deductible amount, if any, was paid. Coinsurance rates may differ for different types of services. For example, an enrollee may pay a 10% rate for doctor fees, a 20% rate for hospital fees, and a 5% rate for prescription fees.

COPAYMENT - A fixed dollar amount that an enrollee pays when medical service is received, regardless of the total charge for service. The insurer is responsible for the rest of the total charge. For example, an enrollee may pay a $20 copay for each doctor’s office visit, $150 for each day in the hospital, and $20 for each prescription.

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. For example, if the plan has a $1000 deductible, the insured person would be responsible for the first $1000 of covered medical services. Plans may have both individual and family deductibles.

DOMESTIC PARTNERS - Unmarried couples of the same or opposite sex who live together and share a common domestic life. People in a common-law marriage should not be considered domestic partners.

EMPLOYEE-PLUS-ONE COVERAGE - Health insurance coverage for an employee-plus-spouse or an employee-plus-child AT A LOWER PREMIUM LEVEL than family coverage.

EMPLOYEE PRE-TAX CONTRIBUTIONS TO HEALTH INSURANCE - Also known as a Premium Only Plan (POP), this is the most basic type of Section 125 Plan. An employee pays his/her share of the premium for employer-sponsored health insurance through a payroll deduction prior to taxes being withheld. This lowers the amount of income on which the employee must pay taxes.

EXCLUSIVE PROVIDER ORGANIZATION (EPO) PLAN - A restrictive type of preferred provider organization plan under which enrollees must use providers from the specified network of physicians and hospitals to receive coverage except in an emergency situation.

FAMILY COVERAGE - A health plan that covers the enrollee and members of his/her immediate family (spouse and/or children). For purposes of this survey, "family coverage" is any coverage other than single and employee-plus-one (see definitions). Some plans offer more than one rate for family coverage, depending on family size and composition. If more than one rate is offered, report costs for a family of four.

FLEXIBLE BENEFITS PLAN (Full Cafeteria Plan) - A benefit program under Section 125 of the Internal Revenue Code that offers employees a choice between permissible taxable benefits which may include cash, and nontaxable benefits such as life and health insurance, vacations, retirement plans, and child care.

FLEXIBLE SPENDING ACCOUNT (FSA) - An account offered and administered by employers that provides a way for employees to set aside, out of their paycheck, pre-tax dollars to pay for the employee’s share of medical expenses not covered by the employer’s health plan. In 2017, the maximum amount allowed in an individual’s FSA is $2,600. Typically, benefits or cash must be used within the given benefit year or the employee loses the money.

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FULL-TIME EQUIVALENT (FTE) - An FTE is the number of working hours that represents one full-time employee during a specific time period, such as a week. A FTE is 30 hours per week for purposes of determining whether an employer is eligible to obtain health insurance through a SHOP exchange and 40 hours per week for purposes of determining whether an employer is eligible for the Small Business Healthcare Tax Credit. See healthcare.gov for details.

GATEKEEPER - A gatekeeper is responsible for coordinating (managing) all services, approving referrals and directing patients to specialists or health care facilities.

GRANDFATHERED HEALTH PLANS - Plans that existed before the Patient Protection and Affordable Care Act (PPACA) was enacted. Plans certified to be grandfathered plans are not subject to all of the PPACA requirements.

HEALTH MAINTENANCE ORGANIZATION (HMO) - A health care system in which plan participants obtain comprehensive health care services from a specified list of "in-network" providers who receive a fixed periodic prepayment from the insurer. Plan participants’ access to "in-network" providers is controlled by a primary-care physician or gatekeeper. HMOs typically do not have a deductible.

HEALTH SAVINGS ACCOUNT (HSA) - A trust account owned by the employee for the purpose of paying for medical expenses not covered by the employer’s health plan. The employee must be enrolled in a high deductible health plan that is HSA-eligible in order to qualify for an HSA.

HEALTH REIMBURSEMENT ARRANGEMENT (HRA) - An agreement where an employer funds a predetermined amount of expenses to pay an employee per benefit year for out-of-pocket medical costs, including health insurance premiums. The HRA funds may be carried over to the next benefit year. The HRA does not have to be used in conjunction with any health plan.

OPTIONAL COVERAGE (Single service plans) - Separate coverage for a limited area of medical care to supplement the basic health insurance plan. Often, these plans are offered through an insurance company/carrier separate from the one providing basic health coverage. An additional premium is paid by the enrollee and/or employer for this optional coverage. (Example: Dental or Vision Plan)

POINT-OF-SERVICE PLAN (POS) (Also called open-ended HMO or HMO/PPO hybrid) - Plan participants’ access to "in-network" providers is controlled by primary-care doctors or gatekeepers. Participants are covered when they seek care from out-of-network providers, but at reduced coverage levels.

PREFERRED ("IN-NETWORK"/PARTICIPATING) PROVIDER - A medical provider (doctor, hospital, pharmacy) who is a member of a health plan’s network. Enrollees generally pay lower or no copayment for services from a preferred provider.

PREFERRED PROVIDER ORGANIZATION (PPO) PLAN - A plan that provides coverage to participants through a network of selected health care providers (such as hospitals and physicians). The enrollees may go outside of the network, but would incur larger costs in the form of higher deductibles, higher coinsurance rates, or non-discounted charges from the providers.

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PREMIUM - Agreed upon fees paid for coverage of medical benefits for a defined benefit period. Premiums can be paid by employers, unions, employees, or shared by both the insured person and the plan sponsor.

PREMIUM EQUIVALENT - For self-insured plans, this is the cost per covered enrollee, or the amount the organization would expect to pay in premiums if the plan were insured by someone else. The premium equivalent is equal to the per-capita amount of claims, administration, and stop-loss premiums for a self-insured plan.

PRIVATE EXCHANGE - An employer may choose to contract with a private exchange to provide a set of health insurance plans to be offered to its employees. Private exchanges are Affordable Care Act (ACA) compliant but are not the same as the Federal exchange or marketplace (at healthcare.gov) or those run by individual states.

PURCHASED PLAN (Also called a fully-insured plan) - A health plan is considered purchased when the financial risk for the enrollee’s medical claims is assumed by a health insurance company/carrier.

SELF-INSURED PLAN - A health plan is self-insured when the financial risk for the enrollee’s medical claims is assumed partially or entirely by the organization offering the plan. Organizations with self-insured plans commonly purchase stop-loss coverage (see definition).

SINGLE COVERAGE - A health plan that covers the employee only.

SMALL BUSINESS HEALTHCARE TAX CREDIT - A small employer may be eligible for this credit on its federal income taxes if 1.) it has fewer than 25 full-time equivalent (FTE) employees, 2.) pays an average wage of less than $50,000 per year, AND 3.) pays at least half of the health insurance premiums for its employees. Effective in 2014, small businesses obtaining coverage for their employees through a Small Business Health Options Program (SHOP) exchange are eligible for a tax credit.

SMALL BUSINESS HEALTH OPTIONS PROGRAM (SHOP) - SHOP exchanges are health insurance marketplaces that provide a variety of health insurance plans which small businesses can purchase for their employees. Each State has its own SHOP exchange that is administered by either the State or federal government. Coverage through an exchange is provided by private sector insurance companies who choose to offer plans in the exchange. SHOP exchanges were created under the federal Patient Protection and Affordable Care Act of 2010. Effective in 2016, SHOP exchanges are available to employers with 100 or fewer full-time equivalent (FTEs) employees. See healthcare.gov for details.

SPECIALTY DRUGS - Prescription medications that require special handling, administration or monitoring. These drugs are used to treat complex, chronic and often costly conditions, such as multiple sclerosis, rheumatoid arthritis, hepatitis C, and hemophilia. Additionally, specialty drugs include specifically identified types of drugs, such as lifestyle drugs and biologics.

STOP-LOSS COVERAGE - A form of reinsurance for organizations with self-insured health plans which limits the amount the firm will have to pay for each enrollee’s healthcare (the specific (individual) stop-loss coverage amount) or for the total health expenses of the firm (the aggregate stop-loss coverage amount).

THIRD PARTY ADMINISTRATOR (TPA) / ADMINISTRATIVE SERVICES ONLY (ASO) - An individual or firm hired by an employer to handle claims processing, pay providers, and manage other functions related to the operation of a self-insured health plan.

TYPICAL PAY PERIOD - Any pay period during calendar year 2017 in which employment was neither unusually high nor unusually low.

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II.  Additional Terms That Appear in the MEPS-IC Tables

AVERAGE WAGE QUARTILES - Average wage quartiles: (Table VIII series) Quartiles are groups of establishments, each of which contains 25% of the total employment. The following process was used to determine the establishments within each of these employment quarters or quartiles:

  1. The establishments were placed in order from lowest to highest average payroll per employee.

  2. Starting with the lowest establishment, the employment was summed until the cumulative employment of the establishments on the list was 25% of the total employment of all establishments. The establishments on the list to that point are considered to be in the first quartile.

  3. The second quartile begins with the next establishment on the list and includes all establishments from that point on the list until the cumulative employment reaches 50%.

  4. The third quartile includes all establishments after the second quartile and ends with the establishment that brings the cumulative employment to 75% of the total.

  5. The fourth quartile includes all establishments above the third quartile.

Using this process, the establishments were broken into groups of 25% of the employment, with each group having establishments that had a higher average payroll per employee than the previous set. Wage (average payroll) quartiles are constructed for each state individually and for the US at the national level. The average payroll data are taken from the Census Bureau’s Business Register frame, which is the basis for the MEPS-IC sample. Because the frame is based in part on confidential IRS tax records, the average payroll value cutoff for each quartile cannot be disclosed.

ANY-PROVIDER PLAN - A plan that allows covered persons to go to the providers of their choice with no cost incentives to use a particular subset of providers. Often referred to as a Conventional Indemnity plan.

CIVILIAN - A combination of both private sector and State and local governments.

DIVISION (CENSUS DIVISION) - The States are grouped in the tables by the following Census divisions:

New England West North Central West South Central

  Connecticut
  Maine
  Massachusetts
  New Hampshire
  Rhode Island
  Vermont

  Iowa
  Kansas
  Minnesota
  Missouri
  Nebraska
  North Dakota
  South Dakota

  Arkansas
  Louisiana
  Oklahoma
  Texas

Middle Atlantic South Atlantic Mountain

  New Jersey
  New York
  Pennsylvania

  Delaware
  District of Columbia
  Florida
  Georgia
  Maryland
  North Carolina
  South Carolina
  Virginia
  West Virginia

  Arizona
  Colorado
  Idaho
  Montana
  Nevada
  New Mexico
  Utah
  Wyoming

East North Central East South Central Pacific

  Illinois
  Indiana
  Michigan
  Ohio
  Wisconsin

  Alabama
  Kentucky
  Mississippi
  Tennessee

  Alaska
  California
  Hawaii
  Oregon
  Washington

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ESTABLISHMENT - A particular workplace or physical location where business is conducted or services or industrial operations are performed. Also known as a site. The sample is chosen at the establishment level, and the MEPS-IC data are collected at the establishment level whenever possible.

EXCLUSIVE-PROVIDER PLAN - A plan in which the covered persons must to go to providers associated with the plan for all non-emergency care in order for costs to be covered.

FIRM - A business entity consisting of one or more establishments under common ownership or control. Also known as an enterprise. A firm represents the entire organization, including the company headquarters and all divisions, subsidiaries and branches. A firm may consist of a single-location establishment or multiple establishments. In the case of a single-location firm, the firm and establishment are identical. Firm size is the total number of employees for the entire firm as reported on the sample frame.

FOR PROFIT, INCORPORATED - A private sector firm that is granted a charter recognizing it as a separate legal entity having its own privileges and liabilities, separate from those of its members.

FOR PROFIT, UNINCORPORATED: - A private sector firm with a sole owner or a partnership where two or more persons join to carry on a trade or business with each having a shared financial interest in the business.  The MEPS-IC survey does not include unincorporated, self-employed sole owners with no employees.

HIGH DEDUCTIBLE HEALTH PLAN (HDHP) - Single coverage plans are classified as “high deductible” if the individual deductible met or exceeded the Internal Revenue Service (IRS) threshold for a high deductible plan in a given year. In 2017, the individual deductible threshold was $1,300. Family coverage plans are classified as “high deductible” if the family deductible met or exceeded the Internal Revenue Service (IRS) threshold for a high deductible plan in a given year. In 2017, the family deductible threshold was $2,600. Note that plans must also meet other requirements to be considered a high deductible plan by the IRS.

INDUSTRY CATEGORIES - The primary business activity as reported by the respondent. Some industry categories are abbreviated in the tables (as shown in the list below). From 1996 to 1999, the industries were based on SIC (Standard Industrial Classification) codes. Beginning in 2000, the industries were converted to NAICS (the North American Industry Classification System). Even categories that retained the same name are not comparable for the two coding systems, due to the reclassification of specific businesses from one industry category to another. Making year-to-year comparisons of MEPS data by industries across the 1999: 2000 boundary is not recommended. For more information on NAICS, visit the Census Bureau’s NAICS web site.

SIC industry categories used by MEPS IC for collection (1996-1999) NAICS industry categories used by MEPS IC for collection (2000-current) NAICS Sector
Agriculture (agric.) Agriculture (agric.) 11
Fishing (fish.) Fishing (fish.) 11
Forestry (forest.) Forestry (forest.) 11
Mining Mining 21
Manufacturing Manufacturing 31,32,33
Construction Construction 23
Retail trade Retail trade 44,45
Wholesale trade Wholesale trade 42
Transportation (transp.) Transportation (transp.) 48,49
Utilities (util.) Utilities (util.) 22
Communications (commu.) Financial services (fin. svs.) 52,55
Finance (fin.) Real estate (real est.) 53
Insurance (ins.) Professional services 51,54,61,62
Real estate (real est.) Other services 56,71,72,81
Services (no data) (no data)

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INDUSTRY GROUPING - For data estimation and reporting purposes, groups of industry categories are constructed in the creation of MEPS-IC tables. Without grouping the industries, the cell sample sizes would be insufficient for producing estimates.

LOW-WAGE EMPLOYEE - From 1996 through 1999, a low-wage employee was defined as an employee making $6.50 per hour or less and that rate was not adjusted for increasing wage levels. Beginning in 2000, the definition of a low-wage employee was redefined as those earning at or below the 25th percentile for all hourly wages in the United States based on data from the Bureau of Labor Statistics. Using this new criterion, the dollar amount used to define this category is adjusted each year based on the most recent wage data available so that the wage level will remain constant relative to overall wages from year-to-year.

Year Low-wage upper bound (in $/hours)
1996-1999 $6.50
2000-2003 $9.50
2004-2005 $10.00
2006 $10.50
2008-2009 $11.00
2010-2016 $11.50
2017 $12.00

Making comparisons of changes across the 1999: 2000 survey years regarding low-wage employees is not recommended due to the definition change.

MANAGED CARE PLAN - Either a mixed provider or exclusive provider plan.

METROPOLITAN STATISTICAL AREA (MSA) - A geographical region with a relatively high population density at its core and close economic ties throughout the area. MSAs consist of one or more counties, are defined by the U.S. Office of Management and Budget, and are used by U.S. government agencies for statistical purposes.

MIXED-PROVIDER PLAN - A plan that allows covered persons to go to any provider but there is a cost incentive to use a particular subset of providers.

NONPROFIT - A private sector firm that does not distribute surplus funds to its owners or shareholders, but instead uses surplus funds to help pursue its goals. Most nonprofits are exempt from taxes.

OUT-OF-POCKET MAXIMUM - The most an enrollee will have to pay during a policy period (usually a year) for health care services. Once an enrollee has reached the plan’s out-of-pocket maximum, the plan begins to pay 100 percent of the allowed amount for covered services.

PERCENTILES - The value at or below which a certain percent of observations fall.  For example, the 10th percentile is the value at or below which 10 percent of the observations are found.  The 50th percentile is also referred to as the median.

PRIVATE SECTOR - All economic activity other than that of government. In the MEPS-IC survey, the private sector excludes the unincorporated, self-employed with no employees.  However, the self-employed with employees and the incorporated, self-employed with no employees are included.

STATE AND LOCAL GOVERNMENTS (PUBLIC SECTOR) - The public sector is the portion of the economy consisting of various levels of government.  The MEPS-IC survey only collects public sector data from State and local governments.  The Federal government (including the postal system and the military) are not included in the MEPS-IC.  Where possible, the term State and local government is used instead of public sector as it more accurately describes the coverage of the MEPS-IC survey.

SPECIALIST PHYSICIAN - A doctor who has completed advanced education and training in a specific field of medicine. Depending on the type of health insurance plan, an enrollee may need a referral from a primary care physician to see a specialist. Some examples of specialist physicians include urologists, sleep disorder specialists, oncologists, and cardiologists.

TABLE I SERIES (NATIONAL ESTIMATES BY FIRM SIZE) - The industry groups are:

NAICS industry groups used by MEPS IC in Table I series NAICS Sector
Agriculture (agric.), Fishing (fish.), Forestry (forest.) 11
Mining and Manufacturing 21,31,32,33
Construction 23
Utilities (util.) and Transportation (transp.) 22,48,49
Wholesale trade 42
Financial services (fin. svs.) and Real estate (real est.) 52,53,55
Retail trade 44,45
Professional services 51,54,61,62
Other services 56,71,72,81


TABLE V SERIES (STATE BY INDUSTRY GROUPINGS) - The industry groups are:

NAICS industry groups used by MEPS IC in Table V series NAICS Sector
Agriculture (agric.), Fishing (fish.), Forestry (forest.) and Construction 11,23
Mining and Manufacturing 21,31,32,33
Retail trade, other services 44,45,56,71,72,81
Professional services 51,54,61,62
All other 22,42,48,49,52,53,55

UNION PRESENCE - An establishment has a union presence if any of its employees are covered by a collective bargaining agreement.

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III.  Other Health Insurance Terms of Relevance

ASSOCIATION HEALTH PLANS - This term is sometimes used loosely to refer to any health plan sponsored by an association. It also has a precise definition under the Health Insurance Portability and Accountability Act of 1996 that exempts from certain requirements insurers that sell insurance to small employers only through association health plans that meet the definition.

CONVENTIONAL INDEMNITY PLAN - An indemnity that allows the participant the choice of any provider without effect on reimbursement. These plans reimburse the patient and/or provider as expenses are incurred.

COVERED PERSONS - An enrollee plus any dependents covered by a health insurance plan. The MEPS IC survey has no data on the number of dependents covered, and therefore cannot estimate total covered persons.

EXCLUSIVE PROVIDER ORGANIZATION (EPO) PLAN - A more restrictive type of preferred provider organization plan under which employees must use providers from the specified network of physicians and hospitals to receive coverage; there is no coverage for care received from a non-network provider except in an emergency situation.

GROUP MODEL HMO - An HMO that contracts with a single multi-specialty medical group to provide care to the HMO's membership. The group practice may work exclusively with the HMO, or it may provide services to non-HMO patients as well. The HMO pays the medical group a negotiated, per capita rate, which the group distributes among its physicians, usually on a salaried basis.

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).

HEALTH INSURANCE PORTABILITY AND ACCOUNTABILITY ACT (HIPAA) - This federal law, enacted in 1996, protects health insurance coverage for workers and their families when they change jobs by limiting exclusions for pre-existing conditions, prohibiting discrimination against employees and dependents based on their health status, and guaranteeing renewability and availability of health coverage to certain employers and individuals.

HEALTH MAINTENANCE ORGANIZATION (HMO) - A health care system that assumes both the financial risks associated with providing comprehensive medical services (insurance and service risk) and the responsibility for health care delivery in a particular geographic area to HMO members, usually in return for a fixed, prepaid fee. Financial risk may be shared with the providers participating in the HMO.

INDEMNITY PLAN - A type of medical plan that reimburses the patient and/or provider as expenses are incurred.

INDIVIDUAL PRACTICE ASSOCIATION (IPA) HMO - A type of health care provider organization composed of a group of independent practicing physicians who maintain their own offices and band together for the purpose of contracting their services to HMOs. An IPA may contract with and provide services to both HMO and non-HMO plan participants.

MANAGED CARE PLANS - Managed care plans generally provide comprehensive health services to their members, and offer financial incentives for patients to use the providers who belong to the plan. Examples of managed care plans include:

  • Health maintenance organizations (HMOs),
  • Preferred provider organizations (PPOs),
  • Exclusive provider organizations (EPOs), and
  • Point of service plans (POSs).

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MANAGED CARE PROVISIONS - Features within health plans that provide insurers with a way to manage the cost, use and quality of health care services received by group members.

MINIMUM PREMIUM PLAN (MPP) - A plan where the employer and the insurer agree that the employer will be responsible for paying all claims up to an agreed-upon aggregate level, with the insurer responsible for the excess. The insurer usually is also responsible for processing claims and administrative services.

MULTI-EMPLOYER HEALTH PLAN - Generally, an employee health benefit plan maintained pursuant to a collective bargaining agreement that includes employees of two or more employers. These plans are also known as Taft-Hartley plans or jointly-administered plans. They are subject to federal but not State law (although States may regulate any insurance policies that they buy). They often self-insure.

MULTIPLE EMPLOYER WELFARE ARRANGEMENT (MEWA) - MEWA is a technical term under federal law that encompasses essentially any arrangement not maintained pursuant to a collective bargaining agreement (other than a State-licensed insurance company or HMO) that provides health insurance benefits to the employees of two or more private employers.

Some MEWAs are sponsored by associations that are local, specific to a trade or industry, and exist for business purposes other than providing health insurance. Such MEWAs most often are regulated as employee health benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA), although States generally also retain the right to regulate them, much the way States regulate insurance companies. They can be funded through tax-exempt trusts known as Voluntary Employees Beneficiary Associations (VEBAs) and they can and often do use these trusts to self-insure rather than to purchase insurance policies.

Other MEWAs are sponsored by Chambers of Commerce or similar organizations of relatively unrelated employers. These MEWAs are not considered to be health plans under ERISA. Instead, each participating employer’s plan is regulated separately under ERISA. States are free to regulate the MEWAs themselves. These MEWAs tend to serve as vehicles for participating employers to buy insurance policies from State-licensed insurance companies or HMOs. They do not tend to self-insure.

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NETWORK MODEL HMO - An HMO model that contracts with multiple physician groups to provide services to HMO members; may involve large single and multi-specialty groups. The physician groups may provide services to both HMO and non-HMO plan participants.

NON-EMERGENCY WEEKEND ADMISSION RESTRICTION - A requirement that imposes limits on reimbursement to patients for non-emergency weekend hospital admissions.

PHYSICIAN-HOSPITAL ORGANIZATION (PHO) - Alliances between physicians and hospitals to help providers attain market share, improve bargaining power and reduce administrative costs. These entities sell their services to managed care organizations or directly to employers.

POINT-OF-SERVICE (POS) PLAN - A POS plan is an "HMO/PPO" hybrid; sometimes referred to as an "open-ended" HMO when offered by an HMO. POS plans resemble HMOs for in-network services. Services received outside of the network are usually reimbursed in a manner similar to conventional indemnity plans (e.g., provider reimbursement based on a fee schedule or usual, customary and reasonable charges).

PREADMISSION CERTIFICATION - An authorization for hospital admission given by a health care provider to a group member prior to their hospitalization. Failure to obtain a preadmission certification in non-emergency situations reduces or eliminates the health care provider's obligation to pay for services rendered.

PREADMISSION TESTING - A requirement designed to encourage patients to obtain necessary diagnostic services on an outpatient basis prior to non-emergency hospital admission. The testing is designed to reduce the length of a hospital stay.

PREFERRED ("IN-NETWORK"/PARTICIPATION) PROVIDER - A medical provider (doctor, hospital, pharmacy) who is a member of a health plan's network. Enrollees generally pay lower or no copayment for services from a preferred provider.

PREFERRED PROVIDER ORGANIZATION (PPO) PLAN - An indemnity plan where coverage is provided to participants through a network of selected health care providers (such as hospitals and physicians). The enrollees may go outside the network, but would incur larger costs in the form of higher deductibles, higher coinsurance rates, or non-discounted charges from the providers.

SECOND SURGICAL OPINION - A cost-management strategy that encourages or requires patients to obtain the opinion of another doctor after a physician has recommended that a non-emergency or elective surgery be performed. Programs may be voluntary or mandatory in that reimbursement is reduced or denied if the participant does not obtain the second opinion. Plans usually require that such opinions be obtained from board-certified specialists with no personal or financial interest in the outcome.

STAFF MODEL HMO - A type of closed-panel HMO (where patients can receive services only through a limited number of providers) in which physicians are employees of the HMO. The physicians see patients in the HMO's own facilities.

USUAL, CUSTOMARY, AND REASONABLE (UCR) CHARGES - Conventional indemnity plans operate based on usual, customary, and reasonable (UCR) charges. UCR charges mean that the charge is the provider's usual fee for a service that does not exceed the customary fee in that geographic area, and is reasonable based on the circumstances. Instead of UCR charges, PPO plans often operate based on a negotiated (fixed) schedule of fees that recognize charges for covered services up to a negotiated fixed dollar amount.

UTILIZATION REVIEW - The process of reviewing the appropriateness and quality of care provided to patients. Utilization review may take place before, during, or after the services are rendered.

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