Benefits Glossary
Employee Benefits Terminology
LDP's employee benefits glossary is designed to provide a practical, easy-to-use guide to terminology.
Benefit Period
A period of time, usually 12 months, during which Deductibles and other benefit requirements must be satisfied.
Capitation
This is the usual method used to pay providers under Managed Care Plans. In other words, the Managed Care Plan pays a negotiated "per head" fee during an agreed-upon period for each person served, no matter how many are actually served or the nature of the services provided.
Coinsurance
After satisfaction of a deductible, an insurance company will pay a percentage (typically 70% or 80%) of an allowable expense up to a maximum dollar amount, after which benefits are paid 100%.
Comprehensive Major Medical Program (CMM)
A type of Indemnity plan that only pays benefits subject to a specified Deductible and Coinsurance.
Consolidated Omnibus Budget Reconciliation Act (COBRA)
This federal law requires, under certain circumstances (e.g., layoffs), that employers extend employees’ health benefits at group rates for a certain period, usually from 18 to 36 months.
Coordination of Benefits
This insurance policy clause applies to persons covered by more than one health insurance plan. It requires that benefit payments to that person not duplicate each other or that the combined total of benefits payable for covered services not exceed the costs of the covered services.
Co-payment (Co-pay)
This is the specified amount you pay – in addition to what the insurance company pays -- for covered services and supplies.
Deductible
If your policy has a "$500 deductible," this means that you will have to spend $500 on covered services within a 12-month period before your policy will begin to pay benefits specified in the policy.
Dependent
A person who, because of their relationship to you, is eligible to share your coverage under an employee benefits plan. Spouses, children and adopted children are often eligible for dependent coverage.
Explanation of Benefits (EOB)
After you receive health services, providers will send you a statement titled "Explanation of Benefits." It lists the services rendered, the amount billed, and the amount paid. This statement is "not a bill." It is sent to you for informational and record-keeping purposes only.
Fee-for-Service
This is a method of billing where a healthcare provider charges and the insurance company pays for each service on a separate basis.
Generic Drug
Prescription medications that cost less but contain the same active ingredients as a given brand name drug (e.g., Claritan or Prozac). The Federal Drug Administration (FDA) must identify such drugs as identical in strength and form to their brand-name equivalents.
Health Maintenance Organization (HMO)
This is a "Managed Care" health insurance plan that requires its members to receive services only from its Participating Provider Network. The HMO member generally must select a Primary Care Physician who coordinates care and provides Referrals to Specialists. Benefits are typically covered 100% less a Co-payment (e.g., $10 or $15). Healthcare providers outside of the network are not covered.
Identification (ID) Card
This card identifies you by name and number as a person who is eligible for benefits under your employer’s health benefits plan and is used to facilitate your access to benefits under the plan.
Indemnity Health Benefit Program
These plans pay (indemnify) policyholders on the basis of "Fee for Service" according to a Usual, Customary, and Reasonable Fee. The payment is made either to the policyholder or directly to the provider. Under such a plan, benefits may be paid 100% or subject to a specified Deductible and Coinsurance amounts. Indemnity plans do not require the utilization of a Participating Provider Network.
Maintenance Medications
Drugs used for the long-term treatment of chronic conditions, such as diabetes, high blood pressure, gastro esophageal reflux disease, or asthma.
Managed Care Plans
These health insurance plans contain features that allow for your insurance company to review services rendered or services to be rendered in an effort to coordinate and deliver cost effective, quality healthcare.
Open Enrollment Period
The period during which employees may apply and sign up for a health benefits plan.
Open-Access Program
These are HMO or POS plans that allow members to seek care without a Referral from their Primary Care Physician. However, benefits are still paid at the Participating Provider Network level and under this type of plan, your insurer may not require that you select a Primary Care Physician to coordinate care.
Participating Provider Network
This is the collective name given to a group of health care providers within a certain geographic area who have agreed to provide their services to members of a specific health insurance company/plan. These providers must agree to accept the insurance companies payment as payment in full less any Co-payment.
Point of Service (POS)
This type of health insurance plan is essentially the same as a Health Maintenance Organization (HMO) except that it allows you to choose a physician outside of the defined Participating Provider Network at a reduced level of benefit. Like an HMO, you typically must choose a Primary Care Physician to oversee and coordinate in-network services. Most services provided by network physicians are covered 100% after a Co-payment (e.g., $10 or $15). Providers outside the network are paid subject to a Deductible and Coinsurance.
Pre-Admission/Facility Review (PAR)
Before you are admitted to a hospital for a non-emergency, some health benefit plans require a PAR – that is a review of the necessity and appropriateness of such an admission by members of its utilization review committee.
Preferred Provider Program (PPO)
A PPO is similar to the Point of Service (POS) except there is no requirement that a Primary Care Physician be chosen to approve the selection of services rendered. You may deal directly with chosen providers and may use both network and non-network providers who are both paid on a Fee-for-Service basis. However, for a network provider, most benefits are usually covered 100% less a Co-payment (e.g., $10 or $15). Providers outside the network are paid subject to a Deductible and Coinsurance.
Primary Care Physician (also known as a Gatekeeper)
The physician you select to be in charge of your health care, to supervise and coordinate your use of other providers, and to initiate a Referral for Specialist services.
Referral
Provided by a Primary Care Physician or Specialist to allow you to access additional benefits or services. This is typically required of HMO and POS plans and may be in either written or electronic format.
Specialist
A provider whose services are specific to the treatment of certain conditions, body parts, age groups, or procedures.
Usual, Customary and Reasonable Fee (UCR)
Refers to the criteria used to make payment to healthcare providers, which is usually based on geography and type of service rendered. Sometimes referred to as "allowance", UCR is applied to providers that do not participate in a health insurance companies Participating Provider Network.