Health Insurance - Glossary of Terms

GLOSSARY OF TERMS Accidental Death and Dismemberment A policy or a provision in a policy which pays benefits if the insured dies, loses his or her sight, or loses two limbs as the result of an accident. A lesser amount, usually half, is payable for the loss of one eye, arm, leg, hand, or foot. Generally companion coverage to group term life insurance, LHSIC offers this as a benefit in its individual health insurance policies. Accreditation A designation indicating that an insurers networks or a managed care organization has been evaluated and has met the standards of a certifying body, such as the National Committee for Quality Assurance (NCQA) or the Utilization Review Accreditation Commission (URAC). The designation can help purchasers, regulators, and consumers assess managed care plans. Accrual An accounting term to describe the practice of recognizing an expense or revenue that has been realized but has not yet been recorded. ACR (Adjusted Community Rate) The equivalent of the premium that an HMO organization would have charged to Medicare+Choice enrollees independently of HCFA payments for Medicare covered services, using as a basis the same rates it charges to its non-Medicare enrollees and adjusting for Medicare enrollees utilization. Actively-at-work A provision in most group health insurance policies that if an employee is not actively at work on the day the policy goes into effect, the coverage will not begin until the employee does return to work. Under HIPAA, the employee is eligible to enroll even though he is not at work, but he may not be eligible for benefits. Activities of Daily Living (ADL) A term usually used in disability or long term care policies. Everyday living functions and activities performed by individuals without assistance. These functions would include mobility, dressing, personal hygiene and eating. Activities of Daily Living (ADL) Standards Used to assess the ability of an individual to live independently, measured by the ability to perform unaided such activities as eating, bathing, toiletry, dressing, and walking. ADL standards are sometimes discussed as a way to measure or define eligibility for long term care. Actual Charge The actual amount charged by a provider for medical services rendered. Sometimes referred to as Billed Charge. Acute Care Skilled, medically necessary care provided by medical and nursing personnel in order to restore a person to good health. Additional Monthly Benefit Riders added to disability income policies to provide additional benefits during the first year of a claim while the insured is waiting for Social Security benefits to begin. Accelerated Life Benefit Benefits of a life insurance policy paid in advance of death to an insured in certain specific circumstances such as contracting cancer or AIDS or suffering a heart attack or a stroke. Adjusted Average Per Capita Cost (AAPCC) The estimated average cost of Medicare benefits established on a per county basis -factors include age, sex, Medicaid, institutional status, disability, and end stage renal disease status and working aged. Used to determine payments to cost contractors for Medicare benefits.

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Health Insurance - Glossary of Terms

Administrative Expense A companys operating costs, fees for medical examinations and inspection reports, underwriting, printing costs, commissions, advertising, agency expenses, premium taxes, salaries, rent, etc. Such costs are a component of premium. See also Retention. Administrative Services Only (ASO) A contract under which a third party will deliver administrative services to an employer for its health benefits plan. Usually the plan is self-insured (the employer is at risk for the cost of health care services). Sometimes referred to as Administrative Service Contracts (ASCs). Admissions/1,000 The number of hospital admissions for each 1,000 members of the health plan. Admits The number of admissions to facilities, including outpatient and inpatient facilities. Adverse Selection A situation in which a carrier enrolls a poorer risk than the average risk of the group. Age Change The date on which a persons age, for insurance purposes, changes. For products that are rated specific to a persons age, changes in rates due to age are based on the age of the person at his last birth date. Rating structures may vary to use age bands (such as 1, 5 or 10 year age bands) and use age at last birthday, age at nearer birthday, or age at next birthday in placing persons within age bands. Generally, rates for individual products are based on a persons specific age while rates for group products are based on a compositing of the age for all members and adjusting rates accordingly. Age/Sex Factor Compares the age and sex risk of medical costs of one group relative to another. An age/sex factor above 1.00 indicates higher than average risk of medical costs due to that factor. Conversely, a factor below 1.00 indicates a lower than average risk. Aggregate Indemnity A maximum dollar amount that may be collected by the claimant for any disability, for any period of disability, or under the policy as a whole. Allied Health Professional Under LHSIC policies, Allied Health Professionals are health care providers other than hospitals or Doctors of Medicine or Osteopathy, such as dentists, nurses, optometrists, etc. Allowable Charge Under Medicare, this term is the lesser of the actual charge, the customary charge and the prevailing charge. It is the amount on which Medicare will base its Part B payment. Under LHSIC and HMOLA policies, the Allowable Charge is the lesser of the billed charge or an amount set by the Company as reasonable for the service. Alternative Delivery Systems Systems, which cover health, care costs, other than on the usual fee-for-service basis. Could include HMOs, IPAs, PPOs, etc. Alternative Medicine Nontraditional health care treatments, such as chiropractic services and acupuncture. Ambulatory Care Care that does not require hospitalization. Ambulatory Setting Institutions such as surgery centers, clinics, or other outpatient facilities which provide health care on an outpatient basis. Page 2 of 21

Health Insurance - Glossary of Terms

Ancillary Services Additional services provided by a facility (other than room and board charges) such as X-rays, anesthesia, lab work, etc. Approved Charge Amounts paid under Medicare as the maximum fee for a covered service. Assignment An authorization to pay benefits directly to the provider. Under Medicare, payments may be assigned to participating providers only. Under LHSIC policies, assignment of benefits is prohibited. Louisiana law requires honoring assignments to hospitals; this law may be preempted by federal law (ERISA) for group plans other than church and governmental plans and for the federal employees benefit plan (FEP). Average Cost Per Claim The total cost of administrative and/or medical services divided by the number of units of exposure such as costs divided by number of admissions, or cost divided by number of outpatient claims, etc. Average Length of Stay (ALOS) The average number of days in a hospital for each admission. The formula for this measure is a follows: total patient days incurred, divided by the number of admissions and discharges during the period. Average Wholesale Price (AWP) A term usually applicable to prescription drugs. It is the average of prices charged by manufacturers for a particular drug. Balanced Budget Act of 1997 (BBA) Federal legislation that established Medicare+Choice, which broadens the array of health plans available to Medicare recipients. This Act established a new Medicare Part C, allowing Medicare beneficiaries the option of choosing the Medicare fee-for-service (FFS) program (Parts A and B) or to enroll in Medicare+Choice plans, effective January 1, 1999. Bed Days/1,000 The number of inpatient hospital days per 1,000 members of the health plan. Benefit Period A period of time during which benefits may be provided or limited. Usually a calendar year, but may be shorter for certain benefits (ex. a quarter for prescription drugs). Birthday Rule Used when coordinating benefits for a person covered by more than one policy. This method determines which parents medical coverage will be primary for dependent children: the parent whose birthday falls earliest in the year will be considered as having the primary plan. See Coordination of Benefits. Capitation (CAP) A rate paid, usually monthly, to a health care provider. In return, the provider agrees to deliver the health services agreed upon to any covered person. Carrier Usually a commercial insurer contracted by the Department of Health and Human Services to process Medicare Part B claims payments. BCBS Arkansas is the Medicare Part B carrier for Louisiana. Carry Over Provision In major medical policies, these provisions allow an insured who has submitted no claims during the year to apply any medical expenses incurred in the last three months of the year toward the new calendar years deductible. Many LHSIC health policies carry this provision. Carve-Outs Page 3 of 21

Health Insurance - Glossary of Terms

Type of service separately designed and contracted to an exclusive, independent provider. For example, mental health care, drug and vision coverage are often carve-out services. Case Management The assessment of a persons long term care needs and the appropriate recommendations for care, monitoring and follow-up as to the extent and quality of services to be provided. Case Manager A person, usually an experienced professional, who coordinates the services necessary under the case management approach. Case Mix The relative frequency and intensity of hospital admissions or services, which reflects the different needs and uses of hospital resources. Case mix can be measured based on patients diagnoses or the severity of their illnesses, the utilization of services, and the characteristics of a hospital. Case Rate Flat fee paid for patients treatment based on their diagnosis and/or presenting problem. For this fee, the provider covers all of the services the patient requires for a specific period of time. Centers of Excellence In the insurance industry, this term refers to a network of health care facilities selected for specific services and determined to be exemplary based on criteria such as experience, outcomes, and effectiveness. BCBSA has designated Centers of Excellence for organ transplant procedures (also known as Blue Quality Centers for Transplant (BCCT)). Certificate of Authority (COA) A license issued by the state Department of Insurance (in Louisiana) to operate an insurer or HMO (Health Maintenance Organization). Chronic Case Management The coordination of care by a health care professional for an individual whose illness or condition is characterized by slow progression and/or long continuance such that care is required on an ongoing basis. Civilian Health and Medical Program of the Uniformed Services (CHAMPUS) Part of the Uniformed Services Health Benefits Program which supplements the medical care available for families of active, deceased, and retired military personnel. Claims Adjudication The processing and payment of claims. Closed Access A benefit structure under which covered insureds must select a primary care physician. That physician is the only one allowed to refer the patient to other health care providers within the plan. Also called Closed Panel or Gatekeeper model. Coinsurance The portion of the cost for care received for which an individual is financially responsible. Usually this is determined by a fixed percentage, as in major medical coverage. Often co-insurance applies after a specific deductible has been met and may be subject to an individual out-of-pocket limit. Community Rating Under this rating system, the charge for insurance to all insureds depends on the medical and hospital costs in the community or area to be covered. Individual characteristics of the insureds are not considered at all. Louisiana law imposes modified community rating for groups under 35 in size and for individual coverage. Composite Rate One rate for all members of the group regardless of their status as single or members of a family. Page 4 of 21

Health Insurance - Glossary of Terms

Comprehensive Major Medical A plan of insurance which has a low deductible, high maximum benefits, and a coinsurance feature. It is a combination of basic coverage and major medical coverage which has virtually replaced separate hospital, surgical and medical policies with each having its own deductible requirements. Concurrent Review A case management technique which allows insurers to monitor an insureds hospital stay and to know in advance if there are any changes in the expected period of confinement and the planned release date. Consolidated Omnibus Budget Reconciliation Act (COBRA) of 1986 Federal legislation applicable to groups of 20 or more, providing for a continuation of group health care benefits under the group plan for a period of time when benefits would otherwise terminate due to loss of employment or eligibility as a dependent. Coverage may be continued for up to 18, 36, or 54 months, depending on the circumstances of the loss of coverage. Continuation Allows continuation of group health insurance coverage under certain conditions. Louisiana law provides for continuation for employees losing employment, if not eligible for COBRA, and for surviving spouses age 55 and over, as well as for their dependents. Conversion The right to receive an individual policy after group coverage ends. Once mandatory under Louisiana law, now persons entitled to conversion are covered under the Louisiana Health Plans HIPAA pool. BCBSA requires Blue Plans to issue conversion policies to persons covered by a sister Blue Plan when they move to the Blue Plans service area. Coordination of Benefits (COB) A policy provision which helps determine the primary carrier in situations where an insured is covered by more than one policy. This provision prevents an insured from receiving more than 100% coverage. Traditionally appears only in group policies but trend is moving toward allowing COB between group and individual policies. See also Birthday Rule. Copayment This is a cost sharing arrangement where the covered person pays a specified amount for various services and the health care provider pays the remainder. The covered person usually must pay his or her share when the service is rendered. Similar to coinsurance, except that coinsurance is usually a percentage of certain charges where the co-payment is a dollar amount. Cost of Living Benefit An optional disability benefit where the monthly benefit will be increased annually once the insured is on claim for 12 months. Covered Expenses Health care expenses incurred by an insured or covered person that qualifies for reimbursement under the terms of a policy. Covered Person A person for whom premiums are paid and who also meets eligibility requirements. Credentialing The process of approving a provider, based on certain criteria, to provide health care services or participate in a health plan. Current Procedural Terminology (CPT) This terminology includes medical services and procedures performed by physicians and other providers of health care. The health care industry uses it as a standard for describing services and procedures.

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Health Insurance - Glossary of Terms

Custodial Care Care that is primarily for meeting personal needs such as help in bathing, dressing, eating or taking medicine. It can be provided by someone without professional medical skills or training but must be according to doctors orders. Date of Service For professional claims, the date of service is the date that the health service was provided. For hospital claims, this is the date of admission. Death Spiral The potentially destructive cycle that occurs when the health status of a pool of insured lives declines as a result of: (1) HMOs penetrating an indemnity plan, pulling off healthier employees and causing the indemnity plans costs to significantly increase as measured on a per member basis; (2) The discontinued enrollment of new, healthy members into a block of business; or (3) The election of healthier small group members of an association to seek coverage elsewhere (outside the association) by shopping rates. Since rates are established based on the pool of individuals covered and the health status of those individuals significantly deteriorates, the rates for the pool will increase, causing the selection to continue to occur. Deductible The amount a policyholder must pay for health care, as established under the terms of his or her contract, before insurance benefits begin. Dependent Coverage Insurance coverage on the head of a family that is extended to his or her dependents, including only the lawful spouse and unmarried children who are full time students or are mentally or physically impaired and incapable of self support. Children may be step, foster, and adopted, as well as natural and, under the Louisiana law, grandchildren who are in the legal custody of, and residing with, the grandparent. The age limit in Louisiana is 24, but coverage is not limited by age if the child is impaired and incapable of self-support. LHSIC policies extend the age limit to 25. Diagnosis Related Groups (DRGs) Set reimbursement for a hospital stay based on a given diagnosis, regardless of the length of stay or the level of services provided. Adjustments may be made for inordinately short or long stays as compared to the norm. Used by Medicare as well as other insurers. Disability Income Insurance A form of health insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of sickness or injury. Discharge Planning Determining what the patients medical needs will be after discharge from a hospital or other inpatient treatment. Disease Management A comprehensive integrated approach to care designed to influence the progression of disease within select patient populations. In disease management, the emphasis is on prevention, proactive case management, patient education, and population-based interventions. Dread (or Specified) Disease Policy Coverage for medical expenses arising out of diseases named in the contract. LHSIC offers a Cancer and Serious Disease (CSD) policy offering three benefit options, which covers cancer, poliomyelitis, leukemia, diphtheria, tetanus, spinal meningitis, encephalitis, rabies, and sickle cell anemia. Drug Utilization Review (DUR) A method for evaluating or reviewing the use of drugs in order to determine the appropriateness of the drug therapy. Durable Medical Equipment (DME)

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Health Insurance - Glossary of Terms

Reusable medical equipment, such as hospital beds and wheelchairs, which can be used by patients either in a hospital or a home setting. Eligible Expenses Expenses as defined in the health plan as being eligible for coverage. This could involve specified health services fees or customary and reasonable or allowable charges. Eligibility Date The date that a person is eligible for benefits. Eligibility Period (1) The period of time during which potential members of a Group Life or Health program may enroll without providing evidence of insurability. Sometimes called Open Enrollment. (2) The period of time under a Major Medical policy during which reimbursable expenses may be accrued. Employee Retirement Income Security Act of 1974 (ERISA) Federal law governing administration of employee benefit plans and the rights of beneficiaries of the plans. These include the right to receive information on benefits and disposition of claims for benefit appeal rights. ERISA preempts all state laws relating to such plans except those regulating the business of insurance. Encounter Each occasion on which a person meets with a health care provider to receive services. Encounters Per Member Per Year The total number of encounters per year divided by the total number of members per year. Enrollee An eligible individual who is enrolled in a health plan. Enrollment Used to describe the total number of enrollees in a health plan. It may also be used to refer to the process of enrolling people in a health plan. Episode of Care Treatment rendered in a defined time frame for a specific disease. Episodes provide a useful basis for analyzing quality, cost, and utilization patterns. Evidence of Insurability The statement of information needed for the underwriting of an insurance policy. This could be an application containing health questions or an Attending Physicians Statement (APS). Exclusive Provider Organization (EPO) A type of preferred provider organization where individual members use particular preferred providers rather than having a choice of a variety of preferred providers. Expected Claims The estimated claims for a person or group for a contract year based usually on actuarial statistics. Expected Morbidity The expected incidence of sickness or injury within a given group during a given period of time as shown on a morbidity table. Experience Rating The process of setting rates based partially or in whole on previous claims experience and projected required revenues for a future policy year for a specific group or pool of groups. Experimental or Investigational Procedures

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Health Insurance - Glossary of Terms

Any health care services, supplies, procedures, therapies, or devices that the health plan determines to be either (1) not proven by scientific evidence to be effective, or (2) not accepted by health care professionals as being effective. Explanation of Benefits (EOB) The statement sent to a participant in a health plan listing services, amounts paid by the plan, and total amount owed by the patient. Extended Care Facility A facility such as a nursing home which is licensed to provide 24-hour nursing care service in accordance with state and local laws. Three levels of care may be provided-skilled, intermediate, custodial, or any combination. Extended Coverage A provision in health policies to allow the insured to receive benefits for specified losses sustained after the termination of coverage, such a maternity expense benefits incurred for a pregnancy in progress at the time of the termination. Sometimes referred to as continuation of care or continuity of care. Extension of Benefits A provision in the insurance policy which allows coverage to continue beyond the expiration date of the policy in the case of insureds who are hospital confined on that date. FASB The Financial Accounting Standards Board, which is a nongovernmental group that sets standards for generally accepted accounting principles (GAAP). Family and Medical Leave Act (FMLA) A federal law passed in 1993 that requires companies to provide eligible workers with up to 12 weeks of jobprotected unpaid leave each year for certain medical and family situations, such as the birth of a child or the care of an aged parent. Employees are eligible to take FMLA leave if theyve worked for the employer for at least 12 months, have worked for at least 1,250 hours over the previous 12 months, and work at a location where the employer has at least 50 workers within 75 miles. Fee-for-Service (FFS) The traditional health insurance reimbursement method in which a set fee (e.g., reasonable and customary or allowable charge) is established for each health care service performed. Services are paid for as rendered. Field Underwriting The initial screening of prospective buyers of health insurance, performed by sales personnel in the field. May also include quoting of premium rates. Fiscal Intermediary A commercial insurer contracted by the Department of Health and Human Services for the purpose of processing and administering Part A Medicare claims. Blue Cross Blue Shield of Mississippi is the Fiscal Intermediary for Medicare Part A claims incurred in Louisiana. Flexible Spending Account A spending arrangement that allows employers and employees to use pretax dollars to pay for certain health care or dependent care expenses not otherwise covered by insurance. Health care FSAs can be used to finance health care expenses, including deductibles and copayments. Formulary A listing of prescription medications that are preferred for use by the health plan and that will be dispensed through participating pharmacies to covered persons. This list is subject to periodic review and modification by the health plan. A plan that has adopted an open or voluntary formulary allows coverage for both formulary and nonformulary medications. A plan that has adopted a closed, select, or mandatory formulary limits coverage to those drugs in the formulary. Franchise Insurance Page 8 of 21

Health Insurance - Glossary of Terms

A plan for covering groups of persons with individual policies having uniform provisions, although they may differ in coinsurance and deductible levels. The individual policies are issued to each person with individual underwriting. Solicitation usually takes place among an employers work force with his consent. Premiums are payroll deducted. No employer premium contributions are allowed. LHSIC uses the term list bill for this type of plan. Gatekeeper Model Under this model a primary care physician (the gatekeeper) is the initial contact for the patient for medical care and for referrals. This is also called a closed access or closed panel. Gatekeepers are typical in HMOs, EPOs, and the in-network portion of a POS. Generic Drug A drug which is exactly the same as a brand name drug and which is allowed to be produced after the brand name drugs patent has expired. It is also called a generic equivalent. Grievance Procedure A procedure which allows a member of a health plan or a provider of benefits to express complaints and seek remedies. Group Coverage of a number of individuals under one contract. The most common group is employees of the same employer. Group Certificate The document provided to each member of a group plan. It shows the benefits provided under the group contract issued to the employer or association. This is called an Evidence of Coverage in HMOs. Group Contract A contract of insurance made with an employer or other entity that covers a group of persons identified by reference to their relationship to the entity buying the contract. The group contractual arrangement is generally used to cover employees of a common employer, members of a trade association, members of a welfare or employee benefit association, members of a labor union, or members of a professional or other association not formed only for the purpose of obtaining insurance. Guaranty Fund See Louisiana Life and Health Insurance Guaranty Association (LLHIGA). Guaranteed Issue Required issuance of an insurance policy without any medical underwriting. Under group insurance, all group participants are covered regardless of health history. Guaranteed issue is required under HIPAA for groups under 51. There is no guaranteed issuance of individual policies under state or federal law, except for persons losing group coverage. (See Conversion) Guaranteed Renewability A right to continue a contract of insurance in force by payment of premiums. The insurer has no right to make any change in any provision of the contract except, in the case of group contracts, on the anniversary date of the contract, and except, in the case of individual contracts, changes made to the contracts of all policyholders uniformly. HCFA 1500 A form developed by HCFA and used by providers of health services to bill their fees to health carriers. Health Care Financing Administration (HCFA) Part of the Department of Health and Human Services, responsible for administration of the Medicare and Medicaid programs. Health Insurance (HI)

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Health Insurance - Glossary of Terms

Insurance against loss by sickness or bodily injury. The generic form for those forms of insurance that provide lump sum or periodic payments in the event of loss occasioned by bodily injury, sickness or disease, and medical expense. The term Health Insurance is now used to replace such terms as Accident Insurance, Sickness Insurance, Medical Expense Insurance, Accidental Death Insurance, and Dismemberment Insurance. The form is sometimes called Accident and Health, Accident and Sickness, Accident, or Disability Income Insurance. Dental insurance, disability insurance, and accidental death and dismemberment insurance is also considered health insurance. Health Insurance Portability and Accountability Act of 1996 (HIPAA) A federal law designed to provide portability of health coverage by limiting what may be considered pre-existing conditions and exclusions for pre-existing conditions in health plans. HIPAA also requires guaranteed issuance of coverage in the small group market, guaranteed issuance of individual coverage upon loss of group coverage, and guaranteed renewability of coverage in the group and individual markets. Under its Administrative Simplification provisions, HIPAA requires use of unique identifiers, standard data sets, and ensures privacy and security of an individuals identifiable health information. HIPAA Pool A legislatively created insurance pool providing coverage to individuals losing group health coverage. Funded by assessments of health insurers. See Louisiana Health Plan and Conversion. Health Insurance Purchasing Cooperatives (HIPCS) Purchasing agents for health insurance consumers under a managed-competition system, also called health insurance purchasing groups, health plan purchasing cooperatives, and health insurance purchasing corporations. Health Maintenance Organization (HMO) An HMO is a prepaid medical service plan that provides services to plan members either through employed staff or medical providers who contract with the HMO. Members must use contracted providers to receive benefits except in certain circumstances, such as emergencies. HealthMarts Collectives of small businesses joined together to purchase health insurance. Health Plan Employer Data and Information Set (HEDIS) Standard performance measures collected by the National Committee for Quality Assurance and published in the form of a report card to help employers evaluate plan performance. High Risk Pool A legislatively established health plan for uninsurable Louisiana residents. Funded by service charges of $2.00/day for inpatient stays and $1.00 for ambulatory surgical care admissions. Louisiana insurers are required to cover these charges. Home Health Care Care received at home as part-time skilled nursing care, speech therapy, physical or occupational therapy, parttime services of home health aides or help from homemakers or choreworkers. Hospice An organization which is primarily designed to provide pain relief, symptom management and supportive services for the terminally ill and their families. Hospital Income or Indemnity Insurance A form of insurance that provides a stated weekly or monthly payment while the insured is hospitalized, regardless of expenses incurred and regardless of whether or not other insurance is in force. The insured can use the weekly or monthly benefit as he chooses, for hospital or other expenses. LHSIC sells a form of this insurance called the Variable Income Plan or VIP policy, which pays a per diem. In-Area Services Services which are provided within the authorized service area as designated in the plan. Page 10 of 21

Health Insurance - Glossary of Terms

Incurred but Not Reported (IBNR) Costs associated with a medical services that has been provided, but for which a claim has not yet been received by the insurer. IBNR reserves are recorded by the insurer to account for estimated liability, based on studies of prior lags in claim submissions. Incurred Claims The actual insurer liability for a special period, including all claims with dates of service within a specified period (usually called the experience period). Given the time lag between dates of service and the dates of claims payments, adjustments must be made to any paid claims data to determine incurred claims. Indemnity A health care insurance plan that reimburses policyholders for covered services. There is usually a deductible which must be met before payment starts and a maximum benefit, either annual or lifetime, that the insurer will pay. Individual Contract A contract made with an individual that covers that individual and perhaps also specified members of his family for benefits as described in the policy. Individual Practice Association (IPA) Model HMO A situation where an individual practice association is contracted with to provide health care services. The individual practice association contracts with individual physicians or groups of physicians for their services. Inflation Factor A premium loading to provide for future increases in medical costs and loss payments resulting from inflation. In-Force Business Life or Health Insurance for which premiums are being paid or for which premiums have been fully paid. The term refers to the total face amount of a Life insurers portfolio of business. In Health Insurance it refers to the total premium volume of an insurers portfolio of business. Inside Limits Limits placed on benefits which modify benefits from the overall maximums listed in the policy. An inside limit when applied to room and board, limits the benefit to not only a maximum amount payable, but also limits the number of days the benefit will be paid. A prescription drug inside limit limits the benefit to a specific dollar amount in benefits that will be paid in a particular time period. Intermediate Care A level of care associated with a skilled nursing facility which provides nursing care under the supervision of physicians or a registered nurse. The care provided is a step down from the degree of care described as skilled nursing care. Large Claim Pooling A technique that helps stabilize premium fluctuations. Large claims (those over a stated amount, sometimes called shock claims) are charged to a pool contributed to by many small groups. The pooling level depends on the number of groups in the pool. Legend Drug A drug which has on its label caution: federal law prohibits dispensing without a prescription. Length of Stay (LOS) The total number of days a participant stays in a facility such as a hospital. Long Term Care (LTC) Care which is provided for persons with chronic diseases or disabilities. The term includes a wide range of health and social services provided under the supervision of medical professionals. Long-Term Disability Insurance Page 11 of 21

Health Insurance - Glossary of Terms

A group or individual policy which provides coverage for longer than a short term, often until the insured reaches age 65 in the case of illness and for the remainder of his lifetime in the case of accident. See also Short-Term Disability Insurance. Loss-Of-Income Benefits Benefits paid for inability to work for remuneration because of disability resulting from accidental bodily injury or sickness. The loss of income may be real or presumptive. Louisiana Health Plan A legislatively created plan consisting of the High Risk Pool, the HIPAA Pool, and a non-operating small employer insurance account. Louisiana Life and Health Insurance Guaranty Association (LLHIGA) A legislatively created guaranty association created to cover claims of persons whose insurers are significantly financially impaired or insolvent. Does not cover HMOs. Funded by assessments on insurers. See Guaranty Fund. Major Medical Insurance A type of Health Insurance that provides benefits up to a high limit for most types of medical expenses incurred, subject to a large deductible. Such contracts may contain limits on specific types of charges, like room and board, and a percentage participation clause sometimes called a coinsurance clause. These policies usually pay covered expenses whether an individual is in or out of the hospital. Managed Care A system of health care where the goal is a system that delivers quality, cost effective health care through medical management, the monitoring and recommending of utilization of services, and through contracting for cost of services. Managed Care Organization (MCO) Health care plan that emphasizes cost-efficiency in providing care to enrolled members through an organized provider network. Managed Health Care Plan A plan which involves financing, managing, and delivery of health care services. Typically, it involves a group of providers who share the financial risk of the plan or who have an incentive to deliver cost effective, but quality, service. Mandated Benefits Benefits required by state or federal law. Mandated Providers Types of providers of medical care whose services must be included by state or federal law. Manual Rates Rates based on average claims data for a large number of groups. These rates are then adjusted for specific groups based on that groups characteristics, such as the type of industry, changes in benefits from the standard, etc. Maximum Allowable Cost (MAC) A pricing of generic drugs developed due to the wide variation of different manufacturer costs for identical generic drugs. The MAC is the highest amount that will be paid for the drug regardless of its actual cost. Medical Expense Trend The rate at which medical costs are increasing or decreasing, influenced by, for example, utilization, new technology, and billed charges. Medical Loss Ratio (MLR) The cost ratio of health benefits used, compared with revenue received. The MLR is calculated as follows: total medical expenses divided by premium revenue. Page 12 of 21

Health Insurance - Glossary of Terms

Medical Savings Accounts (MSA) (also called Medical IRAs and Medisave Accounts) A health care financing arrangement that allows regular, pre-tax deposits to personal medical accounts that can be used to pay for medical expenditures or health insurance premiums. These accounts work in conjunction with high deductible health insurance policies. Medical Necessity Review Organization (MNRO) An organization of physicians that reviews services to determine if they are medically necessary. Louisiana law was enacted in 1999 regulating MNROs and providing immunity from liability if a licensed MNRO is used to review plan medical necessity determinations. Medically Necessary Services, treatments, procedures, etc., required to identify or treat a members illness or injury, that are consistent with the members symptoms or diagnosis and treatment and the most appropriate supply or level of care which can safely be provided to the member. Medicare Part A The component of Medicare benefits covering inpatient hospital stays, skilled nursing facilities, home health services and hospice care. Medicare Part A is premium-free for anyone automatically eligible for Medicare. Those not automatically eligible may purchase Medicare Part A coverage for a monthly premium. Medicare Part B The optional part of Medicare that can be purchased for a monthly premium. Part B covers outpatient costs, such as the cost of physician services, outpatient hospital services, medical equipment, and medical supplies. Medicare Supplement Insurance Private insurance coverage sold on an individual or group basis which helps to fill the gaps in the protection provided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare, but may pay part or all of Medicares deductibles and copayments, and may cover some services and expenses not covered by Medicare. Medicare+Choice (Also known as Medicare Part C)Medicare+Choice is an expansion of Medicare health plan choices created as part of the Balanced Budget Act of 1997 providing an HMO option. Medicare Select A type of Medicare supplemental health insurance policy that requires policyholders to use specific hospitals, and in some cases specific doctors, except in an emergency, in order to be eligible for full benefits. Member Month The total number of participants who are members for each month. Member Touchpoint Measures (MTM) Refers to the methodology being implemented by the Association to define how well the various plans perform in relationship to the brand identification by their market area. This performance is measured by a series of customer surveys and the utilization of specified metrics reported in the NMIS method. Minimum Premium A cost plus arrangement whereby the employer pays the insurer only a portion of the premium which is to be used for administration costs. The remainder is placed in a bank account which is then used by the insurer to pay claims. Morbidity The relative incidence of disease. Morbidity Rate The ratio of the incidence of sickness to the number of well persons in a given group of people over a given period of time. It may be the incidence of the number of new cases in the given time or the total number of cases of a given disease or disorder. Morbidity Table Page 13 of 21

Health Insurance - Glossary of Terms

A table showing the incidence of sickness at specified ages in the same fashion that a mortality table shows the incidence of death at specified ages. Multiple Employer Trust (MET) A trust consisting of multiple small employers in the same industry, which is formed for the purpose of purchasing group health insurance or establishing a self-funded plan at a lower cost than would be available to the employers individually. LHSIC uses the term MET to describe groups ranging in size from 2-19, even though the trust itself has been dissolved. Multiple Employer Welfare Arrangements Employer funds and trusts providing health care benefits to individuals. Multiple Option Plan Under this plan, employees can optionally choose from an HMO, POS, a PPO or a traditional major medical plan. National Committee for Quality Assurance (NCQA) A nonprofit, Washington, D.C.-based organization, the NCQA is dedicated to assessing, measuring, and reporting on the quality of care provided by the nationals managed care plans. The NCQA manages the evolution of the Health Plan Employer Data and Information Set (HEDIS), a managed care performance measurement tool, issuing accreditation in six categories: quality improvement, physician credentials, members rights and responsibilities, preventive health services, utilization management, and medical costs. National Drug Code (NDC) A system for identifying drugs. National Management Information System (NMIS) Refers to the methodology of the various BCBS plans reporting upon defined standardized metrics relating to business functions performed by the plans. These various plan reports are accumulated and reported by the Association in a quarterly format with the metrics used to rank the plans by peer group and as a member of the whole of the Association Nonparticipating Provider (1) A provider who has not signed a contract with a health plan. (2) A medical or health care provider who is not certified to participate in the Medicare program. Occupational Disease Impairment of health caused by continued exposure to conditions inherent in a persons occupation or a disease caused by an employment or resulting from the nature of an employment. Open Access Allows a participant to see another participating provider of services without a referral. Also called open panel. Outcomes Measurement Assessments that gauge the effect or results of treatment for a particular disease or condition. Outcome measures include the patients perception of restoration of function, quality of life, and functional status, as well as objective measures of mortality, morbidity, and health status. Outlier One who does not fall within the norm. A provider who uses either too many or too few services (for example, anyone whose utilization differs by two standard deviations from the mean on a bell curve is called an outlier.) Out-of-Area (OOA)Treatment given to a member outside of his service area. Out-of-Pocket Limit The maximum dollar amount of coinsurance and deductible an individual will be required to pay, after which the insurer will pay 100% of covered expenses up to the policy limit. Paid Claims Amounts paid to providers based on the health plan. Page 14 of 21

Health Insurance - Glossary of Terms

Paid Claims Loss Ratio Paid claims divided by total premiums. Participating Provider (1) A health care provider under contract with a health insurer or managed care organization. (2) A health care provider approved by Medicare to participate in the program and receive benefit payments directly from carriers or fiscal intermediaries. Participation The number of employees enrolled compared to the total number eligible for coverage. LHSIC usually requires a minimum participation percentage of 75%. Minimum participation percentages are no longer legally required in Louisiana. Peer Review Review of health care provided by a medical staff with training equal to the staff which provided the treatment. Per Member Per Month (PMPM ) Refers to the cost to cover one member for one month. Pharmacy and Therapeutics (P&T) Committee A panel of physicians - usually from different specialties - who advise the health plan regarding the proper use of prescription drugs. Pharmacy Benefit Manager (PBM) A managed care organization for prescription drug benefits, using discounted pharmacy networks and utilization management to control costs. Physician Contingency Reserve (PCR) A portion of the claim which is deducted and withheld by the health plan before payment is made to the physician. It serves as an incentive for proper quality and utilization of health care. A portion of this reserve may be returned to the physician or to pay claims where the plan needs additional funds. It is also sometimes called withhold. Point-of-Service (POS) Plan A health plan that is a hybrid HMO allowing the covered person to choose to receive a service from a participating or nonparticipating provider, with different benefit levels associated with the use of participating providers. Pre-Admission Authorization A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to a hospitalization and receive authorization for the admission. LHSIC and HMOLA require preauthorization for organ transplants. Pre-Admission Certification A cost containment feature of many group medical policies whereby the insured must contact the insurer prior to a hospitalization and receive certification for the admission, as being medically necessary and in an appropriate setting. Pre-existing Condition A physical condition that existed prior to the effective date of a policy. HIPAA and state law limit the time preceding the effective date of a policy during which a condition exists to be considered preexisting. In many health policies these are not covered until after a stated period of time, called a waiting period has elapsed, usually one year. Preferred Provider Organization (PPO)

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Health Insurance - Glossary of Terms

An organization of contracts with hospitals and physicians who provide services to insurance company clients. These providers are listed as preferred and the insured may select from any number of hospitals and physicians without being limited as with an HMO. The insureds cost sharing is less if he utilizes a PPO provider. Premium Stabilization Agreement A financial agreement LHSIC offers to a fully insured merit rated (100+) group, designed to allow a group to accumulate a source of funds to offset future rate increases. The nature of the agreement is to define a calculation of net ending financial results for a policy year. Should the group terminate coverage, at the end of 15 months any remaining positive balance after all expenses have been charged are returned to the group. Under this agreement, premiums paid in excess of claims and administrative expenses are accumulated in a fund, the balance of which can be used to offset rate increases. Preventive Care This type of care is best exemplified by routine physical examinations and immunizations. The emphasis is on preventing illnesses before they occur. Primary Care Basic health care provided by doctors who are in the practice of family care, pediatrics, and internal medicine. Louisiana law requires insurers to recognize OB/GYNs as primary care physicians. Prior Authorization Procedure used in managed care to control utilization of services by requiring prior review and approval. Certain procedures or drugs may require prior authorization. Prospective Reimbursement A system where hospitals or other health care providers are paid annually according to rate of payment which have been established ahead of time. Quality Assurance A formal set of activities to review and affect the quality of services provided. Quality assurance includes quality assessment and corrective actions to remedy any deficiencies identified in the quality of direct patient, administrative, and support services. Quality Improvement A continuous process that identifies problems in health care delivery, tests solutions to those problems, and constantly monitors the solutions for improvement. Quality Improvement System for Managed Care (QISMC) An initiative backed by the Health Care Financing Administration to improve the public health by developing a uniform quality oversight system. The initiative addresses quality assessment and performance improvement, enrollee rights, health services management, and delegation. Reasonable and Customary Charges The charge for medical services which refers to the amount approved for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area. Sometimes called C&R. Rebate A monetary amount that is returned to a payor from a prescription drug manufacturer based upon utilization by a covered person or purchases by a provider. Referral Occurs when a physician or other health plan provider receives permission to consult another physician or hospital. Reinsurance Reinsurance is a transaction whereby one insurer, usually for a fee or premium, agrees to indemnify another insurer against all or part of a loss (risk) that the latter incurs under the insurance policies that it issues. The

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Health Insurance - Glossary of Terms

indemnifying insurer assumes the risk and is known as the Reinsurer. The insurer being indemnified cedes the risk and is known the Reinsured. Relative Value Schedule A surgical schedule which basically compares the value of one surgical procedure to another and establishes the surgical fee to be paid. Relative Value Unit Sometimes used instead of dollar amounts in a surgical schedule, this number is multiplied by a conversion factor to arrive at the surgical benefit to be paid. Resource Based Relative Value Scale (RBRVS) This is a classification system which is used to determine how physicians will be compensated for services provided under Medicare benefits. May be utilized by private insurers. Restoration of Benefits A provision in many Major Medical Plans which restores a persons lifetime maximum benefit amount in small increments after a claim has been paid. Usually, only a small amount ($1,000 to $3,000) may be restored annually. Retention The portion of the premium which is used by the insurance company for administrative costs. Second Surgical Opinion A cost containment technique to help patients and insurance companies determine whether a recommended procedure is necessary, or whether an alternative method of treatment could accomplish the same result. Some health policies require a second surgical opinion before specified procedures will be covered, and many policies pay for the second opinion. Section 125 Plan A plan which provides flexible benefits. This plan qualifies under the IRS code which allows employee contributions to meet with pre-tax dollars. Also called a Cafeteria Plan. Self-Funded Plan Plan of insurance where an employer, which has fairly predictable claim costs, pays the claims rather than an insurance company. See also Administrative Services Only and Third Party Administrator. Service Area The area, allowed by state agencies or by the certification of authority, in which a health plan can provide services. Short-Term Disability Insurance A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon. Contrast with Long-Term Disability Insurance. Split Dollar Coverage An arrangement of Disability Income Insurance in which the employer and employee each pay a portion of the premium. The employer purchases coverage for the sick pay or paid disability leave provided as an employee benefit. The employee pays for disability coverage beyond what the employer provides as a benefit. Stop-Loss Insurance This is a type of reinsurance which can be taken out by a health plan or self-funded employer plan. The plan can be written to cover excess losses over a specified amount either on a specific or individual basis, or on a total basis for the plan over a period of time such as one year. Subacute Care An intermediate level of care provided to medically fragile patients who are too ill to be cared for at home, but require medical and nursing services at a higher intensity level than is offered in a typical skilled nursing facility. Page 17 of 21

Health Insurance - Glossary of Terms

Subacute care may be provided in long-term care hospitals, hospital-based skilled nursing units, transitional, or intermediate care units within community-based nursing facilities, as well as in certain other settings. Subscriber This term has two meanings - first, it refers to a person or organization who pays the premiums, and second, the person whose employment makes him or her eligible for membership in the plan. Summary Plan Description This is a recap or summary of the benefits provided under the plan. It is used most often with employees covered by self-funded plans. Supplemental Medical Insurance (SMI) Part B of Medicare is a voluntary program which generally covers physicians services and various outpatient services. A premium is charged for electing Part B coverage. Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA) This act defines the primary and secondary coverage responsibilities of the Medicare program and also the provisions to be used by health plans in their contracts with the HCFA (Health Care Financing Administration). Ten Day Free Look A notice, placed prominently on the face page of the policy, advising the insured of his or her right to examine a health policy, and if dissatisfied return the policy within ten days for a full refund of premium and no further obligation. Tertiary Care Services provided by such providers as thoracic surgeons, intensive care units, neurosurgeons, etc. Third Party Administrator (TPA) An entity that provides administrative services for employers and other associations having group insurance plans. TPAs usually administer employer self-funded plans but may act as a liaison between an employer and its insurer. Third-Party Payor This refers to any organization such as Blue Cross/ Blue Shield, Medicare, Medicaid, or commercial insurance companies which is the payor for coverages provided by a health plan. Trend Factor The factor applied to rates which allows for such changes as increased cost of medical providers, the cost of new and expensive medical technology, etc. Triple Option A plan where employees have their choice, among different types of provides such as HMO, PPO, or basic indemnity plan. Usually, their choice depends on how much they want to pay for the coverage. Underwriting An insurers procedure for analyzing a group or individual applicant to determine whether or not to offer insurance coverage and, if so, at what price. Insurers weigh risk assessment and feasibility based on an applicants past usage and health-risk factors. Uniform Billing Code of 1992 (UB-92) A federal directive that states how a hospital must provide their patients with bills, itemizing all services included and billed on each invoice. The UB-92 is the standard bill submitted by hospitals to insurers. Utilization A measure of medical service consumption. Utilization Review A formal assessment of a patients course of treatment to evaluate the appropriateness of care. Page 18 of 21

Health Insurance - Glossary of Terms

Waiting Period The period of time between the beginning of coverage and the start of benefits. In case of disability insurance, this is called an elimination period. In health policies it means either (1) the time between the effective date of coverage and the date benefits will be paid for a pre-existing condition (pre-ex waiting period) or (2) the time between an employees date of hire and the date on which he is eligible for benefits under his plan. ACRONYMS and ABBREVIATIONS A AAPCC ADL ALOS ASO AWP B BBA BCBSA C C&R/CNR CAP CEA CHAMPUS CIE CMP COA COB COBRA CPN CPT CSD D DME DOI DRG DUR E EOB EPO ERISA Adjusted Average per Capita Cost Activities of DailyLiving Average Length ofStay Administrative ServiceOnly Average WholesalePrice Balanced Budget Act of 1997 Blue Cross Blue Shield Association Customary and Reasonable Capitation Charge Exceeds Allowance Civilian Health and Medical Program of the Uniformed Services Cancer Endorsement Competitive Medical Plan Certificate of Authority Coordination of Benefits Consolidated Omnibus Budget Reconciliation Act of 1986 Community Pharmacy Network Current Procedural Terminology Cancer/SeriousDisease Durable Medical Equipment Department of Insurance Diagnosis-Related Group Drug Utilization Review Explanation of Benefits Exclusive Provider Organization Employees Retirement Income Security Act of 1974

F FASB FEP FFS FMLA FMP FSA G GBS

Financial Accounting Standards Board Federal Employees BenefitProgram Fee-for-Service Family and Medical LeaveAct Fair Market Price Flexible SpendingAccount Group BusinessSegment

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Health Insurance - Glossary of Terms

H HCFA HEDIS HIPAA HIPCS HIPMA HMO HMP Health Care Financing Administration Health Plan Employer DataInformation Set Health InsurancePortability&Accountability Act Health InsurancePurchasing Cooperatives Health Information PrivacyModel Act Health MaintenanceOrganization Health MaintenancePlan

I IBNRIncurred But NotReported IBSIndividual BusinessSegment IDSIntegrated DeliverySystem IPAIndependent PracticeAssociation ITSInter Plan TeleprocessingServices J-K KEYKey PhysicianNetwork L LHCC LHSIC LLHIGA LTC M MCO&nsp; MET MEWA MLR MNRO MSA MTM N NABP NAIC NASCO NCQA NDC NMIS NOPLG O OED OOA P PBM PCP PCR PCS PHO PIE PIU PMPM POS PPM Louisiana Health Care Commission Louisiana Health Service&Indemnity Company(d/b/a Blue Cross andBlue Shield of Louisiana Louisiana Life&Health GuarantyAssociation Long Term Care Managed Care Organization Multiple Employer Trust Multiple Employer Welfare Association Medical Loss Ratio Medical Necessity Review Organization Medical Savings Accounts Member Touchpoint Measures National Association ofBoards of Pharmacy National Association ofInsurance Commissioners National Accounts ServiceCompany National Committee forQuality Assurance National Drug Code National ManagementInformation System National Other PartyLiability Group Original Effective Date ofthe Contract Out-of-Area Pharmacy BenefitManager Primary CarePhysician Physician ContingencyReserve Pharmaceutical CardSystem Physician HospitalOrganization Prolonged IllnessEndorsement Provider InquiryUnit Per Member PerMonth Point of Service Physician PracticeManagement Page 20 of 21

Health Insurance - Glossary of Terms

PPO PSO Q QA QM QMISC R R&C RBRVS RETRO Preferred ProviderOrganization Provider SponsoredOrganization (Medicare Managed Care) Quality Assurance Quality Management Quality Improvement Systemfor Managed Care Reasonable andCustomary Resource Based RelativeValue Scale Retrospective RateDerivation

S SCR Standard Class Rate SMI Supplemental MedicalInsurance SOB Schedule ofBenefits SPD Summary PlanDescription Stark Law Prohibits PhysicianSelf-Referrals SUB Subscriber T TEFRA TPA U-Z UB-92 UCR UR URAC Tax Equity and FiscalResponsibility Act of 1982 Third PartyAdministrator Uniform Billing Code of1992 Usual Customary andReasonable Utilization Review Utilization Review AccreditationCommission

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