H456 Exam 1

Actuary

Professionals responsible for estimating current medical claim liabilities and predicting future medical expenses by building actuarial models to determine per-member per-month (PMPM) costs.

Affordable Care Act (ACA)

Signed into law in 2010, it expanded access to coverage through mandates, insurance exchanges, and prohibiting denials based on preexisting conditions.

Affordable Care Act: Premium subsidies and how it works

Individuals with incomes between 100% and 400% of the federal poverty level may receive tax credits for plans purchased through official insurance exchanges.

Affordable Care Act: Medicaid expansion

Expanded Medicaid eligibility to individuals with incomes less than 133% (effectively 138%) of the federal poverty level; optional for states after Supreme Court ruling.

Balance billing

When a provider bills a patient for charges the health plan did not pay; prohibited for contracted providers but allowed for non-contracted providers.

Baylor University Hospital Plan

A 1929 plan providing prepaid inpatient care to teachers; historical origin of Blue Cross.

Beneficiary

An individual covered under an entitlement program such as Medicare or Medicaid.

Benefits

The medical goods and services covered by a health plan and the circumstances under which they are paid.

Blue Cross

Historically provided coverage for hospital-associated care; began with the Baylor plan.

Blue Shield

Originated to provide coverage for physician and professional services; later merged with many Blue Cross plans.

Broker

A state-licensed person who sells insurance coverage on behalf of insurers for commission.

Capitation

A payment method where providers receive a fixed amount per member per month regardless of services used.

Captive group HMO

An HMO model where physicians are owned, controlled, or exclusively affiliated with the health system.

Charges (vs. cost and payment)

Charges are listed prices; cost is actual expense of care; payment is the negotiated amount paid by the payer.

Claim

A bill submitted by a provider to a payer for adjudication and payment.

Co-insurance

A cost-sharing method where the member pays a percentage of covered costs.

Commercial insurer

A for-profit or nonprofit organization that assumes medical cost risk in exchange for premiums.

Community rating

A method where the same premium is charged regardless of health status.

Contract

A legally binding agreement between payer and provider defining payment terms and obligations.

Contractual writeoff

The difference between billed charges and the contracted amount accepted as full payment.

Copayment

A fixed dollar amount paid by the member at the time of service.

Coverage

Determines which services a plan will pay for and at what level.

Deductible

The amount a member must pay out-of-pocket annually before the plan pays.

Dependent

A spouse or child eligible under a subscriber’s policy.

Diagnosis Related Group (DRG)

A hospital payment system that pays a flat amount per admission based on diagnosis.

Discount

A negotiated reduction from standard billed charges.

Eligibility

The status of meeting requirements to qualify for coverage.

Employee Retirement Income Security Act of 1974 (ERISA)

Federal law regulating self-funded employee benefit plans and exempting them from most state insurance laws.

Employer-based health insurance

Health coverage provided by employers through purchased insurance or self-funded plans.

Enrollee

An individual formally enrolled in a health plan.

Entitlement

A government program providing a legal right to benefits if eligibility criteria are met.

Exclusions vs. limitations

Exclusions are services never covered; limitations restrict amount or frequency of covered services.

Exclusive provider organization (EPO)

A plan that does not cover out-of-network care but does not require a PCP referral.

Explanation of benefits (EOB)

A statement explaining how a claim was processed and member responsibility.

Fee for service

A payment method where providers are paid for each service performed.

Fully-insured employer

An employer that transfers financial risk to an insurer by paying premiums.

Group model HMO

A closed-panel HMO contracting with a single multispecialty group.

Group rating

Premiums based on the claims experience of a specific group.

Health Maintenance Organization (HMO)

A prepaid plan requiring a PCP gatekeeper and using a limited provider network.

Healthy Indiana Plan

Indiana Medicaid program for low-income adults under federal waivers.

HMO Act of 1973

Federal law encouraging HMO growth and requiring certain employers to offer HMO options.

Hoosier Healthwise

Indiana Medicaid and CHIP program for children and pregnant women.

Indemnity insurance: pure vs. modified

Pure indemnity allows any provider and pays UCR; modified adds cost controls like precertification.

Independent Practice Association (IPA)

Entity contracting with independent physicians and HMOs.

Indigent

Individuals with low or no income eligible for Medicaid or charity care.

Individual rating

Premium setting based on a person’s specific health risk (largely prohibited by ACA).

In-network

Providers contracted with a health plan.

Insurer

Organization at financial risk for medical costs in exchange for premiums.

Lifetime limits

Maximum lifetime payout limit; eliminated by ACA.

Managed care

A system using provider networks and utilization management to control costs and quality.

Medicaid

Joint federal-state program providing health coverage to low-income individuals.

Medicare Advantage

Private plans providing Medicare benefits (Part C).

Medicare Managed Care

Former term for Medicare Advantage.

Medicare Part A

Covers inpatient hospital, skilled nursing, hospice, and some home health.

Medicare Part B

Covers physician services, outpatient care, preventive services, and DME.

Medicare Part C

Authorizes private Medicare Advantage plans.

Medicare Part D

Voluntary prescription drug benefit provided through private plans.

Moral hazard

Increased healthcare use because insurance reduces personal cost burden.

Network

Group of providers contracted with a health plan.

Network model HMO

HMO contracting with multiple multispecialty groups.

No balance billing clause

Contract provision preventing providers from billing members beyond allowed amount.

Non-covered services

Services for which the health plan provides no payment.

Out of network

Providers without a contract; higher member cost-sharing applies.

Out-of-pocket maximum

Annual maximum a member pays before the plan pays 100%.

Out-of-pocket expenses

Member-paid healthcare costs such as deductibles, copays, and coinsurance.

Per-member per-month (PMPM)

Average cost or revenue for one member for one month.

Point of service plan

Hybrid plan allowing out-of-network use at higher cost while encouraging PCP gatekeeper use.

Policy

The legal insurance contract issued to an individual or group.

Preferred Provider Organization (PPO)

A network-based plan offering discounted fees and allowing out-of-network access at higher cost.

Premium

Monthly payment made to purchase health insurance coverage.

Preexisting condition

A medical condition existing before coverage began.

Prospective payment

Payment rates set in advance of service delivery.

Private vs. public insurance

Private insurance funded by individuals/employers; public programs funded by government.

Provider

Licensed individual or facility delivering healthcare services.

Re-insurance (stop loss)

Insurance limiting financial exposure to very high claims.

Retrospective payment

Payment made after services are rendered.

Risk

Financial uncertainty regarding actual healthcare costs.

Self pay

Paying entirely out-of-pocket without insurance.

Self-funded employer

Employer that assumes financial risk for employee medical claims.

Self-funded health plan

Plan where employer acts as insurer, typically under ERISA.

Stop loss insurance: specific vs. aggregate

Specific protects against one high-cost claim; aggregate protects against total claims exceeding budget.

Staff model HMO

Closed-panel HMO directly employing physicians.

Stakeholder

Any party with an interest in healthcare operations.

Subscriber

Individual who holds the insurance policy.

Third party administrator (TPA)

Company providing administrative services to self-funded plans without assuming risk.

Title XIX of the Social Security Act

Established the Medicaid program.

Title XVIII of the Social Security Act

Established the Medicare program.

TriCare

Healthcare program for active-duty military, retirees, and families.

Underwriter

Person or department evaluating risk and setting premium rates.

Usual, customary, and reasonable (UCR)

Payment method based on prevailing regional fees.

Utilization management

Techniques to review necessity and appropriateness of care to manage cost and quality.

Veterans Administration Hospitals

Government-owned hospitals providing care to veterans.