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Useful Terms

Please note: Some of these terms have specific legal definitions, as well as the common definitions used here.

Accusation
The official charging document which alleges violations of the Knox-Keene Act by the health plan.

Acute Care
Medical care that you need right away but only for a short time.

Appeal
A request to your health plan asking it to solve a problem or change a decision because you are not satisfied (An appeal is sometimes called a complaint or a grievance).

Arbitration
A way to solve disputes between health plans and patients without filing a formal lawsuit and going to court (In arbitration, the health plan and the patient select an independent person to settle the dispute, instead of a judge or jury).

Authorization or Pre-authorization
The process of getting approval from your health plan or medical group before you get services (also called approval or prior approval).

Balance Billing
When a provider in your health plan's network sends you a bill for the amount that is more than the contracted rate with the plan. Balance billing can also happen when a non-contracted provider who works in a hospital, such as an anesthesiologist, radiologist, pathologist, or emergency room physician, sends you a bill for the part of the charges that your health plan does not pay.

Benefit
A service covered by your health insurance.

Benefits Package
All the services covered by your health insurance.

Capitated Basis
[Cal. Code Reg. § 1300.76(f)] - fixed per member per month payment or percentage of premium payment wherein the provider assumes the full risk for the cost of contracted services without regard to the type, value or frequency of services provided. For purposes of this definition, capitated basis includes the cost associated with operating staff model facilities.

Cash-to-claims Ratio
[Cal. Code Reg. § 1300.75.4(f)] - an organization's cash, readily available marketable securities and receivables, excluding all risk pool, risk-sharing, incentive payment program and pay-for-performance receivables, reasonably anticipated to be collected within 60 days divided by the organization's unpaid claims (claims payable and incurred but not reported [IBNR] claims) liability.

Cease and Desist Order
An order of the DMHC to a person or organization to refrain from any act that violates the Knox-Keene Act.

Chronic Care
Care for a long-term health problem, such as asthma, diabetes, or congestive heart failure.

Chronic Disease
A health problem that goes away and comes back, or that lasts your whole life, such as diabetes, asthma, or high blood pressure.

Claim
A request to your health plan to pay a bill for a health care service (Usually your provider files the claim. You can file a claim yourself if you paid for the service up-front).

COBRA/Cal-COBRA
Laws that help you and your family keep your group health insurance if your job ends or your hours are cut.

Complaint
A request to your health plan or to the Help Center asking it to solve a problem or change a decision because you are not satisfied (A complaint is sometimes called a grievance or an appeal).

Consent Form
A form you sign that says you agree to receive a certain health care service or treatment, and you are aware of side effects that you may have.

Conservator
An independent consultant assigned to oversee a health plan that has been seized by the DMHC.

Continuity of Care
Your right to continue seeing your doctor in certain cases, even if your doctor leaves your health plan or medical group.

Co-payment/Co-pay
A fee you pay each time you see a doctor, get other services, or fill a prescription.

Creditable Coverage
The amount of time you were covered by a previous health plan (You can reduce your new plan's pre-existing condition exclusion by one month for every month you had creditable coverage, as long as the gap in coverage between your previous plan and your new plan is 62 days or less).

Deductible
The amount you must pay for covered health services each year before your health plan starts to pay.

Dependent
A person who is covered by another person's health plan, such as a child or a spouse.

Durable Medical Equipment (DME)
Medical equipment, like hospital beds and wheelchairs, which can be used over and over again.

End-Stage Renal Disease (ESRD)
Severe kidney failure that needs lifetime dialysis or a kidney transplant.

Enrollee
A person who is enrolled in a health plan (An enrollee is also called a member or a subscriber).

Evidence of Coverage (EOC)
A written guide to the services your health plan covers and does not cover and what you pay for services (An EOC is also called a contract or letter of entitlement).

Exclusions
Medical services that a health plan will not pay for (These are usually listed in your Evidence of Coverage).

Expedited Review
A fast review of a complaint, grievance, or appeal if your medical problem is serious or urgent (A health plan must decide an expedited review in 3 days).

Formulary/drug Formulary
A list of the prescription drugs that your health plan covers.

Gap in Coverage
More than 62 days in a row without health insurance (This can affect your eligibility for HIPAA or conversion plans).

Generic Drug
A drug that is no longer owned and patented by one company (A generic drug has the same active ingredients as the brand name drug, but it costs less. For example, Valium is the brand name version and Diazepam is the generic version of the same tranquilizer).

Grievance
A request to your health plan, asking your plan to solve a problem or change a decision (A grievance is sometimes called an appeal or a complaint).

Group Health Insurance
Health insurance that you get through a group, such as your employer or union.

Health Maintenance Organization (HMO)
An HMO is a kind of health insurance where you get all your health care from one group of doctors, hospitals, and labs. This group is also called a network. You have a main doctor, also called your primary care doctor, who oversees your care.

Home Health Care
Health care that you receive in your home when you need continued treatment after surgery or hospitalization for an illness or injury.

Hospice Care
Care to relieve the physical and emotional pain of people who are dying of terminal illnesses, and to support the person's family caregivers (Hospice care is usually provided at home, but it can also be provided in a health facility).

Incurred But Not Reported (IBNR)
an estimation used to develop a cash reserve to cover claims obligations for medical services that have been authorized or provided, but not yet received by the RBO.

Independent Medical Review (IMR)
A review of your health plan's denial of your request for a certain service or treatment (The review is provided by the Department of Managed Health Care and conducted by independent medical experts, and your heath plan must pay for the service if an IMR decides you need it).

Individual Health Insurance
Insurance you buy on your own, not as part of a group.

In-patient Care
Care for people who are in a hospital or other health facility for at least 24 hours.

Letter of Agreement
A document outlining an agreement between the health plan and the DMHC regarding findings and/or penalties of an enforcement action.

Medi-Cal/Medicaid
Health care for people with low incomes who qualify (Medicaid is paid for by the federal government, but each state runs its own program. In California, Medicaid is called Medi-Cal).

Medical Group
A group of doctors who have a business together and contract with a health plan to provide services to the plan's members.

Medicare
A federal health insurance program for people 65 and older and some people who are permanently disabled.

Medigap insurance policy (Medicare Supplemental Insurance)
Private insurance that helps cover the services and costs that Medicare does not cover.

Member
A person who is enrolled in a health plan (also called an enrollee or subscriber).

Network
All the doctors, labs, hospitals, and other providers that have contracts with a health plan to provide health care services to the plan's members.

Open Enrollment Period
The time period when you must decide either to stay in your current health plan or to join another health plan that your employer offers (Many employers offer open enrollment for a month every year in the fall).

Outpatient Care
Health care that does not require an overnight stay in a hospital.

Pre-existing Condition
A health condition for which you received medical advice, diagnosis, or care in a specific period before you joined a health plan.

Preferred Provider Organization (PPO)
A kind of health plan that allows members to choose any doctor and see out-of-network providers.

Premium
A monthly fee your health plan charges for your health insurance (You may pay part of the premium and your employer or union may pay the rest).

Preventive Care
Health care to help prevent illness, such as flu shots and mammograms.

Primary Care
General health care services, such as a check-up or treatment for a cold or ear infection (You usually get your primary care from a family practice doctor or an internal medicine doctor who is your primary care doctor. Children usually get their primary care from a pediatrician).

Primary Care Provider/Physician (PCP)
Your main doctor, who provides most of your care (In an HMO, your PCP coordinates all your health care services and treatments and sends you to a specialist when you need one).

Prior Approval/Prior Authorization
The process of getting approval from your helath plan or medical group before you get services.

Provider
A professional person, medical group, clinic, lab, hospital, or other health facility licensed by the state to provide health care services.

Risk-Bearing Organization (RBO)
[Cal. Health & Safety Code § 1375.4 (g)] - a professional medical corporation, other form of corporation controlled by physicians and surgeons, a medical partnership, a medical foundation exempt from licensure pursuant to subdivision (l) of Section 1206, or another lawfully organized group of physicians that delivers, furnishes, or otherwise arranges for or provides health care services, but does not include an individual or a health care service plan, and that does all of the following:

  • Contracts directly with a health care service plan or arranges for health care services for the health care service plan's enrollees.
  • Receives compensation for those services on any capitated or fixed periodic payment basis.
  • Is responsible for the processing and payment of claims made by providers for services rendered by those providers on behalf of a health care service plan that are covered under the capitation or fixed periodic payment made by the plan to the risk-bearing organization. Nothing in this subparagraph in any way limits, alters, or abrogates any responsibility of a health care service plan under existing law.

Second Opinion
Advice you get from a second doctor after the first doctor has made a diagnosis or recommended a certain treatment and you want to make sure it is the right diagnosis or decision for you.

Service Area
All the zip codes that a health plan serves.

Specialist
A doctor who has extra training in a certain medical field, such as an orthopedist (for bones) or a cardiologist (for your heart).

Sponsoring Organization Arrangement
[Cal. Health & Safety Code § 1375.4(b)(1)(B)] - a formal arrangement whereby an RBO may reduce its liabilities for purposes of calculating tangible net equity and working capital by the amount of liabilities the payment of which is guaranteed by a sponsoring organization. A sponsoring organization is one that has a tangible net equity of a level to be established by the director that is in excess of all amounts that it has guaranteed to any person or entity. A qualified guarantee is one that meets all of the following: (i) It is approved by a board resolution of the sponsoring organization. (ii) The sponsoring organization agrees to submit audited annual financial statements to the plan within 120 days of the end of the sponsoring organization's fiscal year. (iii) The guarantee is unconditional except for a maximum monetary limit. (iv) The guarantee is not limited in duration with respect to liabilities arising during the term of the guarantee. (v) The guarantee provides for six months' advance notice to the plan prior to its cancellation.

Standing Referral
A referral to a doctor or other provider for on-going treatment for a long-term disabling or life-threatening illness.

Step Therapy
A process that some health plans have, in which you must try a lower-cost drug for your condition and if that drug does not work, then you can try a more costly drug.

Stipulation
An agreement between the health plan and the DMHC that may contain promises, findings, and/or corrective actions.

Subscriber
A person who is enrolled in a health plan (also called an enrollee or member).

Tangible Net Equity
[Cal. Code Reg. § 1300.76(e)] - net equity reduced by the value assigned to intangible assets including, but not limited to, goodwill; going concern value; organizational expense; starting-up costs; obligations of officers, directors, owners, or affiliates which are not fully secured, except short-term obligations of affiliates for goods or services arising in the normal course of business which are payable on the same terms as equivalent transactions with non affiliates and which are not past due; long term prepayments of deferred charges, and non returnable deposits. An obligation is fully secured for the purposes of this subsection if it is secured by tangible collateral, other than by securities of the plan or an affiliate, with an equity of at least 110 percent of the amount owing.

Underwriting
A process that a health insurance company uses to look at an applicant's health history in order to decide whether to accept the applicant and how much to charge.

Urgent Care
Care for a health problem that is not an emergency but needs attention quickly, before you can get in to see your doctor or if your doctor's office is closed.

Waiting Period
The time you must wait before your health plan covers care for a pre-existing condition (A waiting period begins on the date your benefits start).

Working Capital
[Cal. Health & Safety Code §1375.4(b)(iii) and Cal. Code Reg. § 1300.75.4.2(a)(4)] - current assets over current liabilities calculated in a manner consistent with generally accepted accounting principles (GAAP).

Yearly Out-of-pocket Maximum
The most you have to pay for covered health services in a year (Once you have paid this amount, your health plan pays all of your covered health care costs).

Premium Rate Review Terms

Actuarial Justification
A health plan’s stated reason or explanation as to why a proposed rate increase is needed.

Actuarial Value
The percentage of total costs for covered health care services that are paid by the health plan. For example, if a plan has an actuarial value of 70%, on average, an individual would be responsible for 30% of the costs of all covered health care services.

Adjusted Community Rating
Beginning in 2014, the Affordable Care Act (ACA) limits the factors that health plans offering non-grandfathered coverage can use to determine premiums for individual and small groups. This is known as Adjusted Community Rating. Specific allowed factors are: age, family size, geographic rating area, and tobacco use.

Adverse Selection
The tendency for sicker people to purchase health coverage and healthier people to opt-out. When adverse selection occurs, health plans charge higher premiums to cover the health care costs of the entire insured group.

Essential Health Benefits (EHB)
The comprehensive set of benefits that the ACA requires all health plans to include for products sold on or after January 1, 2014 to include. (See Metal levels)
EHBs include, but are not limited to:

  • Ambulatory patient services (such as doctor visits or outpatient surgery)
  • Emergency services
  • Hospitalization
  • Maternity and newborn care
  • Mental health and substance use disorder services, including behavioral health treatment
  • Prescription drugs
  • Rehabilitative and habilitative services and devices
  • Laboratory services
  • Preventive and wellness services and chronic disease management
  • Pediatric services, including dental and vision care

Exchange
A new health coverage marketplace in which individuals and small businesses will be able to shop for and purchase competitively priced qualified health plans. California’s Exchange market place is known as Covered California.

Geographic Rating Areas
The geographic regions across which health plans can vary premiums. Beginning in 2014, the ACA allows non-grandfathered health plans to vary the premiums they charge based only on the following factors: age, geographic rating area, family size, and tobacco use. State law has created 19 geographic rating areas California. (See Rating Factors)

Grandfathered Health Plan
A health plan that an individual was enrolled in prior to March 23, 2010. Grandfathered plans are exempt from most of the changes required by the ACA as long as there are no significant changes made to the plan. New employees may be added to grandfathered group plans and new family members may be added to all grandfathered plans.

Guaranteed Issue
A requirement that health plans accept anyone who applies for health coverage regardless of an individual’s health status or age. Beginning in 2014, the ACA requires that all health plans be sold on a guaranteed-issue basis.

Guaranteed Renewability
A requirement that health plans renew health coverage except in cases of fraud or failure to pay premium.

Health Maintenance Organization (HMO)
A type of health plan that requires its enrollees to receive health care services from within a network of participating physicians, hospitals and other providers of medical care.

For more information about HMOs, visit: http://www.healthhelp.ca.gov/HealthPlansCoverage.aspx.

Individual Market
A term used to refer to health coverage offered to individuals who purchase it on their own rather than as part of a group (i.e., through an employer). The ACA makes numerous changes to the rules governing health plans in the individual market.

For more information about Individual health plans, visit: http://www.healthhelp.ca.gov/HealthPlansCoverage/IndividualHealthInsurance.aspx.

Large Group Market
A term used to refer to health coverage offered to large businesses (defined in California as those with more than 50 employees). Effective 2016, the ACA defines large businesses to be employers with more than 100 employees.

For more information about group health plans, visit: http://www.healthhelp.ca.gov/HealthPlansCoverage/GroupHealthInsurance.aspx.

Mandated Benefit
A specific health care service that all health plans must provide.

For more information about benefits and rights, visit: http://www.healthhelp.ca.gov/HealthCareLawsRights.aspx.

Medical Loss Ratio (MLR)
The percentage of health plan premiums that a health plan spends on medical services and activities that improve the quality of care. The ACA requires health plans offering coverage in the small group or individual markets to spend at least 80% of premiums for these purposes; health plans offering coverage in the large group market must spend at least 85%.

Metal Level
Refers to the four coverage tiers available through Covered California, (California’s health benefit exchange). Each coverage tier represents an actuarial value expressed as a percentage. The four tiers and their actuarial values are: Bronze (60%), Silver (70%), Gold (80%) and Platinum (90%). (See Actuarial Value)

Non-Grandfathered Health Plan
Any new health plan sold after March 23, 2010. All non-grandfathered health plans must comply with all provisions of the ACA.

Policyholder
Under a group plan, the policyholder is the typically the employer that purchases the coverage. Under an individual or family plan, the policyholder is the person who purchases the coverage.

Preferred Provider Organization (PPO)
A type of health plan that allows members to receive health care services from any health care provider. Individuals who receive services from providers within the health plan’s network typically pay less out-of-pocket costs than individuals who receive services from providers outside of the plan’s network.

For more information about PPOs, visit: http://www.healthhelp.ca.gov/HealthPlansCoverage/OtherTypesofHealthPlans/PPOandPOSPlans.aspx.

Premium
A monthly fee health plans charge for health coverage. For group health coverage the employer typically pays a portion of the premium and the employee pays the remainder. Individuals who purchase coverage on their own pay the entire premium.

Qualified Health Plan (QHP)
A health plan that is sold through an Exchange. The ACA requires Exchanges to certify that Qualified Health Plans meet certain minimum standards.

Rate Review
An analysis of proposed health plan premium rates and premium rate changes. During the rate review process, actuaries evaluate proposed premium rates to determine if the rates are unreasonable or unjustified. Actuaries also ensure the rates comply with all relevant laws and regulations. In California, the DMHC and the California Department of Insurance (CDI) review plan rates for the plans or insurers they regulate.

For more information about DMHC’s rate filings, visit: http://wpso.dmhc.ca.gov/RateReview/.

For more information about CDI’s rate filings, visit: https://interactive.web.insurance.ca.gov/warff/index.jsp.

Rating Factors
Certain characteristics that health plans are allowed to use to vary the premium rates charged for coverage. Beginning in 2014, non-grandfathered health plans sold in California may consider only age, geographic area and family size as rating factors. While tobacco use is an allowable rating factor under the ACA, this factor is not used as one of the rating factors in California.

Rebate
An amount paid by a health plan to a policyholder when the health plan does not spend at least 80-85% of the premiums it collects on medical services or activities that improve quality. If a health plan spends less than 80-85% of premiums on these areas, the health plan must return the portion of premium dollars that exceeded the limit to its policyholders. This is commonly known as the Medical Loss Ratio (MLR) rule. (See Medical Loss Ratio)

Risk Pool
Groups of individuals whose medical costs are combined and averaged and used by health plans to calculate health coverage premiums.

Small Group Market
Health coverage offered to small businesses (defined in California as employers with 2 to 50 employees). Effective 2016, the ACA will broaden the small group market to employers with 1 to100 employees.

For more information about group health plans, visit: http://www.healthhelp.ca.gov/HealthPlansCoverage/GroupHealthInsurance.aspx.