Useful Terms

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

General Terms

A

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

Appeal
A request to your health plan asking that it 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). Learn more about authorization and pre-authorization on the DMHC's Referrals and Approvals page.

B

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. Learn more about balance billing on the DMHC's Frequently Asked Questions page.

Benefit
A service covered by your health insurance.

Benefits Package
All the services covered by your health insurance.

C

Capitated Basis
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.[Cal. Code Reg. § 1300.76(d)]

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 keep your group health plan for a certain amount of time if your job ends, your hours are cut, or you change jobs and there is a waiting period before your new health plan starts. Learn more on the DMHC's Keep Your Health Coverage (COBRA) page.

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 any potential side effects that may occur.

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

Continuity of Care
Your request to continue seeing your doctor in certain cases, even if your doctor leaves your health plan or medical group. Learn more on the DMHC's Continuity of Care page.

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.

D

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.

E

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.

Exclusive Provider Organization (EPO)
An exclusive provider organization (EPO) plan is a network of individual medical care providers, or groups of medical care providers, who have entered into written agreements with an insurer to provide health insurance to subscribers. As a member of an EPO, you can use the doctors and hospitals within the EPO network, but cannot go outside the network for care.

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).

F

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

G

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. Learn more on the DMHC's Types of Coverage page.

H

Health Maintenance Organization (HMO)
An HMO is a kind of health insurance that has a list of providers, such as doctors, medical groups, hospitals, and labs. You must get all of your health care from the providers on this list. This list is called a network. Learn more on the DMHC's Types of Plans page.

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.

I

Independent Medical Review (IMR)
A review of your health plan's denial, modification, or delay of your request for health care services or treatment. The review is provided by the DMHC and conducted by independent medical experts. Your health plan must pay for the service if an IMR decides you need it. The complaint form is available online.

Individual Health Insurance
Insurance you buy on your own, not as part of a group. Learn more on the DMHC's Types of Coverage page.

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

L

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

M

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).

N

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.

O

Open Enrollment Period
The time period when you must decide either to stay in your current health plan or to join another health plan. 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.

P

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

Preferred Provider Organization (PPO)
A PPO is a preferred provider organization. A PPO is a good plan for people who want to see providers without prior approval from their health plan or medical group and who do not want to choose a primary care doctor. Learn more on the DMHC's Types of Coverage page.

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 health 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.

R

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.

S

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. Learn more on the DMHC's Care of Illness page.

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).

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.

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

U

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. Starting in 2014, individual health plans are no longer allowed to refuse to cover you or charge higher premiums because you have a pre-existing condition.

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.

Y

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

A

Actuarial Certification
A health plan's stated reason or explanation as to why a proposed rate increase is needed. The certification includes information such as (1) a statement of the qualifications of the actuary issuing the certification, (2) a statement of opinion that the proposed rates are actuarially sound in aggregate for the particular market segment (i.e. individual or small group), (3) a complete description of the data, assumptions, rate factors and methods used to determine the premium, and (4) a statement of opinion on whether the rate increase is reasonable or unreasonable.

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) limited the factors that health plans offering non-grandfathered coverage can use to determine premiums in the individual and small group markets. This is known as Adjusted Community Rating. Specific allowed factors are: age, family size, geographic rating area, and tobacco use.

Administrative Expenses (per 45 CFR 158.160)
Business expenses associated with general administration, agents and brokers fees and commissions, direct sales salaries, workforce salaries and benefits, loss adjustment expenses, cost containment expenses, and community benefit expenditures, and prescription drug rebates and other price concessions retained by a provider of pharmacy benefit management services.

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.

Affordable Care Act (ACA)
The Affordable Care Act (ACA) is a comprehensive federal health care reform law enacted in March 2010. The law was enacted in two parts: The Patient Protection and Affordable Care Act (PPACA) and the Health Care and Education Reconciliation Act. The name Affordable Care Act is used to refer to the combined version of the law.

After-Tax Profit Margin
A financial performance ratio used to determine profitability. It is calculated by dividing net profit after taxes by revenue. Net profit after tax is defined as total revenue less total costs (claims, administrative, selling, and taxes).

ACA Insurer Fee
Effective January 1, 2014, the Affordable Care Act (ACA or health care reform) imposed a new annual fee on health insurance providers based on their market share of net premiums written, or the sum of premiums earned from all policies, during the previous year.

C

Claims Experience
Historical claim and capitation payments from the 12-month (usually) base experience period used to develop future premium rates.

Covered California
Covered California is the state marketplace established under the Affordable Care Act that connects Californians to accessible, quality health coverage.

Covered California for Small Business
Covered California operates a specific program that offers new health insurance choices to small businesses and their employees. The program is designed specifically for employers with 100 and fewer eligible employees to give them unprecedented opportunities to offer a variety of health insurance plans to their employees. Through Covered California, employers and their employees can choose the plans that fit their needs and their budgets.

E

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. (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 health coverage marketplace in which individuals and small businesses shop for and purchase competitively priced qualified health plans. California's Exchange is known as Covered California. Learn more on Covered California's website.

Exchange User Fee
This fee is to cover the administrative costs of running California's Exchange, Covered California. This fee is paid to Covered California by qualified health plans (QHP) participating in the Exchange. QHP issuers will recover their exchange user fee from policyholders in the form of premium increases.

F

Fee-for-Service (FFS) Claim
A fee-for-service claim is a method in which doctors and other health care providers are paid for each service performed.

G

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 in California.

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.

I

IBNR
Incurred But Not Reported – refers to an unpaid claim liability or claim reserve established by the health plan for healthcare services that have been rendered by the provider but not yet paid by the plan. This is also referred to as Incurred But Not Paid (IBNP).

Income Tax
Tax imposed on individuals or corporations (taxpayers) that may vary with the income or profits (taxable income) of the taxpayer. Details vary widely by jurisdiction (e.g. federal, state)

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, review the DMHC's Types of Coverage page.

L

Large Group Market
A term used to refer to employer-based health coverage offered by businesses with more than 100 employees.

M

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

For more information about benefits and rights, review the DMHC's page about Your Health Care Rights.

MCO Tax
The federal government approved the state’s specialized tax on Managed Care Organizations (MCO) in an effort to help California fund Medi-Cal, a government health insurance program which provides needed health care services for low-income individuals and families.

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%.

Medical Trend
The growth or change in medical costs per member measured over a defined period of time. Medical claim cost trends are generally considered to be composed of two major components – a trend in price (unit cost) and a trend in utilization. Medical trends may be analyzed by aggregate benefit category such as inpatient hospital, outpatient hospital, and professional services.

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)

Morbidity Change
Any adjustment made to the experience period claims to account for anticipated changes in the average health status (i.e. frequency or severity of disease or illness) of the issuer's covered population from the experience period to the projection period.

N

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.

P

Patient-Centered Outcomes Research Institute (PCORI)
The Patient-Centered Outcomes Research Trust Fund fee is a fee on issuers of specified health insurance policies and plan sponsors that help to fund the Patient-Centered Outcomes Research Institute (PCORI). The institute will help, through research, patients, clinicians, purchasers and policymakers, in making informed health decisions by improving the quality and relevance of evidence-based medicine.

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

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.

Per Member Per Month (PMPM)
PMPM is a calculation used by health plans to determine an average amount (e.g. premium, claim cost) for each member per month. For example, the average monthly premium can be determined by dividing total premiums owed over a specified period of time (e.g. year) by the total member months.

Q

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.

R

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, search via the page for its Rate Review Filings database.

For more information about CDI’s rate filings, search via the page for its Rate Filing system.

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 only consider 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)

Reinsurance Contribution
The Affordable Care Act (ACA) requires all health insurance issuers and third-party administrators on behalf of self-insured group health plans to make contributions under the Transitional Reinsurance Program to support payments to individual market issuers that cover high-cost individuals (payment-eligible issuers). The Transitional Reinsurance Program is a temporary program that operated for benefit years 2014 through 2016.

Risk Adjustment Fee
This fee is intended to cover the administration of the ACA's risk adjustment program. The program is intended to transfer funds from insurers with a relatively low-risk enrollee population to insurers with a relatively high-risk enrollee population, with a goal of reducing incentives for insurers to avoid high-risk enrollees.

Risk Adjustment Payment (Receipt)
The ACA’s risk adjustment program is intended to reinforce market rules that prohibit risk selection by insurers. The program accomplishes this by transferring funds from plans with lower-risk enrollees to plans with higher-risk enrollees. The goal of the risk adjustment program is to encourage insurers to compete based on the value and efficiency of their plans rather than by attracting healthier enrollees.

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

Rx Trend (Prescription Drug Trend)
The growth or change in prescription drug costs per member measured over a defined period of time. Pharmacy claim cost trends are generally considered to be composed of two major components – a trend in price (unit cost) and a trend in utilization (prescriptions). Pharmacy trends may be analyzed by drug tier – generic, preferred brand, non-preferred brand, and specialty.

S

Selling Expenses
Costs incurred by the sales department within health plan organization. These costs typically include the following: sales commissions, sales administrative staff salaries and wages.

Single Risk Pool
To determine the members of a single risk pool, a health insurance issuer must consider the claims experience of all enrollees in all health plans (other than grandfathered health plans), subject to section 2701 of the Public Health Service Act and offered by such issuer in the individual or small group market, including those enrollees who do not enroll in such plans through the Exchange.

Small Group Market
A term used to refer to employer-based health coverage offered by businesses with 1 to 100 employees.

For more information about group health plans, review the DMHC's Types of Coverage page.

U

Unified Rate Review Template (URRT)
The Unified Rate Review Template (URRT) is a federal form that is required for any rate increase in a single risk pool compliant plan. This template may also be used for compliance with applicable state requirements. Additionally, it is intended to capture information needed to review rate increases of health insurance coverage offered through and outside an Exchange, and ensure compliance with the single risk pool methodology, including allowable market level index rate adjustments to reflect risk adjustment payments and charges, and other Federal rating requirements.