Health insurance terminology

Basic terms

• Consumer - An individual "consuming" health care resources. This term was made fashionable in 2003/2004 with the introduction of HSA/HDHPs.
  
• Carrier - An insurance carrier. Just to make things confusing, also referred to as "plan provider," not to be confused with "provider" as listed below.
  
• Consumer-Directed Health - Broadly, CDH is the idea that consumers with some "skin in the game" (i.e. they have to spend more than a $15 co-pay to access services beyond preventive care) are more likely to use preventive care services and avoid unnecessary care. The goal of CDH is behavior modification to reduce medical cost trends.
  
• Claim - An insurance term referring to a notification of requested payment for an amount that is based on the terms of the policy.
  
• Dependent - A spouse, child or other person eligible to be added to a subscriber's health insurance.
  
• Life - One person. Generally used in the context of membership reporting (e.g. "Blue Shield of California has 500,000 TriCARE lives").
  
• Network - The panel of physicians contracted to provide services to a health insurer's population.
  
• Payer - The party ultimately responsible for reimbursing providers. Can be a health insurer, the government (for Medicare, TriCARE, SCHIP and Medicaid) or an employer (in the case of a self-funded plan).
  
• Provider - A physician, medical group, facility, or other direct health care provider.
  
• Risk - An insurance term referring to financial liability; an entity taking on risk agrees to reimburse the beneficiary/subscriber for certain costs under specific conditions in exchange for a monthly premium.
  
• Subscriber - The primary health insurance enrollee.
  
• TPA - Third Party Administrators generally do not take on risk and instead process claims for self-funded employers.

Insurance types

• Fee-for-service - See indemnity.
  
• Fully insured - In a fully-insured plan, the health insurer takes on risk in exchange for a monthly premium. The insurer keeps any revenue not spent on health care or other expenses as profit.
  
• HMO - Health Maintenance Organizations use volume-direction to negotiate discounts with a narrow panel of providers, require that members see contracted providers only, and often require that primary care physicians act as gatekeepers to additional care (i.e. they refer members to specialists). Often, HMOs will pay medical groups a "premium" (known as a capitation payments; these medical groups are known as capitated groups) to take on risk for members and manage their care.
  
• Indemnity - Also known as fee-for-service, indemnity plans pay providers per procedure and generally have no network restrictions.
  
• Medicaid - An amalgamation of federal and state programs intended to insure low-income populations.
  
• Medicare - The recently-revamped federal insurance program for seniors. Providers are paid either on a fee-for-service basis or by private insurers through the Medicare Advantage (MA) program. The largest MA insurers are UnitedHealth (through its SecureHorizons brand) and Humana.
  
• POS - Point of Service plans add a third tier of less-expensive physicians to the PPO model.
  
• PPO - Preferred Provider Organizations negotiate contracts with a broad panel of physicians based on volume-direction. Because more physicians are involved, and because PPOs do not require that members only see contracted providers, network discounts are often smaller than for HMOs. PPOs effectively separate providers into two tiers: preferred (contracted) and non-preferred (non-contracted); members pay more to use non-preferred providers.
  
• SCHIP - The State Children's Health Insurance Program is a federally- and state-funded program that provides insurance to uninsured children from poorer families.
  
• Self-funding - A large employer can choose to take on financial risk for its employees' health care. Generally, the employer pays a fee to an insurer or a Third Party Administrator (TPA) to process health care claims, and to provide a network of contracted providers and other services. The benefits of this arrangement are a) that the employer, rather than a health insurer, keeps the money that is not directly spent on health care and b) that self-funded health plans are exempt from state coverage mandates.