Managed Care – A system designed to maintain the quality of healthcare in a cost-effective manner. It encompasses both the delivery of healthcare and payment for those services. Instead of simply paying claims submitted by independent physicians and hospitals, organizations enter into formal agreements with providers, set guidelines for healthcare providers and monitor their effectiveness.

Health Maintenance Organization (HMO) – This is the earliest form of managed healthcare. In an HMO, enrollees usually choose from a pre-selected group of physicians and/or hospitals, and pay a flat fee per person per month. Your family’s care will be managed by a primary care physician. This physician will determine the type of treatment you may need and refer you to a specialist if needed. In exchange for lower out-of-pocket costs, you obtain all medical care from physicians, hospitals and labs in the HMO’s network, as directed by your primary care physician.

Preferred Provider Organization (PPO) – These plans allow you to select your primary care physician, specialist or hospital, but you pay a smaller portion of the medical charges if you see a “preferred provider” who agrees to charge the health plan discounted fees. These discounts are usually passed on to consumers through lower out-of-pocket costs.

Traditional Indemnity – This is the traditional (indemnity) type of payment to the provider, which pays for whatever physician or hospital you choose. The insurance companies pay the physicians and hospitals the fees they set and charge. This most common type of plan typically offers the most flexibility in choosing a physician but has significantly higher out-of-pocket costs.

Capitation – A fixed fee paid to a provider for each participant in a group plan. Usually the provider is given a maximum amount of money per person no matter how many or few services are used.

Co-Insurance – A share of healthcare premiums that is paid by the insured.

Co-Payment – The amount you pay after satisfying your deductible. In some plans, this is a small fixed fee paid at the time you receive service.

Covered Lives – The total number of people in a health plan or the people covered by an insurer.

Deductible – The amount you or your family must pay before your insurance starts paying benefits.

Employer Contribution – The portion of the healthcare premium paid by the employer.

Exclusions – Health conditions that are specifically not covered by a health plan, usually a pre-existing health condition.

Fee-for-Service – This is the traditional (indemnity) type of payment to providers, which pays for whatever physician or hospital you choose to utilize. The insurance companies pay the physicians and hospitals the fees they set and charge.

Maximum Out-of-Pocket Costs – The maximum amount of money you will have to pay from your own funds for deductibles, co-payments or other expenses during a specified period of time.

Network – A list of hospitals, physicians, laboratories, pharmacies and other healthcare providers who participate in the plan’s health delivery program.

Physician Hospital Organization (PHO) – A PHO consists of a hospital and physicians in individual and group practices who are organized for the purpose of contracting with managed care organizations. Several plans may be available that offer the PHO panel of physicians and the participating hospital for inpatient and outpatient services.

Plan – This is the system selected by you or your employer to provide healthcare coverage.

Pre-certification – In order to assure that you will receive the fullest coverage, certain plans require you to report in advance any non-emergency surgery, procedures and/or hospitalizations you will undergo. Some plans may require immediate notification, even in an emergency. Without this certification, you may not receive maximum coverage for care provided.

Pre-existing Condition – A condition such as heart disease or diabetes that may be excluded from coverage by a health plan altogether or for a limited period after enrollment.

Premium – The fee a policyholder pays to an insurance company for coverage. It does not include deductibles or co-payments.

Preventive Care – Services designed to keep patients healthy, such as check-ups, well baby care, immunizations, Pap smears and mammograms.

Primary Care Physician – A physician who practices internal or family medicine, pediatrics or general practice and acts as a gatekeeper to decide when patients need to be seen by a specialist. They often stress preventive care and wellness.

Provider – Any person or organization that provides healthcare, such as a physician, hospital, nursing home, clinic, pharmacy, physical therapist or any other formal healthcare giver.

Third Party Administrator (TPA) – A person or firm that takes on the administrative burden of operating an employee benefits plan. The majority of a TPA’s work is to review and pay claims.