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OCR for page 172
B
Glossary and Acronyms
Adverse Selection The disproportionate enrollment of individuals with poorer
than average health expectations in certain health plans. Over time, as plan premi-
ums rise as a result of higher enrollee health care costs, the plan becomes less
attractive to relatively healthy potential enrollees, disproportionately attracting
relatively sicker enrollees in successive enrollment cycles, which results in spiraling
costs.
Affinity Group A group of people with a common organizational interest or
membership, other than for the purchase of health insurance, for example, mem-
bership in a professional society.
Benefit The particular services covered by a health plan and the amount payable
for a loss under a specific insurance coverage (indemnity benefits) or as the guar-
antee of payment for certain services (service benefits).
Charity Care Generally, physician and hospital services provided to persons who
are unable to pay for services, especially those who are low income, uninsured,
and underinsured. A high proportion of the costs of charity care is derived from
services for children and pregnant women (e.g., neonatal intensive care).*
*Adapted from the Academy for Health Services Research and Health Policy glossary at: http://
www.academyhealth.org/publications.glossary.pdf. Accessed February 4, 2002.
172
OCR for page 173
173
APPENDIX B
Coinsurance The percentage of a covered medical expense that a beneficiary
must pay, after any required deductible is met.
Community Rating Calculating premiums based on the average costs of all of
an insurer’s subscribers rather than on the experience of a subgroup or of indi-
viduals.
Copayment A fixed payment per service (e.g., $15 per office visit or procedure)
paid by a health plan member.
Cost Sharing The portion of health care expenses that a health plan member
must pay directly, including deductibles, copayments, and coinsurance, but not
including the premium.
Cost Shifting Transfer of health care provider costs that are not reimbursed by
one payer to other payers through higher charges for services.
Cross-Subsidization Payments made for services rendered to one individual or
group that are used to cover shortfalls in individual payments for services rendered
to another individual or group.
Crowd-Out, Substitution A phenomenon whereby new public programs or
expansions of existing public programs designed to extend coverage to the unin-
sured prompt some privately insured persons to drop their private coverage and
take advantage of the expanded public subsidy.*
Deductible The amount of loss or expense that must be incurred by an insured or
otherwise covered individual before an insurer will assume any liability for all or
part of the remaining cost of covered services. Deductibles may be either fixed-
dollar amounts or the value of specified services (such as 2 days of hospital care or
one physician visit). Deductibles are usually tied to some reference period over
which they must be incurred (e.g., $100 per calendar year, benefit period, or spell
of illness).*
Dependent An insured’s spouse (not legally separated from the insured) and
unmarried child(ren) who meet certain eligibility requirements and are not other-
wise insured under the same group policy. The precise definition of a dependent
varies by insurer or employer.
Disproportionate Share Adjustment, Hospital (DSH) A payment adjust-
ment under Medicare’s prospective payment system or under Medicaid for hospi-
tals that serve a relatively large volume of low-income patients.*
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174 INSURING AMERICA’S HEALTH
Entitlement A legal obligation on the federal government to make payments to
a person, business, or unit of government that meets the criteria set in law.
Congress generally controls entitlement programs by setting eligibility criteria and
benefit or payment rules—not by providing budget authority in the appropriation
act (CBO, 2002).
Equity Concerning fairness and justice, the idea of balancing legitimate, compet-
ing claims of individuals in society in a way that is seen as impartial or disinter-
ested. Distributional equity, which concerns the fair distribution of some good or
service of interest, has been the dominant equity concern both of normative
economic analysis and of health policy makers (Hurley, 2000).
Experience Rating Setting health insurance premiums based in whole or in part
on past claims history of a particular group or its anticipated future claims.
Federal Poverty Level (FPL) One of two federal poverty measurements; also
known as “poverty guidelines.” Issued annually in the Federal Register by the U.S.
Department of Health and Human Services; it applies to persons of all ages in
family units. The guidelines are a simplification of the poverty measurements for
administrative purposes, such as determining financial eligibility for certain federal
programs. In 2003, the FPL for a family unit of one was $8,980; for a family unit
of three, $15,260; and for a family unit of four, $18,400 (see Appendix A, Table
A.1) (DHHS, 2003).
Fee-for-Service An approach to billing for health services in which providers
charge a separate price or fee for each service provided or patient encounter.
Under fee-for-service, the level of expenditures for health care depends on both
the levels at which fees are set and the number and types of services provided.*
Global Budget A budget set in advance to contain costs among a group of
hospitals, where each hospital accepts an aggregate cap on its annual revenues.*
Gross Domestic Product (GDP) The total market value of goods and services
produced domestically during a given period. The components of GDP are con-
sumption (both household and government), gross investment (both private and
government), and net exports (CBO, 2002).
Guaranteed Issue Insurance coverage that does not require the insured to pro-
vide evidence of insurability. Alternatively, it is the requirement that insurers offer
coverage to groups or individuals during some period each year.*
Health Capital The present value of a person’s health over the course of their
lifetime (Cutler and Richardson, 1997).
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175
APPENDIX B
Health-Related Quality of Life A research construct developed by the Centers
for Disease Control and Prevention to help monitor progress in achieving national
health objectives. Its core element consists of four questions that encompass gen-
eral self-reported health status, the number of unhealthy days within a recent time
period (e.g., the month before the interview) for both physical and mental dimen-
sions, and restricted activity days.
High-Risk Pool A subsidized health insurance pool organized by a state as a
subsidized alternative for individuals who have been denied health insurance
because of a medical condition or whose premiums are rated significantly higher
than the average due to health status or claims experience. It is commonly
operated through an association composed of all health insurers in a state. The
Health Insurance Portability and Accountability Act allows states to use high-risk
pools as an “acceptable alternative mechanism” that satisfies the statutory require-
ments for ensuring access to health insurance coverage for certain individuals.
Individual Market, Nongroup Market The insurance market for products sold
to individuals rather than to members of groups. Typically each state regulates its
own nongroup market.
Integrated Delivery System, Integrated Services Network A group of
health care providers and institutions that delivers services across the continuum of
care to a target population and is accountable for the financial and clinical out-
comes of the services delivered.*
Job Lock A distortion in job mobility attributed to employer-provided health
insurance when employees keep jobs they would rather leave for fear of losing
coverage (from Madrian, 1994).
Maintenance of Effort The requirement that states, local governments, employ-
ers, individuals, or other organizations continue spending their own funds at
previous levels to support a particular purpose or program after reform.
Medical Savings Account A vehicle through which individuals can accumulate
funds to pay for health care or insurance premiums, subject to federal income
taxation but tax exempt in some states.*
Medical Underwriting An insurance practice of determining whether to accept
or refuse individuals or groups for insurance coverage (or to adjust coverage or
premiums) on the basis of an assessment of the risk they pose and other criteria
(e.g., insurer’s business objectives).
Nongroup Market See definition for individual market.
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176 INSURING AMERICA’S HEALTH
Out-of-Pocket Expenses Payments made by an individual or family for medical
services that are not reimbursed by health insurance. They can include payments
for health plan deductibles, coinsurance, services not covered by the plan, pro-
vider charges in excess of the plan’s limits, and enrollee premium payments.
Portability of Benefits A guarantee of continuous coverage without waiting
periods (e.g., for a preexisting health condition) for persons moving between
plans.*
Preexisting Condition A physical or mental condition that exists prior to the
effective date of health insurance coverage.
Premium, Total The purchase price of a health insurance policy. Out-of-
Pocket Premium or Employee Share Most workers enrolled in employment-
based policies do not pay the total premium for their coverage but only a part of
it, with the remainder subsidized by the employer. Risk-Adjusted
Premium The price or amount of the premium reflects the expected utilization
of the policy holder or group of enrolled persons and thus the financial liability for
the insurer, often estimated according to the gender, age, and health status of the
insured.
Purchasing Pool A group of people who purchase health insurance jointly.
Quality of Care The degree to which health services for individuals and popu-
lations increase the likelihood of desired health outcomes and are consistent with
current professional knowledge (IOM, 1990).
Reinsurance The spreading of the costs to an insurer of underwriting health
insurance coverage by reselling insurance products in the secondary market.*
Risk Pool A group of people whose actuarial risk is considered together.
Self-Insurance Funding of medical care expenses, generally by an employer, in
whole or part through internal resources rather than through transfer of risk to an
insurer.
Small-Group Market The insurance market for products sold to groups that are
smaller than a specified size, typically employer groups. The size of groups
included usually depends on state insurance laws and thus varies from state to state,
with 50 employees the most common size.*
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177
APPENDIX B
Social Insurance Old-age, disability, health, or other insurance that is mandated
by statute for defined categories of individuals or the entire population, usually
financed by payroll and other taxes.
Spillover Effect A direct effect, either positive or negative, on a person’s or
institution’s welfare or profit developing as a byproduct of some other person’s or
firm’s activity. Also referred to as an economic externality.
Supplemental Coverage In the case of Medicare, private health insurance de-
signed to cover expenses not paid for by Medicare, often designated as Medigap
policies.
Tax Credit, Refundable, Advanceable, Assignable An amount subtracted
from the tax bill to be paid (tax liability). In contrast to a credit, an exemption
subtracts some amount from income on which the tax is computed. If the credit is
refundable, the taxpayer should receive a refund for the amount by which the
credit exceeds the tax liability. An advanceable credit can be used by the taxpayer
for up to a year before the filing date for taxes, for example, to subsidize monthly
premium payments. An assignable credit can be used by the taxpayer to direct
payment of the credit to another party, for example, to an insurer as a premium
payment.
Tax Expenditure The loss of federal tax revenue due to a special exclusion,
exemption, or deduction from gross income in federal tax law, the provision of a
special credit or a preferential tax rate, or a deferral of tax liability (U.S. Congress,
1974).
Tax Incidence The distribution of the final burden of taxation across a popula-
tion, taking into account all shifts in tax payments, for example, the shift in tax
burden from a producer of goods to the consumer by means of a higher price for
the goods.
Uncompensated Care Service provided by physicians and hospitals for which
no payment is received from the patient or from third-party payers. Some costs of
these services may be covered through cost shifting. Not all uncompensated care
results from charity care. It also includes bad debts from persons who are not
classified as charity cases, but who are unable or unwilling to pay their bills.*
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178 INSURING AMERICA’S HEALTH
ACRONYMS
AALL American Association for Labor Legislation
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985
EMTALA Emergency Medical Treatment and Labor Act of 1986
ERISA Employee Retirement Income Security Act of 1974
FPL Federal Poverty Level (see Appendix A, Table A.1)
HIPAA Health Insurance Portability and Accountability Act of 1996
SCHIP State Children’s Health Insurance Program
TA Trade Act of 2002
Representative terms from entire chapter:
insurance coverage
