| Co-insurance | Co-payment
| Exclusive Provider
Organization | Fee for
Service Plan | HCFA 1500 | Health Insurance Organization (HMO) - pros and cons
| Indemnity Plan (IPO) | Independent Physician Association
(IPA) | Managed Care | Point of Service Plan (POS)
| Preferred Provider Organization (PPO) - pros, cons and types
| Primary Care Physician | Referral Authorization Form
| UB-82 | Usual, Customary and Reasonable Rates (UCR)
| Utilization Management
| Worker's Compensation Plan
| Write-Off Amount
Prepared by Mary Hanson
(CyberFamily moderator, and valued advisor to PAL)
group of providers of medical care, other than physicians or
hospitals. These may include laboratories, radiology
facilities; physical, speech, or occupational therapies; and
out-patient surgical facilities.
- A percentage
of either the billed charge, or the contracted amount that the
doctor has agreed to accept as payment in full for services rendered
according to his contract with the managed care company, that is the
patient’s financial responsibility. The amount varies.
- A flat dollar amount
that the patient is required to pay for each office visit to the
doctor. The amount varies. This is a feature of many
managed care plans, usually Preferred Provider, Exclusive Provider
and Health Maintenance Organizations. In general, this is the
patient’s only financial responsibility in these plans, with the
remainder of the patient’s bill being paid for by the insurance
PROVIDER ORGANIZATION (EPO)
- An EPO functions much as an HMO functions. (See definition
for “Health Maintenance Organization”.) The primary
difference is that an EPO is not governed by federal legislation,
and the range of covered benefits may differ from HMO, generally
offering less in the way of well-care benefits. The advantages
and disadvantages of an EPO are the same as for an HMO. EPOs
are governed by state legislation, which is not as strict as federal
legislation, and are allowed only in states that have passed
legislation that permits them to exist. Many insurance
companies that do not have an HMO have formed an EPO to allow them
to compete for more employer groups who want to be able to offer a
wide range of health option choices to their employees.
- A “Fee-For-Service” plan pays the doctor for the services he actually
renders, as opposed to a monthly sum to provide for
all of the patient’s medical needs. Typically, in a
insurance company’s Fee-For-Service plan, the patient may seek
medical care from any provider or facility he or she chooses.
The insurance company requires that the patient pay a calendar year
deductible before the insurance company will begin to pay for
claims. The patient is usually also required to pay a
“co-insurance” amount of the services that are covered after the
calendar year deductible has been met. This co-insurance
amount is a percentage of the area’s “usual, customary and
reasonable rates” (See UCR.). This type of plan is also
referred to as an “indemnity” plan.
billing form developed by the Health Care Financing Administration (HCFA)
for use in submitting physician office billing information to
federal payment sources such as MediCare. This form is used by
most doctor’s offices to submit insurance information to all
payers of medical care, and most managed care companies require that
bills be submitted on this form.
- A form of health insurance where the employee has a specific
amount of money paid each month into a fund by his employer, for all
of the employee’s and his dependents medical care. The
patient has unlimited access to a primary care physician, who is
usually paid a set amount of money each month to provide basic
primary medical care to the employee and his dependents. HMOs
are governed by federal legislation entitled the “Knox - Keene”
act. Ross-Loos was the first HMO, begun in Alaska mining
country, by two physicians named Dr. Ross and Dr. Loos, who agreed
to provide all medical care for the employees at a large mining camp
for a set amount of money per miner per month.
medical expenses are generally limited to office
visit co-payments and a minimal dollar amount, if any, for
generally offer certain “well-care”
services as a covered benefit that may not normally
be a part of other types of health plans, such as immunizations,
annual physicals, and well-child visits.
regarding health care are generally made by the HMO, and the patient
has access to a wide
variety of skilled professionals.
patient has NO coverage if they seek medical care from providers
outside of the HMO providers.
patient has no freedom of choice as to which providers he seeks care
patient has no freedom of choice if there are several treatment
options available from which to choose.
patient has no freedom of choice as to where the services are
drugs – usually name-brand drugs – may not be covered under this
may be treatment protocols which must be tried first, before
treatment plans can become more “creative”.
- See definition for “Fee-For-Service”
PHYSICIAN ASSOCIATION (IPA)
- A group of physicians who form a corporation for the purpose of
negotiating agreements that are favorable to all of the members of
the group. Many IPAs are associated with a hospital that may
offer their expertise in marketing, management, financial resources,
etc., in return for the IPA agreeing to contract with the managed
care companies that the hospital has contracted with, and referring
their patients to the hospital.
- A health insurance plan that incorporates any medical care review
activity designed to provide the most appropriate level of care to a
patient, given his medical condition, that has the potential to
reduce medical costs. Some “managed care” activities are:
the act of requiring the approval of an independent utilization
management organization before admitting a patient to the hospital,
or referring a patient to a specialist.
- A point of service plan is a combination of two types of insurance
coverage, first, an indemnity or fee-for-service plan, and second,
an exclusive provider organization plan or a health maintenance
organization plan. The patient can still realize substantial
savings in out-of-pocket expenses if they use the EPO or HMO plan,
but also has the option of continuing to use non-EPO or non-HMO
providers, at much greater out-of-pocket expense.
PROVIDER ORGANIZATION (PPO)
- Preferred Provider Organizations began to appear in the late 1970s
and early 1980s, as an alternative to HMOs, and are a way in which
employers could manage their escalating health care costs. In
a PPO, there is a panel of providers who have signed contracts with
the PPO, agreeing to accept a reduced payment for services rendered
in return for having patients directed to their offices by way of a
Provider Directory given to employees and their dependents.
can use the Plan’s “Preferred Providers” at a minimal
out-of-pocket expense (usually a nominal office visit co-payment),
and do not have to meet a calendar year deductible or pay a
co-insurance for the services they receive.
“Preferred Hospitals” are used, the out-of-pocket
expense to the patient is generally substantially lower than it
would otherwise be.
hospitals and physicians are members of PPOs.
also have the option of having some coverage if they choose to
use non-preferred providers, although their
out-of-pocket expense is much greater, and they may have to meet a
calendar year deductible and pay a co-insurance for non-preferred
provider services. This option, however, if very
appealing to people who want to continue to see one non-preferred
provider (for an annual gynecological exam, for example), but are
willing to change their other doctors for “preferred” providers.
freedom of choice is lost by the patient if they choose to use only
are two types of PPOs. One is a “non-gatekeeper” PPO, and
the other is a “gatekeeper” PPO.
“non-gatekeeper” PPO gives employees a provider
directory that includes the names of specialists, since patients may
go directly to them for medical care, without a referral form from a
primary care physician.
“gatekeeper” PPO requires that the patient seek medical care
first from a primary care physician. If the patient
seeks medical care directly from a specialist, without a referral
from a primary care physician, he or she may have to pay the
specialist’s charges in full, with no assistance from the
- Most managed care companies define a primary care physician as any
physician who is: an internist, a family practice physician, a
general practitioner, a pediatrician or, sometimes, a gynecologist.
See “SPECIALIST’ for more information.
- A form used by managed care companies for referrals to
specialists, and sometimes for referrals to various ancillary
providers. Some companies allow the doctor to use his prescription
pad and others require their own form to be used. Refer to the
Care Resource Directory1 page, and call
the number under PRIOR
AUTHORIZATION REQUIREMENTS to find out which form to
use, and whether or not someone other than your doctor must approve
the referral before it happens.
Most managed care companies distinguish between “specialist” and
“primary care” physicians. Specialists are generally any
medical provider who is NOT a family practice physician, a general
practitioner, an internist, a pediatrician, or, sometimes, a
gynecologist. The definition varies from company to company,
and some companies consider only family practice physicians and
general practitioners as primary care providers. This
distinction between types of providers was due to the difference in
practice patterns of the two groups. Specialists tend to cost
more than primary care physicians, even when the diagnosis is the
same. It is thought by insurance companies that specialists
order more expensive tests than primary care physicians and are
likely to pursue more aggressive and expensive forms of treatment
than primary care physicians. This is why many managed care
companies require approval for referral for specialist services.
They want to be certain that the primary care physician has
attempted to treat the problem, and genuinely found that the
concentrated training and experience of a specialist is medically
“universal billing” (UB) form used by hospitals to submit
billing information to insurance companies for reimbursement.
The UB - 82 was developed by the federal government in 1982 (hence
the “82”), and is used by virtually all hospitals for bill
(USUAL, CUSTOMARY AND REASONABLE RATES)
- Insurance companies gather mountains of information regarding what
physicians charge for all medical services that are rendered.
They may choose to use their own claims experience (based on charges
for service codes that appear on claims that are submitted to them)
or they may purchase this data, usually from HIAA (Health Insurance
Association of America, to which most insurance companies belong).
customary and reasonable rates are the average that is charged by
the doctors within a given area (most companies can break down
charges to an individual zip code, which allows for geographic
differences in the price of providing medical care to their insureds).
insurance companies that pay a percentage of the doctor’s bill,
with the patient being responsible for the remainder, pay on the
basis of “UCR”. If the bill is $100, and the coverage is
for 80%, but the average charge in that community is only $90, the
insurance company will only pay 80% of $90, and the patient is
required to pay the remainder.
insurance companies will only pay the dollar amount that equals 80%
or 90% of the local UCR, and the patient is responsible for the
is one way that insurance companies keep their costs down, and can
remain competitive in the marketplace with employers. However,
it is really cost-shifting to the employee, since it reduces
what the insurance company pays, but it increases
what the employee pays.
- this term applies to a variety of functions developed by insurance
companies to control escalating health care costs. Some types
of Utilization Management functions are:
- medical personnel review the medical history of a patient, the
treatment that has been tried on an out-patient basis, and
determines if hospital admission is required. If the decision
is that the patient needs in-patient care, generally a number of
days, referred to as a “LOS” (length of stay) will be assigned.
- the day before the patient is scheduled to be discharged from the
hospital, a medical person from the Utilization Management company
will contact the doctor or the hospital, obtain medical information
on the patient’s progress, and determine if additional days need
to be approved.
- when the patient no longer needs in-patient care, the UM company
will talk with the doctor and the discharge planner at the hospital,
and will decide if more care will be needed as an out-patient, such
as home health care, hospital beds, etc., and if so, will authorize
these and arrange for them.
- Some types of medical problems are long-term and have the ability
to incur substantial medical costs. Some of these are
premature births, cancers, AIDS, brain injuries, spinal cord
disease, etc. When patients are diagnosed with these
conditions, a “Case Manager” may be assigned to coordinate care
for the insurance company. The Case Manager will make
arrangements for and coordinate all care, from discharge from the
hospital, to in-home care, nursing home placement, etc. The
Case Manager’s role is primarily administrative in nature,
although they do have medical backgrounds.
- Many UM companies require that referrals to specialists be
approved before the patient is referred. For more information,
- Most UM companies require that some of the more expensive
diagnostic tests receive their approval before they are performed,
in order for the insurance company to pay for them. Due to the
increase in malpractice rates, many physicians practice
“defensive” medicine to protect themselves, and this may involve
the ordering of more expensive diagnostic tests than are actually
medically necessary. Having an outside UM company assist in
the decision making takes some of the responsibility for the
practice of defensive medicine off the shoulders of the doctor,
saves the insurance company money (which in turn saves the employer
money), and may prevent unnecessary expense for all involved, and
inconvenience and discomfort to the patient.
- All employers in the state of California are required to provide
their employees with Worker’s Compensation coverage that protects
them if they are injured while they are on the job. This
coverage is free to the employees and is paid for in full by the
employer. Some Worker’s Compensation Coverage Insurance
Companies have developed what is similar to a Preferred Provider
Organization to help control their Worker’s Compensation Insurance
premium costs. By accessing a network of contracted providers
who agree to provide medical care for employees injured on the job,
at reduced rates in return for having injured employees referred to
their offices, the employers save money. There is neither a
financial advantage or disadvantage from the employee’s point of
view, since the expenses are paid by the employer. The only
disadvantage from the employee’s point of view is that they must
use the network of contracted providers for any medical care that is
rendered after the first 30 days
of care. During the first 30 days of medical
care, the injured employee may choose his own provider of care.
If care is not completed within the first thirty days, the employer
may require that the employee seek continued care from the network
of “preferred” providers.
- The difference between the billed charge and the amount that the
doctor has agreed to accept as payment in full for the services
rendered. The “write-off amount” cannot be billed to the