Appendix A–Glossary

Access: Degree to which appropriate treatment is available, timely, geographically feasible, culturally sensitive, and affordable.

Actuarial Study: Analysis of past utilization data for specified groups in order to estimate future costs for each group. Built upon assumptions where necessary, the final analysis combines all estimates to compute the cost per covered person per month (PMPM).

Administrative Services Only (ASO): Health care organization provides administrative support services only for a self-funded plan or startup MCO.

Adverse Selection: Situation where a health care organization has a disproportionate share of high utilizing, high risk recipients and/or expensive-to-treat enrollees.

Average Length of Stay (ALOS): Duration of treatment in a 24-hour treatment setting, usually expressed in days.

At Risk: Situation where a health care organization is vulnerable to providing or paying for more service delivery than is paid through premiums or per capita payments.

Beneficiary: A subscriber or dependent eligible for health care services (also: enrollee, member).

Benefit Package: Contractually defined set of services in which the costs, in full or in part, are borne by the insurer.

Capitation: A method of health care financing and delivery which pays a fixed amount of money per member for a specified set of services for a specified time.

Carveout: Within the managed care industry, it generally refers to a situation where mental health and/or AOD treatment is separated from physical medical care and managed as a separate entity.

Case Mix: The overall clinical and diagnostic profile of a defined population which influences intensity, cost, and scope of services typically provided.

Case Rate: A predetermined "package rate" for delivery of a specified set of procedures or services to a specified population.

Closed Panel: PPO (see below) in which enrollees can only use a specified group of providers in order to receive benefits.

Coinsurance: Percentage of covered expenses the insured party must pay for health care services above and beyond the deductible.

Community Rating: A method of establishing a capitation rate which is based on the average cost of actual or anticipated health care used by all enrollees in a given geographic region, community, or defined population.

Copayment: A form of cost-sharing in which the enrollee pays a fixed amount of money per unit or time of treatment service (e.g., $2 per visit, $20 per inpatient day) designed to reduce utilization of a treatment service.

Cost-Based Reimbursement: Method of reimbursement in which third parties pay providers for services provided based upon the documented costs of providing that service.

Cost Sharing: Health insurance practice which requires the insured person to pay some portion of covered expenses (e.g., deductibles, coinsurance, copayments) in an attempt to control utilization and allow lower premium payments.

Covered Days: Maximum number of days for which an insurer will reimburse for services rendered. Days may be limited per episode of illness, per year, per lifetime, or per length of policy.

Deductible: A fixed amount of money that the member must pay for specified medical services before the insurer will pay for further services within a defined period of time.

Enrollee: See beneficiary.

Exclusive Provider Organization (EPO): A "closed panel" PPO in which patients may only use a specified group of providers in order to receive benefits.

Experience Rating: A method of establishing health insurance premiums in which a premium for a specified population is based on the average cost of actual or anticipated health care used by members of that population. Variables such as age, gender, and health status affect that rating.

Federally Qualified HMOs: An HMO that has applied for and met Federal HMO requirements and laws.

Fee-for-Service: A common and traditional method of reimbursement for services rendered.

First-Dollar Coverage: Health insurance coverage that has no deductible. Copayments and coinsurance may be present.

Freestanding Facility: Usually refers to an autonomous treatment service that is not physically connected to a hospital or to other services (e.g., a freestanding detoxification unit).

Gatekeeper: A person or entity at the entry point of treatment who either provides all care, triages enrollees to appropriate care, and/or has the power to authorize or deny the delivery of care.

Group Model HMO: An HMO which contracts for services of treatment professionals in an existing group practice, usually with financial incentives for treatment efficiency.

Health Maintenance Organization (HMO): Organization which provides, or ensures the delivery of, a specified set of prevention, treatment, and rehabilitation services to enrollees for a prepaid amount of money.

Holdback: A portion of a fee which is withheld pending the achievement of a specified outcome or result. Often used in a risk situation, it can be used to strengthen the capacity to enforce a contract provision.

Hold Harmless: A clause sometimes included in a managed care contract which protects the MCO from all costs related to patient claims of injury, regardless of potential malpractice, negligence, or policies of the MCO.

Incentives: Financial incentives (and disincentives) used in managed care contracts to increase the likelihood of specified processes or results.

Indemnity Benefits: Insurance benefits based on payment of a defined amount of money for a specified range of covered services, usually incorporating maximum limits.

Individual Practice Association (IPA): A model in which a management organization is contracted to administer a plan and contract with an association of independent treatment professionals.

Last-Dollar Coverage: Insurance coverage without the imposition of arbitrary upper limits or maximums on treatment or dollars spent.

Length of Stay (LOS): Length of time patients are treated in a 24-hour treatment setting, usually reported as the average number of days of treatment per discharge.

Lock-in Feature: A feature requiring that individual enrollees receive all nonemergency care from the MCO. Care provided outside of the MCO will not be reimbursed by the MCO.

Medical Necessity: The decision by an MCO regarding the need for a particular clinical service. Historically, this term has sometimes been interpreted in an overly restrictive way that is insensitive to the full biopsychosocial nature of addiction treatment.

Member: An alternative term for enrollee, beneficiary, or recipient of health insurance benefits.

Open Panel: Usually refers to an MCO which contracts with a variety of treatment provider subtypes.

Out-of-Area Coverage: Payment for services provided outside of a defined geographic area, with costs paid by the MCO or shared with the treating provider.

Overutilization: Rendering of a service, or demand for services, which are judged to be unnecessary and/or excessive.

Penetration: Generally, a marketing concept which describes what proportion of a given market or population has contracted for services with a specific MCO.

Per Capita: Payment for specified health care services based on the number of enrollees covered, regardless of the number actually receiving services or the amount of services delivered (related to capitation, prospective payment, risk).

Preferred Provider Organization (PPO): Payer directly contracts with individual providers at reduced fees, usually fee-for-service, with a commitment to guaranteed volume. Enrollees have incentives to utilize these providers.

Prepaid Group Practice: A group model HMO in which the group has a set amount of payment to provide service to a defined population; this set amount of payment is determined in advance for the coming year.

Prepaid Health Plan: A contract between an insurer and a group of enrollees, whereby the insurer provides a defined set of services for a fixed premium payment.

Prior Authorization: A requirement imposed by a utilization review system that, in order to be reimbursed for a treatment, the provider must justify the need for this particular treatment to a utilization review clinician before delivering it (also called pre-authorization, precertification, and predetermination).

Proprietary: Generally refers to a for-profit company or to materials "owned" by a company that are not to be shared outside of that company.

Prospective Reimbursement: A reimbursement method in which a provider or other health care system has the amount or rate of payment for defined services to a defined population determined in advance for the coming year. That amount is paid regardless of the number of enrollees served or the amount of services delivered.

Provider-Based PPO: An organized system of treatment providers forming a preferred provider organization (PPO) for the purpose of providing, managing, and overseeing the delivery of care.

Quality Assurance: An organized set of activities intended systematically to ensure quality of care. Deficiencies in care are identified, measured, and systematically remeasured in the context of ongoing staff training and monitoring until an acceptable level of practice is consistently maintained.

Quality Improvement: An organized set of activities, programs, and philosophies intended to assure continuous improvement of specified practices focusing on customer definition, customer satisfaction, active utilization of data, non-hierarchical decisionmaking, efficient group process, teamwork, and a respect for the individual.

Risk: The situation when a provider or other healthcare organization is in a prospective payment system where reimbursement is a predetermined amount per covered enrollee regardless of amount of services provided. The provider is thus liable (i.e., at risk) for any losses or profits which result from how service is allocated. When spending exceeds budget, shortages occur and loss is experienced. When spending is less than budget, profits occur. (See also Shared Risk below.)

Self Insurance: A practice by which an organization assumes complete financial responsibility for medical and/or behavior health treatment costs for its defined group members. Insurance protection against excessive loss can be purchased.

Service Area: A geographic area generally defined by natural geographic boundaries, population distribution, and/or transportation accessibility, whose population is served by a healthcare organization.

Shared Risk: A variation of a risk-based reimbursement system (see Risk above) in which any financial profits or liabilities are "shared" between two or more entities in a contractually defined manner, thereby spreading the risk of unplanned financial loss resulting from underestimates of service needs.

Skimming: A practice by a healthcare organization which attempts to ensure, by a wide variety of practices and processes, that the most healthy, least difficult, lower risk, and/or least expensive to treat are enrolled within the MCO as a means of controlling costs.

Stop-Loss Insurance: Insuring against a specified level of financial risk with a third party.

Stop-Loss Provision: A provision in a risk-based contract that (1) caps the amount of money for which a healthcare organization is responsible when spending for services exceeds budgeted amounts, and (2) that identifies a means (e.g., stop loss insurance) to pay for these services.

Subscriber: The individual who contracts with a healthcare or insurance plan for a defined set of services. The term "subscriber" does not include other individuals (e.g., family members) who may receive services as a result of this contract.

Third Party Payor/Administrator: Generally refers to the organization (e.g., insurer, State agency) that pays for, insures, and/or is responsible for the payment of specified health care expenses.

Utilization Rates: Patterns or rates of use of a single service or type of service usually expressed in rates per unit of population for a defined period of time (e.g., 28 hospital days/per 1,000/per calendar year).

Utilization Review: Evaluation by an outside party of the appropriateness, necessity, and/or efficiency of a given clinical service for an enrollee.

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