Glossary - My Health Insurance Advisor Accept/Reject Admitted Company Adverse Selection Agent

My Health Insurance Advisor - Glossary

Accept/Reject

Accept/Reject –applies to states in which the health care coverage provider uses the applicant’s medical history to approve or deny coverage (Underwritten). In accept/reject (underwritten) states the applicant(s) is either approved or denied based upon underwriting and there is no option to offer coverage by eliminating a particular medical problem. Most states are accept/Reject. In contrast, see exclusion.

Admitted Company

Admitted Company- an insurance company that is licensed and authorized to conduct business in a particular state.

Adverse Selection

Adverse Selection – is a term Insurance companies use to describe the tendency for only those who will benefit from insurance to buy it. Specifically in reference to health care coverage or insurance, unhealthy people are more likely to purchase health insurance because they anticipate large medical bills. On the other hand, people who consider themselves reasonably healthy may decide that medical insurance is an unnecessary expense. For example, if a person only sees the doctor once a year, they would rather run the risk of paying for it out of their own pocket than making a monthly payment for coverage.

Agent

All insurance, including health care plans, is sold by two types of agents:

Independent agents are self-employed, represent several insurance companies and are paid by commission;and
Exclusive or captive agents which represents only one insurance company. Insurance companies that use exclusive or direct agents are called direct writers.

Allowable Charge

Allowable Charge- has no standard meaning and is typically used in conjunction with PPO and POS type policies to indicate that the providers will be paid based upon what the insurance carrier has established. The consequence of such a policy lies hidden in the context of how the plan reimburses providers who are not participating in the PPO network. Generally speaking, a policy that reimburses based upon Usual Customary and Reasonable charges (UCR) is better for the consumer.

Archer Medical Savings Accounts

Archer Medical Savings Accounts (MSA)— (obsolete) was a federal law allowing individuals to set up savings accounts for self-employed individuals or those who work for a company with fewer than 50 employees in conjunction with high-deductible health insurance policies. The Archer MSA program was discontinued as of December 31, 2003. An Archer MSA can no longer be established. However, a rollover from an Archer MSA to an HSA is permitted, and individuals who already have an Archer MSA may keep them

Assigned Physician

The economics, quality of care, and availability of care givers can vary dramatically. For example, the “Closed Panel” HMOs tend to have rigidly enforced standard procedures and guidelines that are used to determine the insured access to the health care they need as a means to contain costs. The “Assigned Physician” model often tends to result in providers spending too little time and delivering minimal care as they get compensated the same regardless of how many patients they see.

Broker

Is a designation that is loosely defined and varies from state in terms of its ethical and legal implications. The general imeaning implies that an insurance broker is one who represents the consumer or client’s interests rather than that of the coverage provider or insurance company. An insurance broker designation generally carries a greater responsibility to seek out the products that best suit the needs of the consumer at a reasonable price. This is in contrast to an agent designation where an agent may represent a single or limited number of entities. Not all states recognize the term legally in connection with sale of health care coverage or health insurance.

Particular caution should be given when the term is used in connection with the Internet. It is often used to make it appear to the consumer that they are representing the consumer when, in fact, the consumer is simply being passed to a website to select a plan from a menu and submit their own application. One cannot be a broker when they are directing a consumer to a specific company’s website to make a choice? Be cautious!

Cafeteria plan

Cafeteria plan -is a type of employee benefit plan based upon Section 125 of the IRS code. The name comes from the earliest such plans that allowed employees to choose between different types of benefits (therefore, the name cafeteria). Employees of employers with cafeteria plans may obtain such benefits as health insurance, group-term life insurance, and flexible spending accounts through the plan. Some cafeteria plans offer an explicit choice of cash or benefits. Most today are operated through a salary reduction agreement or payroll deduction. Deductions under such agreements are often called pre-tax deductions not subject to income tax, or in most cases FICA.

Capitation

Capitation –typically applies to pre-paid medical care plans such as a traditional HMO. It refers to the way in which a health care coverage provider or health insurance company pays the providers participating in their plan. Providers are paid either a fixed monthly fee or reduced flat fee per enrolled member to see any patient enrolled in the plan. Capitation is a cost containment provision used primarily by HMO type plans as a means for the HMO to reduce its medical care expenses. Studies show that capitation may dramatically alter clinical practice patterns and substantially reduce costs. This may not be good news to the policyholder. Capitated health-care delivery systems have strong incentives to avoid patient populations in need of care. This is especially true in the case of patients who are disabled, aged or dying. Capitation provides incentives that are diametrically opposed to those of fee-for-service.

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