What It All Means

Adverse selection

A situation in which people with more serious and costly illnesses apply for membership in particular health insurance plans, resulting in those plans having higher medical costs than groups that have healthier members.

Allowable expenses

The necessary, customary and reasonable expenses that an insurer will cover.

Alternative treatment plan

Provision in managed-care arrangements for treatment outside of a hospital.

Ambulatory care

Medical care provided on an out-patient (non-hospital) basis.

Average length of stay

Measure used by hospitals to determine the average number of days patients spend in their facilities. A managed care firm will often assign a length of stay to patients when they enter a hospital and will monitor them to see that they don't exceed it.

Capitation

Method of payment for health services in which the insurer pays providers a fixed amount for each person served regardless of the type and number of services used. Some HMOs pay monthly capitation fees to doctors, often referred to as per-member, per-month amount.

Case management

A managed care technique in which a patient with a serious medical condition is assigned an individual who arranges for cost-effective treatment, often outside a hospital.

Coinsurance or co-payment

An amount a health insurance policy requires the insured to pay for medical and hospital service, after payment of a deductible.

Community rating

A method, based on geographical area, of calculating health insurance premiums for which employer groups and individuals pay the same rates.

Concurrent review

A managed care technique in which a representative of a managed care firm continuously reviews the charts of hospitalized patients to determine if they are staying too long and if the course of treatment is appropriate.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Federal law that requires employers with more than 20 employees to extend group health insurance coverage for at least 18 months after employees leave their jobs. Employees must pay 102% of the premium.

Cost containment

An attempt to reduce the higher-than-necessary costs surrounding the allocation and consumption of health care. These costs may arise from inappropriately used services and from care that can be provided in less costly settings without harming the patient.

Cost shifting