The following definitions may be useful to you in your navigation through the insurance appeals process.
Refers to study, assessment, diagnosis, treatment, and prevention of mental illness and substance use disorders.
Classifications of benefits
For the purposes of the federal parity regulations, plans are divided into 6 different categories of benefits:
Refers to money that an individual is required to pay for services, after a deductible has been paid. Coinsurance is often specified by a percentage. For example, the employee pays 20 percent toward the charges for a service and the employer or insurance company pays 80 percent.
A specific dollar amount that your health insurance company may require that you pay out -of-pocket each year before your health insurance plan begins to make payments for claims. Under the parity regulations, plans may not implement a separate deductible for mental health or addiction treatment.
ERISA (Employee Retirement Income Security Act of 1974)
Establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans. Section 514 preempts all state laws that relate to any employee benefit plan, with certain, enumerated exceptions, including state insurance, but a limitation is placed on the insurance exception, which essentially provides that state insurance law cannot regulate employer self-funded benefit plans. These self-funded plans are often referred to as ERISA plans.
In a traditional fully insured health plan, your company pays a premium. The premium rates are fixed for a year, and you pay a monthly premium based on the number of employees enrolled in the plan. The insurance company pays all of the medical claims for the employees therefore holds the risk.
A prescription drug which is the same as a brand name prescription drug, but which can be produced by other manufacturers after the brand name drug’s patent has expired. Generic drugs are usually less expensive than brand name drugs and are usually the preferred drug of a health plan.
This refers to providers or health care facilities that are part of a health plan’s network of providers with which it has negotiated a discount. Insured individuals usually pay less when using an in-network provider, because those networks provide services at lower cost to the insurance companies with which they have contracts. In-network is part of two classifications of benefits under the law, in-network, inpatient and in-network, outpatient.
A term used to describe a person admitted to a hospital for at least 24 hours.
Generally, those are business with more than 50 employees. The laws about how coverage can be issued to large groups are different than those for small groups, and the way that premium rates are determined is also different. These health benefit plans are regulated under the parity law and must meet the standard.
A basic criterion used by health insurance companies to determine if healthcare services should be covered. A medical service is generally considered to meet the criteria of medical necessity when it is considered appropriate, consistent with general standards of medical care, consistent with a patient’s diagnosis, and is the least expensive option available to provide a desired health outcome.
No More Restrictive
Parity regulations clarify this as, “If a restriction is applied to substantially all the benefits and it is the predominate standard it can be applied no more restrictively to the mental health or addiction benefits than the medical/surgical benefits.” For example, a plan may not make a determination that no mental health inpatient treatment is covered due to lack of medically necessity, but provide panel review to determine the medical necessity of inpatient treatment for medical/surgical benefits.
Non-Quantitative Treatment Limitation
A limitation that cannot be expressed numerically. These are cost containment strategies, often referred to as care management, includes requirements such as prior authorization, step-therapy, prescription drug formulary creation, utilization review, etc.
Usually refers to health care providers who are considered nonparticipants in an insurance plan. Depending on an individual’s health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual’s insurance company. Out of network applies to two of the classifications of benefits: out-of-network, inpatient and out-of-network, outpatient.
Insured health care costs for which the consumer is responsible, because of the application of deductibles, coinsurance and co-payments.
The quality or state of being equal. Mental health parity is the recognition of mental health conditions and addictions as equivalents to physical illnesses.
The parity regulations define “predominant” as a requirement or limit applied to 50% of medical/surgical spending in a category. Requirements or limitations for one medical/surgical benefit in a category do not qualify as predominant. For example, a plan may not implement visit limitations for all mental health or addiction inpatient treatment if it only limits orthopedic inpatient treatment on the medical/surgical side.
Prescription Drug Formulary
A list of prescription medications selected for coverage under a health insurance plan. Drugs may be included on a drug formulary based upon their efficacy, safety and cost-effectiveness. Some health insurance plans may require that patients obtain preauthorization before non-formulary (non-preferred) drugs are covered or require that a patient pay a greater share or all of the cost involved in obtaining a non-formulary prescription.
Prior Authorization (pre-certification, prior authorization)
Most commonly refer to the process by which a patient is pre-approved for coverage of a specific treatment or prescription drug. Health insurance companies may require that patients meet certain criteria before they will extend coverage for some treatments or for certain drugs. In order to pre-approve such a drug or service, the insurance company will generally require that the patient’s provider submit notes and/or lab results documenting the patient’s condition and treatment history.
Quantitative Treatment Limitation
A limitation on treatment that can be expressed in numbers. Examples include: visit limitations, inpatient day limitations, and co-insurance requirements such as co-payments.
A self-insured plan is when the employer holds the risk of paying for the employee’s health benefit claims. Normally an employer buys insurance and pays a monthly premium for your coverage (you may pay a portion of that monthly fee through payroll deduction). The insurance company pays all of the medical bills for insured employees. If employees have a large amount of medical bills that exceed the total of the monthly premiums collected by the insurance company, the insurer is “at risk” and pays the difference. Some large companies prefer to hold the risk themselves (self-insured) and contract with insurance companies to only administer their insurance plan (i.e. handling enrollment and paying health care providers for services rendered, with the company’s money).
The market for health insurance coverage offered to small businesses – those with between 2 and 50 employees in most states. These health benefit plans are not currently regulated under the parity law and are exempt from the standard.
Affecting the body rather than the mind, often referred to as medical/surgical care.
Standard of Care
A clinically recognized, diagnostic and treatment process that a provider should follow for a certain type of patient, illness, or clinical circumstance. This criterion is often used in deter- mining the medical necessity of a specific treatment.
The parity regulations define “substantially all” as 2/3 of the benefits in one of the six categories of benefits. If 2/3 of the inpatient, in-network medical/surgical benefits are subject to a 20% co-insurance requirement, then inpatient, in-network mental health/addiction benefits cannot be subject to more than 20%.
Usual, Customary and Reasonable (UCR) Charge
The average fee charged by a particular type of health care practitioner within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test or procedure. It is often employed in determining Medicare payment amounts.
This term is often used to describe a treatment limitation that plans use to determine if a patient’s use of healthcare services was medically necessary, appropriate, and within the guidelines of standard medical practice. Utilization Management/Review may also be referred to as Medical Review. It can be done prior to treatment, during treatment (concurrent) or post-treatment (retrospective). Retrospective is considered the least restrictive, and prior is considered the most restrictive.