State of Minnesota
More about
Attorney General
Lori Swanson


Minnesota Attorney General's Office

1400 Bremer Tower
445 Minnesota Street
St. Paul, MN 55101

(651) 296-3353
(800) 657-3787

M - F 8 am - 5 pm

TTY:(651) 297-7206
TTY:(800) 366-4812

Glossary of Health Care Terms

CAPITATION AGREEMENT
A payment made in advance by a health plan to a physician or clinic which is a flat, pre-arranged amount. Under a capitation payment structure, the physician receives the same payment from the health plan for a particular patient regardless of the amount of health care the patient needs. The more treatments or referrals the patient receives, the less money the physician or clinic makes. This is different from more traditional "fee-for service" payments under which a physician makes more money if the patient receives more care. A capitation agreement operates as a financial incentive to the physician to limit treatment or referrals.

CERTIFICATE OF COVERAGE
The document that provides evidence of coverage that is issued to a consumer who is enrolled in a group health plan.

CLOSED PANEL
A health plan which will not provide coverage to enrollees unless they use "participating providers."

COPAY
An arrangement which requires a covered person to pay a fixed amount each time a covered service is used. For instance, the enrollee might be required to make a $10 copayment for each office visit or an $8 copayment for each prescription drug.

DEDUCTIBLE
An amount that a covered person must pay before plan payments begin. For instance, the health plan may have a $500 deductible, in which case the enrollee pays the first $500 in medical bills before the plan pays anything.

DEPENDENT
A family member of a policyholder who has coverage under the policyholder's health contract.

EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, OR ERISA
This federal law applies to employee benefit plans issued by employers.

EXPLANATION OF BENEFITS FORMS
A form sent by the health plan to the consumer explaining what payments were made on behalf of the consumer and what the unpaid amounts are.

FEE FOR SERVICE
A financial reimbursement system under which a health plan reimburses a physician for the physician's charges incurred in treating the patient. In a "fee for service" system, a physician is paid more money if a patient requires more care. This is different from a capitation system in which a physician receives the same flat payment from the health plan regardless of the amount of care the patient requires.

FORMULARY
A drug-purchasing vehicle established by or under contract with a health plan. The health plan purchases its drugs through the "formulary" and receives certain discounts and rebates in return.

FULLY INSURED
A health coverage agreement under which an HMO, insurance company or nonprofit health services corporation assumes the risk of paying the covered person's health claims.

GATEKEEPER
A physician who is responsible for a patient's access to health care and who typically must approve all referrals to specialists.

MANAGED HEALTH CARE
A system of financial reimbursement which relies upon strategies designed to influence cost and use of treatment.

NON-PARTICIPATING PROVIDER
A physician or clinic that has not signed a contract with a health plan to provide treatment to the health plan's patients.

OUT-OF-POCKET MAXIMUM
The total amount of money that the consumer will be obligated to personally incur each year in copayments and deductibles. For instance, the health plan may have a $3,000 annual out-of-pocket maximum which means that after the deductible and copay costs reach $3,000, the enrollee has full coverage.

PARTICIPATING PROVIDER
A physician who has a contract with the health plan to provide treatment to the health plan's patients.

PARTICIPATION AGREEMENT
An agreement between a health plan and a health care provider detailing how the provider will be paid by the health plan.

POINT OF SERVICE (POS)
An option which allows an enrollee to go outside the network to receive treatment by paying a greater cost of the treatment.

PREFERRED PROVIDER ORGANIZATION (PPO)
An organization which, among other things, contracts with health plans to provide a network panel of physicians.

PREMIUM
The amount paid to obtain insurance coverage.

SELF INSURED
A system under which an employer agrees to use its own assets to pay the health claims of its employees. Self-insured health plans are filed with the United States Department of Labor and subject to a federal law called ERISA.

STAFF MODEL
An HMO which retains physicians as employees to care for its members instead of as independent contractors.

STOP LOSS INSURANCE
An insurance policy purchased by a self-insured employer to reimburse the employer for claims paid on behalf of covered employees in excess of certain amounts.

UMMARY PLAN DESCRIPTION (SPD)
The evidence of coverage required under federal law to be issued by a self-insured employer to its employees.

THIRD PARTY ADMINISTRATOR (TPA)
An entity which processes claims on behalf of a self-insured health plan. In Minnesota, third party administrators are licensed by the Minnesota Department of Commerce.

UNDERWRITING
A process where a health plan reviews a consumer's medical history to decide whether to issue a policy.

UTILIZATION REVIEW
An organization which evaluates the necessity and appropriateness of medical treatments for purposes of determining medical necessity. In Minnesota, utilization review organizations are licensed by the Minnesota Department of Commerce.