CDHP Glossary

Claim:  Notification to an insurance company requesting payment of the amount due under the terms of the policy for whatever medical incident has occurred.

Co-pay:  The amount of money (or percentage of charges) for basic or supplemental health services that an employee is required to pay, as set forth in his or her health plan. A visit to the doctor’s office or the emergency room can generate a co-pay.

COBRA (Consolidated Omnibus Budget Reconciliation Act): This law requires an employer to allow an employee to remain temporarily covered under the employer’s group health plan after the loss of a job. The beneficiary (the former employee) may have to pay both his or her share plus the employer’s share of the premium.

Consumer-driven health plan (CDHP): A broad definition incorporating several emerging healthcare strategies that heighten consumer awareness. Through various plan incentives, a CDHP lays out the cost and utilization of healthcare services. It describes numerous mechanisms for providing health insurance or funding healthcare costs, all of which encourage individuals to become actively involved in making their own decisions regarding their health.

Deductible: The minimum amount the employee must pay before the insurance company will begin to make payments (above and beyond the deductible) for covered medical services. Plans may have both per-individual and per-family deductibles.

Deductible leveraging: The practice of increasing the deductible each year to counterbalance overall healthcare inflation.

Employee benefits consultant: A consultant knowledgeable in the areas of comprehensive benefit plans. To achieve the employer’s business objectives, an employee benefits consultant uses their expertise, along with a firm understanding of the company’s work environment, business goals, and benefit objectives.

Encouragement-based health and wellness program: A program in which no rewards, incentives, or penalties are offered in connection with the wellness program, or any reward, incentive, or penalty offered is dependent solely on participation in the wellness activities, and the results obtained by those activities do not affect the outcome. Encouragement-based programs aren’t subject to any special rules, providing they’re equally available to all similarly situated individuals.

Explanation of benefits (EOB): A statement from the insurer about an employee’s health claim. The statement should include information about the provider, the date of service, the service itself, how much the provider charges for this service, how much the insurer considers to be a reasonable price for this service, and the amount the insurer paid the healthcare provider. It may also include information on how much you, as the patient, may be responsible for paying.

Federal Insurance Contributions Act (FICA) tax: A federal payroll tax imposed on both employees and employers to fund Social Security and Medicare.

First-dollar coverage: A health insurance plan that typically begins to pay its share of the employee’s covered services beginning with the first service they receive within the plan network. In a fee-for-service plan, payments for covered services begin after you’ve met the deductible.

Flexible spending account (FSA): A benefit account (under Section 125 of the Internal Revenue Code) that offers employees a choice between permissible taxable benefits, including cash, and nontaxable benefits, such as life and health insurance, vacations, retirement plans, and childcare. Though a common core of benefits may be required, the employee is allowed to determine how his or her remaining benefit dollars are to be allocated, choosing each type of benefit from the total dollar amount promised by the employer.

Healthcare trend: The healthcare industry’s term for medical cost inflation. Healthcare trend consists primarily of two components: unit cost (the actual cost of each health service or product) and utilization (the number of times health services or products are accessed).

Health maintenance organization (HMO): A healthcare system that assumes both the financial risks associated with providing comprehensive medical services (insurance and service risk) and the responsibility for healthcare delivery in a particular geographic area to its members, usually in return for a fixed, prepaid fee. Financial risk may be shared with the providers participating in the HMO.

Health reimbursement arrangement (HRA): An IRS-sanctioned program that allows an employer to reimburse medical expenses paid by participating employees, thus yielding a tax advantage to offset healthcare costs.

Health savings account (HSA): A tax-advantaged medical savings account available to employees enrolled in an HDHP. The funds contributed to the account aren’t subject to federal income tax at the time of the deposit. Unlike with an FSA, funds roll over and accumulate year over year if not spent. HSAs are owned by the individual, which differentiates them from the company-owned HRA. Funds may be used to pay for qualified medical expenses at any time without federal tax liability.

High-deductible health plan (HDHP): A health insurance plan with lower premiums and higher deductibles than a traditional health plan. Participating in a qualified HDHP is a requirement for HSAs and other tax-advantaged programs.

Managed-care plan: A plan that provides comprehensive health services to members and offers financial incentives for patients to use the providers who belong to the plan. Examples of managed-care plans include HMOs, PPOs, exclusive provider organizations (EPOs), and point of service plans (POSs).

Out-of-pocket costs: Healthcare costs that aren’t covered by the health insurance plan and are paid by the employee.

Performance-based health and wellness program: A program that uses rewards, incentives, or penalties tied to an individual’s ability to meet a certain performance standard related to a specific health factor, such as reaching a healthy body weight or body mass index (BMI), lowering cholesterol, or quitting smoking. Individuals with medical conditions that make it impossible or medically inadvisable to reach such performance standards must be provided alternative standards.

Preferred provider organization (PPO): A healthcare organization composed of physicians, hospitals, or other providers that provide healthcare services at a reduced fee. A PPO is similar to an HMO, but care is paid for as it’s received (fee-per-service) instead of in advance in the form of a scheduled fee. PPOs may also offer more flexibility by allowing for visits to out-of-network services.

Premium: An agreed-upon fee (lump sum) paid for coverage of medical benefits for a defined benefit period. Premiums can be paid by employers, unions, or employees, or shared by both the insured individual and the plan sponsor.

Preventive care: A healthcare program designed to prevent and reduce illnesses by providing such services as physical examinations. This care is in opposition to curative care, which goes into effect only after an illness has been determined.

Qualified high-deductible health plan (QHDHP): QHDHP is part of the Medicare Modernization Act signed into law in 2003. Its purpose is to lower healthcare costs by encouraging plan members to analyze their healthcare decisions, while making insurance premiums more affordable to everyone. An HSA or HRA would be used with the HDHP to help pay for the deductible costs. See high-deductible health plan (HDHP).

Third-party administrator (TPA): A third-party administrator is the same as an administrative services only company. The duties of the TPA is to serve as the liaison between the insured person or company and the health insurance provider. Typically, the TPA will file claims for the insured, but will also certify insurability for the insurance company.

Unit cost: The actual cost of each health service or product accessed by employees, such as visits to health services providers, filled prescriptions, or medical equipment. Unit cost is, along with utilization, one of two components of healthcare trend, the industry’s term for medical cost inflation.

Utilization: The number of times a medical service is accessed or a product is purchased. Also called units of service, utilization is, along with unit cost, one of two components of healthcare trend, the industry’s term for medical cost inflation.

Well-being program: A program dedicated to the transformation of an organization’s entire culture toward a mind-set of continuous improvement and personal accountability, including, but not limited to, all aspects of individual health.

Wellness Council of America (WELCOA): An organization dedicated to the promotion of worksite wellness.

A CDHP solution is highly effective at controlling cost and improving overall health and well-being because of its philosophy, which is governed by three principles:  transparency, responsibility, and opportunity.


Housed here are key components and information within the book, Bend the Healthcare Trend which was the impetus behind the CDHPCoach.