Get to know the terms of the Health Care Insurance Industry.


The right to have access to medical care services or the process to use services effectively.


Industry professional responsible for performing the mathematical analysis required to establish insurance rates.

Added value

The attributes of an insurance company that might or might not have an impact on the premium and that increases the benefits or services members receive. An example: sending a services usage report to members, health care services coverage in the United States, claim’s processing on a reasonable period of time, and the extension of the plan’s providers network.

Added Value

The attributes of an insurance company that might or might not have an impact on the premium and that increases the benefits or services members receive. An example: sending a services usage report to members, health care services coverage in the United States, claim’s processing on a reasonable period of time, and the extension of the plan’s providers network.

Annualized Premium

Gross income estimate, without deducting administrative expenses expected to be generated by an account. The Annualized Premium is the product of the multiplication of the plan’s monthly premium by the total number of contracts and then by twelve (number of months in a year).

Appointment Letter

This letter clearly stipulates, within a specified period of time, that the company grants an exclusive status to the broker or independent agent to act as a representative agent able to negotiate, propose and assist in the administration of a health plan.

Authorization Letter

Letter that exclusively provides a specific information or proposal on behalf of the company. These letters are not designation letters, as is the case of an appointment letter.


Person, partnership, or corporation licensed by the insurance commissioner to transact insurance in favor of a group. Even when the insurer pays this agent’s commission, he/she represents the interests of the group that purchases the insurance (26 LPR, better known as the Puerto Rico Insurance Code).


Method of payment for medical services in which doctors and medical facilities receive a fixed payment for each insured member served, regardless of the kind and quantity of services provided.


(Public Law 99-292, Title X) Consolidated Omnibus Budget Reconciliation Act of 1986. This law requires companies with 20 or more employees to provide its employees and their families the opportunity to temporarily extend their group insurance coverage in specific situations, in which otherwise their plan coverage would have been terminated. For example: in case of employment termination, reduction in work schedule that results in the termination of the insurance coverage for the affected employees. The employer’s insurance coverage will be extended for a period of 18 months. In case of death of an employee, divorce or legal separation from the employee, changes in the employee’s eligibility for Medicare benefits status or if an insured dependent becomes independent, according to the plans terms, the insurance coverage for the beneficiaries (widows, ex-spouses, spouses of the employees with Medicare benefits and dependent minors) will be extended for a 36-month period


A portion of the value of a medical service provided for which the insured member is responsible for. It is usually expressed in percentage terms and is paid after the insured member receives the service. It may vary accordingly to the member’s specific insurance coverage.


Payment brokers and independent or general agents receive for conducting businesses on behalf of MCS.


Generic term used to identify all the companies that compete with MCS in the local health insurance market, such as Cigna, Cruz Arul, Triple-S, and Humana, Canada Life among others.


A person hired as an independent contractor to provides information, advice, counseling, and orientation about the terms of a policy, conditions and benefits of a coverage or premium of any given health insurance policy. (26 LPRA, the Puerto Rico Insurance Code).

Contract or insurance policy

Legal agreements between an insurance company and an individual or employer that describes the benefits and limitation of the insurance coverage to which a member is entitle to receive. The member’s contract will consist of a benefits certificate, endorsement, riders and a member’s identification card.

Coordinated Care

System that coordinates adequate and effective health care services with a selected group of providers. The system integrates quality standards, and services usage analysis mechanisms, and incentives to encourage members to use the contracted network and follow the procedures stipulated by the plan.

Coordination of Benefits

Situation in which two or more health insurance a member to respond for his/her health calls upon plans services claims. One plan acts as a primary health plan and the other as the secondary health plan. The secondary health plan will be responsible, according to the limits established, for the costs not covered by the primary health plan. This mechanism, regulated by a set of rules developed by NAIC, helps to avoid a double payment for the same claim.

Corporate Accounts

Company with 80 or more employees and/or contracts.


Set of medical benefits. There may be different versions available. Each version is different in terms of quantity and type of benefits included. There can also include limitations and exclusions.


That fixed portion of the monetary value of the medical service that the insured pays after receiving medical services provided by a participating provider. The deductible may change according to the coverage that the insured has.

Defensive Medicine

Excessive use of laboratory test, admissions to the hospital and extended hospitalization periods with the main objective of reducing the possibilities of medical malpractice lawsuits or in order to provide a good legal defense in case a lawsuit is filed.

Direct Dependant

Health plans consider the following as directed dependants of the insured member: the spouse of the insured employee, as long as he/she lives in the same household, children under 19 years of age and single, including adoptive children, under the same terms or until getting married, whichever event occurs first. Children must be economically dependant of the insured parent. Children over 19 years of age must present evidence of enrollment as a full time student in a recognized university or provide evidence of disability, if necessary.

Discharge Planning

Process that evaluates the health condition and medical needs of a patient in order to develop an appropriate continued care plan once the patient is discharged from a hospital facility. The plan may include the hospitalization period, the expected results and possible special needs and requirements after discharge.

Elective Surgery

Surgical procedure that, although medically necessary and ordered by a doctor, does not need to be performed immediately, given that there is no imminent risk to the patient’s life or permanent damage to a vital organ.

Eligible Employee

Member of a group that has complied with all the eligibility requirements established under a group’s health plan contract. Some example of eligibility requirements include: being employed for at least three months by your employer, and work as a fulltime employee, among others.


Benefits expressly not covered by an insured member’s policy or services provided by a medical specialty whose services have not been recognized for payment purposes. For such reason, the insurance company does not respond economically for those services. Exclusions should always be expressly written in the insurance policy documents.

Fee for Service

Method of payment for health services providers based on each patient’s visit or service provided.


Term used to describe the primary care physician’s role (usually general medicine doctors, family doctors, pediatricians and internal medicine doctors) under the HMO model, as he/she controls the use and medical referrals of patients to specialists and other health care facilities. Related term: primary care physician.

General Agent

A person hired by an insurance company as an independent contractor or a contractor under a commission for service fee, under a full or part-time schedule. The executive is in charge of such responsibilities as inspecting the services operations of the insurance company, appointing agents for the insurance company and performing other traditional functions of the profession, or as determined by the type insurance policies or clients under contract. (26 LPR Section 334, better known as better the Insurance Code)

Generic Bioequivalent Medications

Drugs that contain the same active ingredients and are considered therapeutically equivalent to the brand name drugs. They are usually cheaper than the brand name drugs. (Ex. Atenolol is Tenormin’s generic bioequivalent to control high blood pressure.)

Health Care Financing Administration (HCFA)

Federal Health Department and Human Services division in charge of administrating Medicare and Medicaid programs in the United States, Puerto Rico and the Virgin Islands.

Health Maintenance Organization (HMO)

A health care services system in which an organization provides an extensive variety of health care services for a determined group of insured members for an advanced and periodic payment. There are several HMO models, including the staff model, group model, independent practice association (IPA) and mixed model.

Individual Case Management

Process that encourages an appropriated and cost effective care for patients that require extended and highly expensive services, whereas these are hospital or outpatient services. In this collaborative process, services options are defined, evaluated, planned, coordinated, implanted and supervised jointly with the corresponding provider in order to fulfill the healthcare needs of the patient.

Individual Market

1. The insurance company engages directly with the member.
2. Price is a very important component on the plan’s selection.
3. Comprised mainly by self-employed persons, housewives, university students and minors.

Insurance Commissioner

Government official responsible of supervising the activities and performance of the local insurance industry. Examines the qualification and competence of all aspiring insurance sales executives, and is also responsible for publishing official industry statistics.


Key Accounts

Accounts that are strategically important to the company. Factors taken into consideration include: company’s prestige, number of employees, and industry leadership, among others.


Limit established on the health policy by the insurance company in order to control the usage of the health care plan’s benefits. If the member exceeds the limits of the policy, the insurance company will not cover the surplus services.

Maintenance Medications

Products used to keep chronic health conditions under control (Example: Tenormin, used to control high blood pressure).


In economic terms, the term is used to indentify the areas in which the offer and demand for products concurs. The local health insurance industry is divided in six different markets: Corporate, ELA, Individual, Federal Government, Elderly and Medical Indigent.
Currently, MCS participates in three of these markets. Each one has its own particularities, which are detailed as follows: Corporate Market

  1. The Insurance Company signs a contract with the employer.
  2. Several services methods are provided: PPO, POS, HMO, ASO and TPA
  3. Includes employers with two or more employees
  4. The size of the group is directly related to the trends of the health care plan. The larger the size of the group, the probability for employees to have a health plan increases.
  5. This market provides the highest number of insured members for local health plans (around 70% of the insurance companies businesses)
  6. Local and foreign insurance companies compete.
  7. In some instances, the insurance company does business with middlemen, brokers and agents.

Medically Indigent Market (MI Salud)

  1. Regulated by the State Government: the government decides who is eligible.
  2. Imposition of mandatory benefits
  3. Aimed at persons with minimal purchasing power
  4. Presentation model: HMO

Medically Required Services

Medical services that comply with the following requirements:

  1. Appropriate services according to the symptoms, diagnostic, injury treatment, condition or illness and required for the direct care of the patient that has the specific condition.
  2. Services provided according to the standards of good medical practices.
  3. Services appropriate for the safest level of services that a participant health professional can offer the member.

Medical Policy

The process in which the company determines the extent and scope of the services that the plan recognizes for payment. Some examples include: visits to doctors, vaccinations, Labs, and surgical procedures.


Individual insurance policies regulated by the Federal Government and designed to act as a supplement to Medicare’s coverage. Legislation provides ten uniform models, identified from A to J.

National Association of Insurance Commissioners (NAIC)

National organization that regulates the insurance business. The organizations does not have any coercive power to impose its decisions, but has a great influence over insurance companies. The entity was created to promote uniformity in the insurance industry’s’ regulations.

Omnibus Budget Reconciliation Act (OBRA)

Name given to the legislation that regulates the administration of the Medicare Program.

Optional Dependant

Immediate relatives of the insured employee by his/her spouse that do not qualify as direct dependents and that substantially depend on the employee for their sustenance and that have not reached the age of 65.

Outpatient Care

Healthcare provided outside a hospital environment or similar facilities.

Over the Counter Medication (OTC)

Medication marketed and sold directly to the consumer without the need of a prescription.

Participating providers

Every health professional , hospital, labs, drug stores or health facilities hired by the insurance company, and whose main activity is providing health care services to members.

Payment Policies

Procedures that establishes the payment conditions for a professional service approved by the medical policy.


Generally refers to the cost per day of a patient staying in a hospital or similar institution.

Pharmacy coverage / MCS FarmaFlex

Describes the medications benefits a member is entitle to under the plan’s coverage. Include limitations and exclusions

Pool Rating

Type of financing that consists of placing all subjects in one same group and determining one same rate or premium for a same level of benefits. It is expected that the subjects that use the same health plan will subsidize the use of those that use the plan the most.

Pre-Admission Tests

Group of diagnostic tests performed to the patient, on an outpatient basis and prior to an elective hospitalization, with the purpose of reducing hospitalization costs.


An authorization given by an insurance company that enables a member to be hospitalized and authorizes payment for the hospital services described in the document. The pre-certification establishes the length of the hospitalization previous to the admission and even determines alternate course of actions. It’s a mechanism to control the usage of the health plan benefits.

Pre-existing condition

An insured’s physical or mental condition that manifests itself before the policy is issued and for which some treatment has been received. Insurers usually do not cover preexisting conditions.

Preferred Provider Organization (PPO)

A manage care services system consisting of a group of hospitals, doctors and other healthcare providers that have a contract with the insurance company, employer or other sponsoring group in order to provide health care services to insured members.

Premium Gained

The portion of the earned premium for which the insurance company has already provided protection. For example: An insurance company is considered to have earned 75% of the annual paid premium after a nine month period.

Preventive Care

Health care utilized designed to prevent illness. It uses mechanism for early detection and inhibits further deterioration of the organism. Incorporates wellness and education strategies

Primary Care Physician

Primary healthcare provider. Provides basic health care to members, deliver referrals to specialist and provides follow-up care. They are usually general medicine, internal medicine, and family doctors, or pediatricians. Related term: Gatekeeper.

Primary Paymaster

The insurance company primarily responsible for paying the member’ medical services claims.

Prolonged Healthcare Facilities

An independent facility or a facility operated in association with a hospital, that provides services to convalescent or chronically ill patients that require specialized nursing care and other related medical services. Mental health hospitals and tuberculosis facilities are excluded. Includes long-term or extended care facilities, nursing homes and hospitals for chronic diseases and shelters for AIDS patients.


Formal presentation for a health coverage prospect that describes all the medical, dental, and pharmacy benefits and added values included.


Name given to potential buyers. The industry’s main indicators to indentify prospects include:

  • Purchasing power of the individual or employer
  • The person’s physical condition
  • Size of the company


Secondary Payer

The insurance company that pays its share of health service claims second.

Tax Plan

A group plan in which the insured shares the cost of the plan with his/her employer.

Types of Financing

  1. Administrative services only (ASO) contract: contract between an employer and a Third Party Administrator.
  2. TPA: Better known in the insurance industry as a Third Party Administration. The insurance company is exclusively limited to administer the company’s health care plan.


The process in which an insurance company determines the basis for accepting an insurance application, as well as the process of selecting, qualifying, and evaluating the risks according to the established insurability standards.

Usual and common charges

The maximum amount that a Health Insurance Plan establishes as reimbursement for a specific medical expense in a determined geographical area.


Waiting Period

Period of time that an insured member or employee must wait after the date in which he/she started on a new job for the insurance coverage provided by the employee to come into effect (usually three months).



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