Third Party Administrators of Health Insurance Key Terms

Understand key terms used by third party administrators of health insurance

The health insurance industry is vast and complex, and understanding it as a beneficiary or as a third party administrator requires the understanding of some key terms. Third party insurance is used during hospital stays, emergency room visits, doctor appointments, and for prescription coverage.

Third party terminology generally consists of terms relating to organizations and tiers of care that are organized within a third party's structure. Learn the basic key terms of third party health insurance administration.

Actuary

An actuary works in the financial sector of third party administration. They assess the possibility of risk and work with insurance administrators to develop policies and formulate copays and premiums based on risk and employment.
U.S. Bureau of Labor Statistics explains how actuaries work and how they affect the third party health insurance industry.

Managed care organization (MCO)

A managed care organization (MCO) is a health care provider or group of providers that contracts with an employer or employee to insure enrolled employees. Employees must see providers within the MCO plan to receive coverage. These plans are also referred to as HMO plans.

Ancillary services

Ancillary services are services that are not considered required care by most insurance companies, such as dermatological procedures, diagnostic testing, and acupuncture or massage. Many third party administrators require enrollees to pay out of pocket for these services and reimburse the member a portion of the cost.

Health Insurance Portability and Accountability Act (HIPAA)

The Health Insurance Portability and Accountability Act regulates patient privacy in the reporting and exchange of medical and insurance information. Third party health insurance providers are subject to HIPAA's guidelines.

Deductible

A deductible is the amount of money that an insured party is required to pay before the third party administrator begins paying for procedures or services. Deductibles help third party administrators of health insurance avoid paying for small claims and let them allot money towards more expensive claims or procedures.

Formulary

A formulary plan is a list of medications that insurance providers will cover at reduced or no cost to enrollees. Third party administrators base formularies on the acquisition cost of the drug, the availability of generic or low-cost equivalents, market availability, and other factors.
PubMedCentral conducted a study on the effect of formulary drug programs on healthcare economics and third party insurance administrators.

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