What does any of this actually mean?

Most of these words exist to make a simple thing sound complicated. A carrier, a broker or a vendor uses one, the room nods, and the conversation moves on before anybody asks what it costs. Every definition below is written so a CEO or CFO can read it once and know what to ask next. Where a number belongs, the number is there.

SECTION 1

How your plan is funded and structured

Fully insured

You pay a carrier a fixed premium and the carrier keeps whatever it does not spend on claims. Predictable to budget, and the least visibility into where your money actually went.

Self-funded

You pay claims out of your own money and buy insurance only against the catastrophic ones. You keep the savings in a good year and you carry the risk in a bad one. Most employers over about 100 lives are candidates.

Level-funded

The middle path. You pay a fixed monthly amount like fully insured, but the plan is self-funded underneath, so unused claim dollars come back to you instead of staying with the carrier.

Stop-loss insurance

The coverage a self-funded employer buys to cap exposure. Specific stop-loss caps what any one person can cost you. Aggregate stop-loss caps what the whole group can cost you.

TPA (third-party administrator)

The company that processes claims and runs the plan day to day for a self-funded employer. It is not the insurer, and swapping it is usually easier than employers assume.

ICHRA

Individual Coverage Health Reimbursement Arrangement. Instead of buying a group plan, you give employees a defined tax-free amount to buy their own coverage. Your cost becomes a number you set rather than a renewal you receive.

Defined contribution

Any benefits model where you commit to a fixed dollar amount per employee rather than a fixed plan design. It moves the budget line from unpredictable to decided.

Captive

A group of employers who pool their risk inside an insurance company they collectively own. It lets a mid-sized employer get self-funded economics without carrying the volatility alone.

PEO (Professional Employer Organization)

Co-employs your staff so you can access their master health plan, payroll and HR. Easier entry, and less control over what the plan costs or how it is priced.

EOR (Employer of Record)

Legally employs workers on your behalf, usually in states or countries where you have no legal entity. A compliance tool rather than a cost tool.

SECTION 2

How care actually gets priced

Allowed amount

The number your plan actually agrees to pay for a service once the discount is applied. It is the only price that matters, and almost nobody sees it before the care happens.

Network discount

The percentage off a hospital list price that your carrier negotiated. It sounds like savings. Because the hospital sets the list price, a bigger discount off a bigger number can cost you more than a smaller discount off a fair one.

Reference-based pricing (RBP)

Paying claims against a public benchmark, usually a multiple of the published Medicare rate, instead of a discount off list price. Typically 15 to 30% off facility cost. It works because the benchmark is public and auditable, where the discount never was.

Balance billing

When a provider bills the patient for the gap between what they charged and what the plan paid. It is the main objection to reference-based pricing, and the reason balance-bill advocacy exists so the member never negotiates.

Cash-pay healthcare

Paying a provider directly at a published cash price instead of running the claim through insurance. Frequently 30 to 50% below the negotiated rate on planned procedures, with no network restriction.

Quality steerage

Guiding members toward providers scored on clinical outcomes rather than price alone. Better-rated doctors cost less because they get it right the first time. Typically 11 to 17% off medical, inside your existing network and cards.

Centers of excellence

A short list of facilities with proven outcomes for a specific procedure. The plan usually covers travel and waives cost sharing. Fewer complications, lower total cost, better experience.

Payment integrity

Auditing claims before and after payment for duplicates, upcoding, unbundling and plain billing errors. A meaningful share of hospital bills contain an error, and they rarely favour the payer.

SECTION 3

Pharmacy

PBM (pharmacy benefit manager)

The middleman between your plan, the pharmacy and the drug manufacturer. A handful of PBMs handle the large majority of US prescriptions, and most are owned by the same companies that own the insurers.

Spread pricing

When a PBM charges your plan more for a drug than it pays the pharmacy and keeps the difference. You are billed one price. The pharmacy receives another. The gap is not on the invoice.

Rebate pass-through

What share of manufacturer rebates actually reaches your plan. Transparent contracts commit to 100%. Traditional contracts frequently do not, and the contractual definition of the word rebate is where the money hides.

Formulary

The list of drugs your plan covers and at what tier. Placement is influenced by rebate economics as much as by clinical evidence, which is why the cheapest drug is not always the preferred one.

Specialty pharmacy

High-cost medications, often biologics, that can run thousands of dollars a month. A very small share of members driving a very large share of pharmacy spend.

$0-copay pharmacy

A program covering a defined list of medications at no cost to the member, funded outside the main plan. It removes the counter price that causes people to skip doses, and it typically covers the whole household.

Medication adherence

Whether people actually take what they were prescribed. Cost is the leading reason they do not, and the skipped doses come back later as an emergency room visit at many times the price.

SECTION 4

Revenue cycle, for healthcare organizations

Revenue cycle management (RCM)

Everything between delivering care and getting paid for it. Coding, claim submission, denials, appeals and collections. It is where healthcare organizations lose the most money quietly.

Claim denial

A payer refusing to pay a submitted claim. Most denials are procedural rather than clinical, which means most of them are overturnable if somebody has the hours to fight them.

Appeal

The formal challenge to a denial. Appeals work. The constraint is never whether they work, it is capacity, because writing them takes staff hours nobody has spare.

Overturn rate

The share of appealed denials that end up paid. 75 to 85% is achievable, worth roughly $112,000 per provider per year. The bigger lever is usually how many denials get appealed at all.

Remote patient monitoring (RPM)

Billable programs where patient data is collected between visits. Generates $60 to $150 per patient per year as a diversified revenue stream, without adding to clinical workload.

Chronic care management (CCM)

Reimbursed care coordination for patients with two or more chronic conditions. A recurring revenue stream that most organizations are entitled to and under-bill.

SECTION 5

Indirect spend and insurance

Indirect spend

Everything you buy that is not your product. Waste, telecom, freight, print, insurance, merchant fees, food service, uniforms. Rarely owned by any one person, so rarely challenged by anyone.

Strategic sourcing

Benchmarking a category against real market rates, then renegotiating or re-bidding it. Most of the savings come from the incumbent matching the market rather than from switching vendors.

Benchmarking

Comparing what you pay against what comparable buyers pay for the same thing. Without it, we already negotiated hard usually means we negotiated against ourselves.

Experience modification factor (e-mod)

The multiplier applied to your workers compensation premium based on your claims history. It is built from data that is frequently wrong, and each error inflates your premium for three years.

Loss run

The insurer report of your claims history. It is the source document for an e-mod audit, and where miscoded classifications, unclosed claims and unadjusted reserves show up.

Total cost of risk

Premiums plus deductibles plus retained losses plus the administrative cost of managing all of it. This is the number to reduce. Premium alone is the number people argue about.

Contingency fee

A fee paid only out of savings that were actually achieved and validated. No savings, no invoice. It takes the capital request out of the decision entirely.

SECTION 6

Workforce, payroll and cashflow

Supplemental health plan

Coverage that sits alongside major medical and pays for defined services or events. Structured correctly it lowers payroll tax liability while improving what members actually receive.

Section 125 plan

The section of the tax code that lets employees pay for certain benefits before tax. It reduces taxable wages, which reduces payroll tax for the employee and the employer at the same time.

Payroll tax savings

The employer share of Social Security and Medicare tax is 7.65% of wages. Pre-tax benefit structures reduce the wage base that percentage is calculated on, which is why the saving repeats every pay period.

Hidden cashflow

Money already inside the business that is leaving unnecessarily. It is not new revenue and it is not a cut. It is the gap between what you pay for something and what that thing actually costs.