ECTA Center: Finance Glossary (2024)

This glossary contains terms relevant to finance for IDEA Part C and Part B, Section 619 programs. The terms include reference to IDEA and other related federal fiscal requirements as well as those specific to billing public and private insurance for IDEA services.

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Terms

Terms are listed alphabetically.

See also: References

Definitions

Actual Expenditures

Amount spent for services provided or aspect of the program implemented.

Allocation

To appropriate (set aside) something such as money for a specific purpose.

Allocation Formula

The components that are considerations when determining the actual amount of funding that will distributed to eligible entities.

Allowed Amount

Maximum amount on which payment is based for covered health care services.

Analysis

A systematic examination and evaluation of data by breaking the data into its component parts to uncover their interrelationships.

Appeal

A request for the insurer or plan to review a payment decision.

Audit

Systematic examination and verification of an organization's books of account, transaction records, other relevant documents, and physical inspection of inventory by qualified accountants (auditors).

Authorization

The term authorization refers to the process of getting a medical service authorized by the insurer or plan.

Balance Billing

The difference between the provider's charge and the allowed amount by the insurer that may be billed to the individual receiving the service.

Blending and Braiding Funds

"Blended and braided funding both involve combining two or more sources (or "streams") of funding to support a program or activity. Braided funding pools multiple funding streams toward one purpose while separately tracking and reporting on each source of funding. Blended funding combines, or "comingles", multiple funding streams for one purpose without continuing to differentiate or track individual sources." (Urban Institute, Local Workforce System Guide)

Budget

An estimate of costs, revenues, and resources over a specified period, reflecting a reading of future financial conditions and goals.

Budget Appropriation

The approval and allocation of funds to various programs for a given fiscal year.

Bundled Payment Arrangement

A payment model under which a provider is paid a single payment for all covered items and services provided to a participant, beneficiary, or enrollee for a specific treatment or procedure.

Capitation

A method of payment for health services in which an individual or institutional provider is paid a fixed amount for each person served without regard to the actual number or nature of services provided in a set period. HMOs characteristically use this payment method.

Central Finance

A funding methodology that is based on a "pay and chase" model where the early intervention provider/organization receives a payment from a state fiscal agent and the fiscal agent subsequently bills the most appropriate source of funding based on the individual child's program eligibilities.

Checks and Balances Procedures

The various procedures set in place to reduce mistakes or improper behavior. Checks and balances usually ensure that no one person or department has absolute control over decisions, and clearly defines the assigned duties. The existence of checks and balances within an organization prevents any one person or department from having too much power, and forces cooperation in completing tasks.

CMS 1500

A paper form used to submit medical claims to Medicare and Medicaid. Many commercial insurance payers also require providers to submit their claims using a CMS 1500, making this one of the most common and important tools in the medical billing process.

COBRA

A federal program that grants a person recently terminated to retain health insurance with their former employer for 18 months, and up to three years if the former employee is disabled.

Cognizant Agency for Indirect Costs

The Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals developed on behalf of all Federal agencies (2 CFR §200.1).

Co-insurance

The share of the cost of a covered health care service, calculated as a percentage of the allowed amount for the service. The recipient of the service is responsible for the co-insurance plus any deductibles owed. This can be through in-network providers who contract with the insurance plan or out-of-network providers who do not contract with the plan. Out-of-network co-insurance usually costs more than in-network co-insurance.

Commingle

The act of combining (funds or properties) into a common fund or stock (per Webster definition). Commingling generally means that the identity of the source of the funds is not evident.

Contract

A legal instrument by which a non-federal entity purchases property or services needed to carry out the project or program under a federal award. The term as used in the OMB Uniform Guidance for Grants and Agreements does not include a legal instrument, even if the non-Federal entity considers it a contract when the substance of the transaction meets the definition of a federal award or subaward (see §200.1 Subaward of the OMB Uniform Guidance).

Contract Financing Payments

Funds transferred from a contractee to a contractor as advance payments, interim payments, performance-based payments, progress payments, and/or other such payments.

Contractor

An entity that receives a contract as defined in 2 CFR §200.1 Contract of the OMB Uniform Guidance for Grants and Agreements.

Co-payment

A fixed amount that the recipient pays for a covered health care service usually owed when the service is received. This can be through in-network providers who contract with the insurance plan or out-of-network providers who do not contract with the plan. Out-of-network providers usually have a higher co-payment.

Cost, Administrative

An expense (such as for computing, maintenance, utilities, security, supervision) incurred in joint usage and, therefore, difficult to assign to or identify with a specific cost object or cost center (department, function, program). Administrative costs are usually constant for a wide range of output.

Cost, Direct Service

An expense that can be traced directly to (or identified with) service provision as identified on the IFSP/IEP.

Cost, Infrastructure

An expense incurred in supporting required components of the system such as personnel development, general supervision and monitoring, child find, data systems etc.

Cost, Total

The addition of all costs-direct, infrastructure and administrative.

Cost Allocation Plan

A cost allocation plan distributes allowable agency-wide direct and indirect costs across several programs or projects in a state department, such as a lead agency, that receives federal funds. The cost allocation plan is approved by the lead agency's federal cognizant agency.

Cost-Benefit Analysis

A systematic process which involves comparing the total expected cost of each idea or option against the total expected benefits, to see whether the benefits outweigh the costs, and by how much.

Covered Benefits

The medical care items or services obtained by a subscriber that a health insurance plan agrees to pay for, under certain terms and limitations. Covered benefits and excluded services, and the terms and limitations of coverage, are defined in the health insurance plan's coverage documents or the subscriber contract.

Credentialing

The process of obtaining and reviewing documentation to determine participation status in a health plan. The documentation may include, but is not limited to, the applicant's education, training, clinical privileges, experience, licensure, accreditation, certifications, professional liability insurance, malpractice history and professional competence. Generally, the terms credentialing and recredentialing include the review of the information and documentation collected, as well as verification that the information is accurate and complete.

Current Procedural Terminology (CPT) Codes

A set of codes, descriptions, and guidelines intended to describe procedures and services performed by physicians and other health care providers. Each procedure or service is identified with a five-digit code.

Deductible

The amount owed for services covered by the insurance policy before the insurance or plan begins to pay.

Distribution

To give out a share or portion of money to a group for their use.

Durable Medical Equipment

Equipment and supplies ordered by a health care provider for everyday or extended use.

Electronic Remittance Advice (ERA)

A digital document that describes how much of a claim the insurance company will pay and, in the case of a denied claim, explains why the claim was returned.

Encounter Data

Records of the health care services for which Managed Care Organizations (MCOs) pay and—in many states—the amounts MCOs pay to providers of those services. Encounter data are conceptually equivalent to the paid claims records that state Medicaid agencies create when they pay providers on a Fee for Service (FFS) basis. States that contract with MCOs to deliver Medicaid services typically require those MCOs to report encounter data to the state so that the state has a full record of all the services for which the state is paying, either directly through the FFS system or indirectly through MCOs.

Equitably Allocated

A prudent, fair, and transparent method of allocating revenue.

Exclusions

Lists of specific medical items or services or general circ*mstance (e.g., not medically necessary) in a subscriber contract that are not covered benefits.

Expense

Money spent, or cost incurred in an organization's efforts to generate revenue, representing the cost of doing business. Expenses may be in the form of actual cash payments (such as wages and salaries), a computed expired portion (depreciation) of an asset, or an amount taken out of earnings (such as bad debts).

Expenditure

Payment of cash or cash-equivalent for goods or services, or a charge against available funds in settlement of an obligation as evidenced by an invoice, receipt, voucher, or other such document.

Explanation of Benefits (EOB)

A document attached to a processed claim that explains to the provider and patient which services an insurance company will cover. EOBs may also explain the reason when a claim is denied.

Federal Fiscal Year (FFY)

The federal fiscal year is the accounting period for the federal government which begins on October 1 and ends on September 30.

Federal Poverty Guidelines (FPG)

An index of poverty in the United States that is updated annually. The measure forms the basis of eligibility for several means-tested programs.

Fee for Service (FFS)

A method of purchasing health care services under which a physician or other practitioner charges separately for each patient encounter or service rendered, as opposed to the capitated method of payment.

Finance Plan

Carefully thought-out written plan of revenue (money) that is available, the use (distribution) of those dollars over a specified period of months or years and the activities to increase revenue to accomplish identified outcomes. The clearly written plan includes measurable goals and activities that assures sufficient funding to support the program and aligns with the larger program strategic plan(s).

Fiscal

Relating to the money that an organization, business or government earns, spend, and owes.

Fiscal Data

Any data element that refers to funding a government, organization and/or provider earns, spends and/or owns.

Fiscal Mapping

A detailed account of all federal, state, and local revenues available to help identify the fiscal resources available and how to use them more effectively to meet program goals.

Flexible Spending Account (FSA)

Fringe benefits offered by some employers that allocate pre-tax dollars for special purposes. Contributions to FSAs are also made on a pre-tax basis and cover a wider variety of activities, such as childcare if the employee designates the account as a Dependent Care FSA. Amounts are allocated on an annual basis and must be used within a designated timeframe and cannot be carried over into a subsequent year.

Forecasting

Forecasting is a technique that uses historical data as inputs to make informed estimates of revenue and expenditures that are predictive in determining the direction of future trends. Businesses utilize forecasting to determine how to allocate their budgets or plan for anticipated expenses for an upcoming period.

Fully-insured Health Plan

A fully-insured health plan is the traditional way to structure an employer-sponsored health plan. The company pays a premium to the insurance carrier. The premium rates are fixed for a year, based on the number of employees enrolled in the plan each month. The monthly premium only changes during the year if the number of enrolled employees in the plan changes. The insurance carrier collects the premiums and pays the healthcare claims based on the coverage benefits outlined in the policy purchased. The covered persons (i.e., employees and dependents) are responsible for paying any deductible amounts or co-payments required for covered services under the policy.

Grant Agreement

A legal instrument of financial assistance between a Federal awarding agency or pass-through entity and a non-Federal entity that, consistent with 31 U.S.C. §6302 and 31 U.S.C. §6304:

Cooperative agreement means a legal instrument of financial assistance between a Federal awarding agency and a recipient or a pass-through entity and a subrecipient that, consistent with [31 U.S.C. §6302, 31 U.S.C. §6303, 31 U.S.C. §6304, and 31 U.S.C. §6305] :

1. Is used to enter into a relationship the principal purpose of which is to transfer anything of value to carry out a public purpose authorized by a law of the United States (see [31 U.S.C. §6101(3))]; and not to acquire property or services for the Federal Government or pass-through entity's direct benefit or use;
2. Is distinguished from a grant in that it provides for substantial involvement of the Federal awarding agency in carrying out the activity contemplated by the Federal award.
3. The term does not include:
   1. A cooperative research and development agreement as defined in [15 U.S.C. §3710a]; or
   2. An agreement that provides only:
   1. Direct United States Government cash assistance to an individual;
   2. A subsidy;
   3. A loan;
   4. A loan guarantee; or
   5. Insurance.

Habilitation Services

Services that help an individual keep, learn, or improve skills and functioning for daily living.

Health Insurance

A contract that requires a health insurer to pay some or all of health care costs in exchange for a premium.

Health Savings Account (HSA)

A fringe benefit offered by some employers that allocate pre-tax dollars for special purposes. Contributions to HSAs are made with pre-tax dollars and are associated with high-deductible health insurance plans to help defray some of the costs of the high deductible and can be rolled over each year.

Health Reimbursem*nt Account (HRA)

An employer-funded plan that reimburses employees for medical expenses not covered by company-sponsored insurance. Because the employer funds the plan, any distributions are considered tax deductible to the employer.

Healthcare Common Procedure Coding System (HCPCS)

A collection of codes that represent procedures, supplies, products and services which may be provided to Medicare beneficiaries and to individuals enrolled in private health insurance programs.

High Deductible Health Plan (HDHP)

A plan with a higher deductible than a traditional insurance plan. The monthly premium is usually lower, but the enrollee pays more health care costs before the insurance company starts to pay its share (enrollee deductible).

Indirect Cost Rate

A method for determining, fairly and expeditiously, the proportion of general (non-direct) expenses that are specific to various grants or projects.

Insurance Cap Limits

A cap on the benefits the insurance company will pay in a year while enrolled in a particular health insurance plan. These caps are sometimes placed on services such as prescriptions or hospitalizations.

Insurance Plan

A benefit the employer, union or other group sponsor provides to pay for someone's health care services.

International Classification of Diseases (ICD) Codes

A globally used diagnostic tool for epidemiology, health management and clinical purposes. The ICD is maintained by the World Health Organization (WHO), which is the directing and coordinating authority for health within the United Nations System.

Maintenance of Effort (MOE)

Describes a specific amount of money the state (or county) is required to spend to continue receiving funding from the federal (or state) government. It is designed to assure that the state (or county) does not reduce its level of funding support for a program.

Matching Funds

Funds that will be supplied in an amount matching the funds available from other sources such as cash in hand, finances, funds, monetary resource, pecuniary resource - assets in the form of money.

Medicaid Management Information System (MMIS)

A mechanized claims processing and information-retrieval system that State Medicaid programs must have to be eligible for federal funding. The system controls Medicaid business functions, such as:

• administrative program and cost control;
• beneficiary and provider inquiries and services;
• operations of claims control and computer capabilities; and
• management reporting for planning and control.

Medicaid State Plan Amendments

A Medicaid state plan is an agreement between a state and the federal government describing how that state administers its Medicaid and CHIP programs. States may submit state plan amendments to request permissible program changes, make corrections, or update their Medicaid or CHIP state plan with new information.

Medical Policies

Plan documents that are used to support coverage decisions for specific medical, surgical, or dental procedures, and behavioral health services, drugs, other ancillary services, or devices. Medical policies frequently address medical necessity or investigational status based on the contract definitions.

Medical Savings Account (MSA)

Tax-advantaged savings accounts that qualifying individuals can use to pay for qualified medical expenses. The core benefit of an MSA is that distributions that are used to pay for qualified medical expenses are not taxed.

Medically Necessary

Health care services or supplies needed to diagnose or treat an illness, injury, condition, disease or its symptoms and that meet accepted standards of medicine.

National Provider Identification (NPI)

This 10-digit identifier is the number that must be used on claim forms submitted to payers by individual and organization health care providers who meet a broad definition of a "covered entity" under the Health Insurance Portability and Accountability Act, or HIPAA. An NPI also is required for all providers enrolled in Medicare. The NPI replaces any legacy or billing numbers for all health insurance plans, both public and private.

Nonsubstitution of Funds

IDEA Part C funds may not be used to satisfy a financial commitment for services that would otherwise have been paid for from another public or private source, including any medical program administered by the Department of Defense (34 CFR §303.510(a)).

Operating Budget

A combination of known expenses, expected future costs, and forecasted income over the course of a year. Operating budgets are completed in advance of the accounting period, which is why they require estimated expenses and revenues.

Out-of-Pocket Limit

The most that a covered individual would be required to pay during a policy period (usually one year) before the health insurance plan begins to pay 100% of the allowed amount.

Oversight

Regulatory supervision; required supervision backed by law or other legal documentations.

Pass-Through Entity

Pass-through entity means a non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program (2 CFR §200.1).

Pass-Through Funding

Funds issued by a Federal agency to a state agency or institution that are then transferred to other state agencies, units of local government, or other eligible groups per the award eligibility terms. The state agency or institution is referred to as the "prime recipient" of the pass-through funds. The secondary recipients are referred to as "subrecipients." The prime recipient issues the subawards as competitive or noncompetitive as dictated by the prime award terms and authorizing legislation.

Payment Mechanisms

A financial system supporting transfer of funds from payers to the payees, usually through exchange of debits and credits among financial institutions. It consists of a paper-based mechanism for handling checks and drafts, and a paperless mechanism (such as electronic funds transfer) for handling electronic commerce transactions. (e.g., contracts, grants, vouchers, central finance system).

Payor of Last Resort

A funding source that may be used only after all other available public and private funding sources have been accessed (34 CFR §303.510).

Planned Expenditures

Amount of expense anticipated, often based on previous year(s) actual expenditure data.

Policy Maximum

An insurer is not liable to pay more than the maximum over the specified time. Therefore, whenever a policyholder makes claims, the amounts rewarded go toward that limit. Once the limit is reached, the insurer no longer must pay out any benefits.

Preferred Provider

A provider who has a contract with the health insurer or plan to provide services at a discount.

Premium

The amount that must be paid for coverage by a health insurer or plan.

Private Insurance Mandate

Either an employer or individual mandate to obtain private health insurance instead of (or in addition to) a national health insurance plan.

Procurement

To deliberately and strategically obtain/ acquire and secure funds.

Rehabilitation Services

Health care services that help a person keep, get back or improve skills and functioning for daily living that have been lost or impaired because of sickness, injury, or disability.

Resource Allocation

Used to assign the available resources in an economic way. It is part of resource management. In project management, resource allocation is the scheduling of activities and the resources required by those activities while taking into consideration both the resource availability and the project time.

Restricted Indirect Cost Rate

The type of indirect cost rate used by IDEA-funded grants or projects that prohibit using federal funds to supplant non-federal funds require the use of a restricted indirect cost rate. This restricted rate is calculated by limiting the types of administrative expenditures included in the indirect cost rate.

Revenue

The income generated from provision of services and received from a variety of sources of funding. Revenue is income without any consideration of actual cost. Revenue is shown usually as the top item in an income (profit and loss) statement from which all charges, costs, and expenses are subtracted to arrive at net income.

Self-insured Health Plan

A plan offered by employers who directly assume the major cost of health insurance for their employees. Some self-insured plans bear the entire risk. Other self-insured employers insure against large claims by purchasing stop-loss coverage. Some self-insured employers contract with insurance carriers or third-party administrators for claims processing and other administrative services; other self-insured plans are self-administered.

Subaward

An award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a Federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a Federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract (2 CFR §200.1).

Subrecipient

A non-Federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program; but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other Federal awards directly from a Federal awarding agency (2 CFR §200.1).

Summary of Benefits and Coverage

Under the law, insurance companies and group health plans will provide consumers with a concise document detailing, in plain language, simple and consistent information about health plan benefits and coverage. It will summarize the key features of the plan or coverage, such as the covered benefits, cost-sharing provisions, and coverage limitations and exceptions.

Supplant

To take the place of or substitute (one founding source) for another.

Third Party Payor

The insurance company or other health benefit plan sponsor that pays for medical services provided to a patient. An insurance company or organization (the third party) other than the patient (the first party) or healthcare provider (the second party) that pays for medical services.

TRICARE

Formerly known as CHAMPUS, this is a federal health insurance plan for active service members, retired service members, and their families.

UB04

Similar in format to the CMS 1500, this is another one of the most common claim forms.

Uniform Guidance

Refers to the Office of Management and Budget (OMB) Uniform Guidance for Grants and Agreements. The purpose of the Uniform Guidance is to contain an authoritative set of requirements for federal awards for non-federal entities; including, not-for-profit, for-profit, and governmental entities (2 CFR §200).

Usual, Customary and Reasonable (UCR)

The amount paid for a medical service in a geographic area based on what providers in the area usually change for the same or similar medical service.

Utilization Review Guidelines (URG)

Apply clinical practice guidelines to determine whether the health care services provided or planned for an individual member are the most appropriate and cost-effective services under the specific circ*mstances.

References

• Definitions of Health Insurance Terms (2002), Bureau of Labor Statistics
• Glossary of Health Coverage and Medical Terms, Centers for Medicaid and Medicaid Services
• The Medicaid Management Information System Snapshot, Centers for Medicaid and Medicaid Services
• Collecting, Using, and Reporting Medicaid Encounter Data: A Primer for States (2011), Mathematica Policy Research
• Summary of Benefits & Coverage & Uniform Glossary, Centers for Medicaid and Medicaid Services
• Collins Dictionary
• Glossary of Insurance Terms, NAIC
• Understanding and Using Fiscal Data: A Guide for Part C State Staff (2014), The DaSy Center
• Title 45 Section 147.210 Transparency in coverage - definitions.
• System Framework Finance Component, ECTA
• Flynn, Margaret & Cheryl D. Hayes. (January 2003). "Blending and Braiding Funds to Support to Support Early Care and Education Initiative." Financing Strategy Series by The Finance Project.
• The Free Dictionary by Farlex
• A Glossary of Fiscal Terms and Acronyms in Money Matters (August 1998) MN House Fiscal Analysis Department on Government Finance Issues.
• Healthcare.gov Glossary
• Investopedia
• Medical Billing Vocabulary and Key Terms, Medical Billing & Coding Certification
• Essential Health Benefits: Balancing Coverage and Cost (2012) Chapter 2: Approaches to Determining Covered Benefits and Benefit Design
• ADMINISTRATIVE GUIDELINE — 10.01.511 Medical Policy and Clinical Guidelines: Definitions and Procedures, PREMERA Blue Cross
• OMB Guidance for Grants and Agreements; Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards