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Health Insurance Glossary

Definitions for common health insurance terms

accountable care organization (ACO)

DEFINITION: An accountable care organization (ACO) is a health care delivery model envisioned by the Affordable Care Act (ACA) in which a group of doctors, hospitals and other health care providers work together to coordinate care for people enrolled in Original Medicare.

Many Medicare beneficiaries have several chronic conditions and see several different doctors. As often as not, the doctors don’t work together, and the patient receives redundant or conflicting care. Under the new model, an ACO will be responsible for providing all health care services for a Medicare beneficiary. Through better coordination and communication, ACOs are expected to provide better care more efficiently, and therefore with lower costs.

As with Original Medicare, ACOs will still be paid on a fee-for-service basis. However, they will also be able to earn more if they keep costs down while meeting quality targets. If the ACO saves money, the savings will be shared between the ACO and the Medicare program.

ACOs were expected to save Medicare $960 million over three years, according to HealthCare.gov.