Glossary
ASO (Administrative Services Only) contract
An arrangement in which a plan sponsor hires a third party to deliver plan administration services such as claims, processing and billing while the plan still bears the risk and costs of claims.
Aggregate Limit
Under stop-loss insurance contracts, the threshold at which medical claims become payable by the stop-loss carrier for the remainder of the policy year, the portion that would otherwise be the self-insured retention for the plan sponsor.
Amendment
A change in the terms of an existing plan or the initiation of a new plan.
Bonding
The Employee Retirement Income Security Act(ERISA) requires trustees of welfare benefit plans (unless they are unfunded) to be covered by a fidelity bond to protect plan assets from fraud and dishonesty.
Cafeteria Plan
Please see Flexible Spending Accounts.
Carry-over Deductible
An arrangement in which expenses incurred during the last three months of the plan year and applied to that year's deductible may be carried over and applied to the following year’s deductible.
Case Management
A utilization management technique that focuses on coordinating a number of health care and disability services. Case management includes a standardized, objective assessment of client needs to develop and provide service or a care plan based on these needs.
Co-insurance
A feature in a benefit plan that apportions expenses between health plan participants and an insurer or plan sponsor in a specified ratio (such as 80 percent paid by the insurer and 20 percent by the participant).
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
Federal law that, among many other provisions, requires most employers with 20 or more employees to offer continuation of health coverage to certain former employees and their eligible spouses and dependents for a designated period of time following a qualifying event.
Contributions
Specified amounts that employees may be required to pay in order to obtain health coverage for themselves or their families.
Coordination of Benefits (COB)
Method to integrate benefits payable under more than one health plan so that the insured's benefits from all sources do not exceed 100 percent of allowable medical expenses.
Copayment
Typically a set amount per type of service paid by the insured, after which the insurer pays the balance of the cost (Example: $30 office copay).
Deductible
Initial portion of medical expenses that plan participants may be required to pay before expenses. Frequently figured on an annual basis, but may be on a per-occurrence basis.
Dependent
Is defined by the plan document. Can be a spouse, newborn child, unmarried child under the age of 19 years old, an unmarried child who is a full-time student under the age of 25 years (or the age limit of your Plan) and who is financially dependent on the parent, an adopted child or child placed for adoption and a grandchild who is considered an Employee's dependent by court order of guardianship.
Employee Retirement Income Security Act of 1974 (ERISA)
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension and health plans in private industry to provide protection for individuals in these plans. ERISA requires plans to provide participants with plan information such as plan features and funding; provides fiduciary responsibilities for those who manage and control plan assets; requires plans to establish a grievance and appeals process for participants to get benefits from their plans; and gives participants the right to sue for benefits and breaches of fiduciary duty.
Family and Medical Leave Act of 1993 (FMLA)
Requires covered employers to allow eligible employees to take up to 12 weeks of unpaid leave in a 12-month period for the birth or adoption of a child, or for a serious health condition of the employee or family member. FMLA applies to private employers with 50 or more employees for each working day of 20 or more weeks, and applies to all public employers and to private elementary and secondary schools.
Fiduciary
Under ERISA, an individual who (1) exercises discretion authority of control over a plan or assets, (2) renders investment advice for a fee or other compensation with respect to funds or property of a plan or has the authority to do so, or (3) has any discretionary authority or responsibility in administration of a plan.
Flexible Spending Accounts (FSAs or Section 125 Plan)
Variation of flexible benefits under which employees may set aside money on a pre-tax basis through salary reduction to pay for dependent care and certain medical expenses, including insurance premiums. The employer sets a maximum contribution amount at the beginning of each plan year, and participants may elect to contribute an amount each plan year up to that maximum.
Form W-2
The federal "wage and tax statement" that must be filed with the IRS by an employer for payments made to each employee during a calendar year. Employers also must provide a copy to employees by January 31 of the following reporting year.
Fully-Insured Healthcare Plan
Health care program in which all the benefits are paid through one or more health insurance policies issued by an insurance company licensed to do business in the state. A fully insured plan typically includes deductibles, copayments, utilization charges or coverage limitations. In a fully insured plan, the "insurer" is the health insurance carrier that issued the policy, and the "insureds" are the employees or members covered by the plan.
Full-Time Student
A student who is enrolled a specific amount of hours, even if the hours are reduced during the term. Coverage is available for the entire academic term when a student registers as a full-time student. There is usually an age limit attached to full-time student status.
Grandfathered
A term used to describe individuals or entities that are exempted from a new rule, most commonly using a cut-off date to determine application of the new rule.
Health Benefits
Generally includes health insurance or coverage, paid sick days, medical leave, workers’ compensation, health-related test and services, fitness and wellness programs, and employee assistance programs.
Health Insurance
Coverage provided through individual policies, group coverage or a health maintenance organization for covered sickness or injury. Generally covers major medical, hospitalization, dental, life, accident, disability and medical insurance or continuation of coverage.
Incurred Basis
Stop-loss coverage in which the stop loss carrier reimburses for claims where the service was incurred in the plan year, regardless of when the bill is received and paid (subject to some ultimate time limit).
Incurred & Paid Basis
Stop-loss coverage in which the stop loss carrier reimburses for claims where the service was incurred and the claim received and paid in the plan year.
Indemnity Plan
Traditional insurance arrangement under which the insurance provider agrees to reimburse the plan participants for specific health services. The insurer can make the payment to the plan participant or directly to the health care provider.
Insured
Person who is indemnified against loss, damage or liability arising from an event that is contingent or unknown.
Insurer
A person, organization, insurance company or other entity that assumes risk and undertakes to indemnify another person against loss, damage or liability arising from an event that is contingent or unknown.
Major Medical Insurance
Health insurance intended to finance the expense of long-term, chronic or catastrophic illness. Covers inpatient and outpatient care, including the cost of x-ray treatment, tests, medicine, home and in-office medical care, psychiatric care and private nursing services.
Managed Care
An approach to controlling utilization, quality and cost of medical care using a variety of cost-containment methods, with an emphasis on creating incentives for employees to choose less expensive treatments and disincentives for employees to choose more expensive ones.
Medical Necessity
Health care services, supplies, or treatment that, in the judgment of the Health Care Provider, are appropriate and consistent with the diagnosis and, in accordance with generally accepted medical standards, cannot be omitted without adversely affecting the patient's condition or the quality of Medical Care rendered. The fact that a Physician has prescribed, recommended, approved, or supplied a treatment, service, or supply does not make it a medical necessity. All conditions are evaluated using the Plan's Cost Containment measures considering the views of the medical community, guidelines and practices of Medicare and Medicaid, and peer review literature. Health plans may exclude coverage for those conditions that are not deemed medically necessary.
Medical Savings Account
A tax-deferred bank or savings account funded by employee salary reduction, employer contributions, or a combination of both along with a low-premium/high-deductible insurance policy, designed for individuals or families in order to fund health care expenses and medical insurance. Allows employees to set aside money on a pretax basis for specific health care expenses that are not reimbursed by the medical plan, including deductibles, copayments, and coinsurance.
Medicare
Program sponsored by the federal government to pay for various medical expenses for qualified individuals—specifically those age 65 or older, those with end-stage renal disease or with disabilities. Medicare includes two separate but coordinated programs: Hospitals insurance (Part A) and supplementary medical insurance (Part B).
Medicare Secondary Plans
Under Medicare secondary payer rules, employer-provided and other health plans generally are primary to Medicare. Medicare is on a secondary basis if a retiree or the retiree's spouse works.
Nontaxable Benefit
Benefit whose value may be excluded from an employee's gross income for income tax purposes.
Occurrence
Claim event that is incurred when an individual covered by a health plan first visits an emergency room, doctor, clinic or hospital.
Plan Document
A written program maintained by an employer for the benefit of employees and their families. It sets forth the benefits available under an employee benefit plan and the eligibility requirements. This document is often separate from the trust agreement to allow plan modifications without frequent trust agreement amendments.
Plan Year
The calendar, policy or fiscal year on which the records of a plan are kept, typically 12 consecutive months.
Pre-existing Condition
Physical or mental condition that existed before the plan participant became covered by the health plan. Most group health plans have clauses that exclude certain pre-existing conditions from coverage for a certain period of time.
Preferred Provider Organization (PPO)
Group of hospitals and/or physicians that contract on a fee-for-service basis with employers, insurance plans or third-party administrators to provide health care.
Pregnancy Discrimination Act (DPA)
Under the act, women affected by pregnancy must be treated the same as other disabled individuals who are similar in the ability or inability to work in employment and benefits.
Premium
Predetermined amount paid by the plan participant to the insurance company to indemnify the plan participant against loss. Premiums may be made in a single payment or a series of payments.
Premium Conversions Plans
Simple agreement between an employer and an employee whereby the employee agrees to reduce his or her salary (or to forego an increase in salary), converting post-tax employee contributions to pre-tax contributions.
"Prudent Man" Rule
Under ERISA, fiduciaries are required to carry out their duties with skill and good judgment in the use of resources.
Reasonable and Customary (R&C) Charges
Also called UCR or Usual, Reasonable and Customary. The price at or below the majority of health care professionals charge for similar procedures within a specific geographic area.
Run-in Period
The time immediately proceeding a stop-loss contract’s effective date that is configured to cover claims.
Run-out Period
Length of time subject, to negotiation between the plan sponsor and the stop loss carrier, that a stop-loss contract can be configured to remain responsible for claims that are incurred during plan year, but not paid during the plan year.
Self-funded Plan
Plan in which the employer and employees contribute, with contributions going to a trust fund to pay health care claims. In such a plan, a participant's contribution obligation is set forth in a plan document or plan enrollment form, and is periodically deducted form the participant's paycheck.
Self-insured plans
See self-funded plans.
Single coverage
Insurance coverage that covers only the person named in the policy.
Stop Loss Coverage
Feature of unfunded and self-funded plans in which the employer assumes the risk of health care cost up to a certain limit on individual claims (specific) or up to a certain limit on all claims combined (aggregate). An employer pays a stop loss carrier to assume the risk above the specific and aggregate levels. Overall, stop-loss coverage can limit the employer's risk while allowing it to retain control over claims and benefits.
Stop Loss Insurance, Aggregate Coverage
Coverage under which payments are made when the sum of all claims paid within the year exceeds a predetermined limit or aggregate attachment point. The stop-loss carrier sets the loss limit after evaluation of claims experience during the last three to five years and a projection of expected claims for the next year.
Subrogation
Provision that gives an employer or plan the right to recover benefits paid to a participant who later recovers the same expense for a third party.
Summary Plan Description (SPD)
A description of the provisions in an employee benefit plan that is provided to plan participants (regardless of employer size) and the Labor Department.
Third Party Administrator (TPA)
Company that accepts responsibility for administering some or all of an employer's benefits program.
Trust
Legal agreement between a plan sponsor and a trustee that fixes the rights and liabilities with respect to managing and controlling the fund for the purposes of the plan.
Unfunded Plan
A benefit plan where the employer assumes all risk and pays claims out of general assets.
Wellness Program
Program designed to promote a healthy lifestyle among employees through on-site exercise facilities, or classes or seminars on nutrition, exercise and health education.
Workers’ Compensation
Benefit in which an employer provides cash payments or medical care to an employee who is injured on the job. These benefits are mandated by state law and include partial wage replacement benefits and rehabilitation benefits.
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