Glossary

Glossary of Terms 

Administration

The handling of all functions of a group benefit plan once it has been sold such as claims processing, customer service, employee communications, etc.

Advanced Funding of Specific Claims

Several of our stop-loss carriers offer a cash flow enhancement often referred to as “pre-funding” or “advance funding”. If a large claim reaches a specific level during a policy year, the plan is required to fund the claim only up to that level. The remaining claim is submitted to the stop-loss carrier for payment, which provides our clients with extra cash flow protection.

Agent of Record

The licensed agent (aka Broker) that you, the employer group, choose to administer your benefits plan.

Aggregate Deductible

The amount of the self-funded health plan’s covered expenses, which are retained by the employer before as aggregates claim may be made. At the beginning of the contract year, the deductible is determined as a projection of claim costs for the contract year. The limit is frequently expressed as 125% of expected claims and is determined on the basis of the number of individuals in the plan, their age, and sex, the industry of the employer, claim frequency and average size of claim. The actual aggregate deductible is determined by aggregating the 12 contract monthly deductibles. The monthly deductible is the sum of the monthly factors times their respective employee counts. The aggregate deductible is also referred to as the aggregate attachment point.

Aggregate Factors/Aggregate Funding Factors

The financials used to determine your aggregate stop loss funding level – typically the amount of expected claims plus 25%. (Factors look similar to, but are not, premium rates.)

Aggregate Limit

The dollar amount point at which the reinsurance carrier begins paying medical claims for the remainder of the policy year. This is when claims for the covered members as a group exceed the limits based on the factors outlined in your policy.

Aggregate Stop Loss

Insurance that protects against an unusually high level of claims for the entire group.

ASO (Administrative Services Only)

A contract between an insurer or Third Party Administrator (TPS) to provide certain administrative services to a self-funded employer.

Attachment Point

Specified limit at which the stop-loss insurance contract will pay for an individual’s claim. The dollar amount above which specific stop-loss protection begins to pay is called the specific attachment point

Audit

An analysis services and charges to see that all billed services were actually provided, that the charges for these services were accurate and that the fees were reasonable.

Broker/Agent

An authorized representative of the group who solicits insurance contracts and services on the group’s behalf even though he may be paid commissions by the insurance company.

Cafeteria Plan/Section 125

A flexible benefit plan, which generally complies with the requirements of IRC Section 125 and offers a choice of two or more benefits or a choice between cash and one
more benefit.

Carrier

The insurers working with a self-funded plan who underwrite (carry the risk) and provide certain of coverages and services. These can include carriers for health benefits, short-term disability, life insurance, dental and vision. There are additional carriers who help protect and reduce your costs via case and disease management, wellness programs and pharmacy benefit managers.

Carve Out

A way for an employer to transfer financial obligation for a specific healthcare condition to a third party. Typically, these are categories that are either high cost or unpredictable, such as transplants or premature babies. With a carve-out insurance program, risk is typically transferred on a “first dollar” or very low (i.e. $10,000) deductible basis as soon as a covered employee is identified as needing a specific service. For acute care services, a carve out also offers the benefit of covering the full “episode of care.” Thus, in contrast to a stop-loss policy, which restricts reimbursements based on incurred and paid dates, a carve out will cover a premature infant from birth through discharge to their home.

Claim Adjudication

To review and make a judgement on a claim based on eligibility, fee schedules, usual and customary fees and charges, and benefit coverage.

Claim Administrator

The TPA who performs the administrative functions for your group plan. You contract with the Administrative Services Only (ASO) or Claims Services Only (CSO)  entity outlines services such as actuarial, benefit design, claim processing, employee communication, governmental reporting, securing of insurance, etc.

Claim Lag

The time interval between the date the claim is incurred, received, processed and paid.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

A federal mandate, COBRA requires you to offer benefits plans to those no longer in your employ for up to 18 months. The covered individual must pay all costs for the plan.  Continuation may also be required for up to 36 months for dependents who lose coverage under the plan due to certain events. COBRA continuation applies to medical, dental, Flex, vision, prescription drug and all other health type coverage. It does not apply to disability of life coverage.

Cost Containment

The activities undertaken by your TPA and associated carriers to keep your costs as low as possible. Activities can include pre-certification, case management, mandatory second opinions and benefit incentives and so on.

Employee Benefit Plan

A plan established or maintained by an employer or employee organization to provide employees with a certain benefit such as medical insurance.

Employer

Any person acting directly as an employer or indirectly in the interest of an employer in relation to an employee benefit plan. The term may also include a group or association
of employers.

Enrollment

The process of adding an employee to the plan, helping them with paperwork, and educating them on the nuances of the benefit plan.

 Enrollment Form

A document signed by the employee as a notice of their desire to participate in the benefits of the plan. It may include health questions and questions relating to dependents who are being enrolled for coverage with the employee.

EOB (Explanation of Benefits)

A document that is sent to covered parties to explain how the claim was adjudicated. It is not a bill. The EOB may or may not accompany a reimbursement check. It includes information on how to contact the carrier and also the claim appeal process. If a check is not issued, the EOB summarizes how the claim was adjudicated (i.e. to deductible, denied as duplicate, etc.).

ERISA (Employee Retirement Income Security Act)

The Act provides for uniform regulation of pensions and welfare benefit plans. As it relates to benefit plans, ERISA provides a general framework for the set up and operation of a self-funded plan. ERISA was written with a pre-exemption of state law included, which means groups that can declare ERISA exemption do not have to comply with state mandates regarding benefits provided under a benefit plan. ERISA is written in very general terms and can sometimes require those involved to seek legal help.

Evidence of Good Health

A personal description that lists factors regarding a person’s physical condition, medical history and other information on which an underwriting decision can be made.

Excess Risk

Also known as Stop-Loss Insurance or Reinsurance, it is insurance coverage that takes effect after the initial liability of a claim (specific) or claims (aggregate) has been paid.

Expected Claims

Expected Claims is the dollar amount or percentage (usually 80%) of the aggregate, which represents the estimated/expected claims that will be paid during the contract period.

Experience

This is the history of actual claims paid by you or incurred by your covered members during a contract period.

Fee for Service

The cost of services rendered.

Fiduciary

Any person who has discretion over plan assets, benefit levels, accounting and record keeping, investments or benefit/eligibility decisions. A fiduciary has a duty under federal law to operate the plan in a prudent (conservative) manner and in the exclusive interest of the persons covered under the plan.

Fixed Costs

Costs which are payable on a regular basis (monthly) apart from the cost of claims. Fixed Costs are reinsurance premiums, PPO Access Fees and the administrative costs charged by your TPA.

Flexible Benefit Plans/Section 125

Flexible benefit plans are those that allow employees to use pre-tax dollars to cover premium payments, medical reimbursement account contributions and dependent care reimbursement accounts.

FMLA (Family and Medical Leave Act) Federal Law

The FMLA, as it relates to benefit plans, requires an employer with 50 or more employees within a 75 mile radius to provide up to 12 weeks of unpaid leave per 12 months in certain situations, during which the employee must continue to be treated as an active employee under the benefit plan. In addition, upon return from FMLA leave all eligibility periods and exclusions will be waived unless such provisions would have applied had the person not gone on FMLA leave. The individual’s job is protected throughout.

Form 5500

Annual filing form for ERISA plans.

Fully Insured Plan

A benefit plan for which the employer pays a fixed monthly premium to the insurance company who bears the risk. The employer spends a set amount for each covered member each month, without regard to actual claims costs incurred.

Funding

The providing of money for payment of claims incurred under a self-funded plan.

HIPAA

The Health Insurance Portability and Accountability Act which protects private health information for an individual.

HMO (Health Maintenance Organization)

A form of insurance whereby, working with contracted providers, the HMO pays providers on a capitated (negotiated) rate regardless of the actual services provided.

ID Card (Identification Card)

A pocket size printed card issued to the employees who are covered under the plan.

Incurred Basis

Coverage in which the stop-loss provider is required to reimburse claims paid not only during a specified period but also calculates an additional contingency amount (or reserve). That calculated amount represents claims for procedures that have been performed but for which bills have not been received.

Incurred Claim

An Incurred Claim is a claim that has happened but has not yet been submitted for processing and payment.

Incurred and Paid 12/12 Contract

This contract is used when moving an employee from another fully insured 12/12 contract. It covers eligible claims that have been incurred and paid during the twelve-month policy period. Claims paid prior to the effective date will not count toward the 12/12 contract.

Incurred But Not Reported (IBNR)

An IBNR is an estimate of incurred claims that have happened but have not yet been submitted for processing and payment. Incurred-paid Basis. Stop-loss coverage provided for claims incurred in the plan year and paid in the plan year.

Lagged Claims

Lagged claims are those that have been incurred but have yet to be submitted and processed for payment.

Laser

A higher coverage attachment point for certain plan members based on their prior claims experience or the likelihood that they will become high-cost claimants in the future.

Lifetime Aggregate or Maximum

The lifetime maximum amount a benefit carrier will pay out under a plan or
insurance contract.

Managed Care

An approach to controlling costs and utilization of medical care using a variety of initiatives to incent covered members to choose less costly care options.

Mandated Benefits

A specific coverage that an insurer or non-ERISA plan is required to offer by state law. Mandated benefits vary from state to state according to the insurance laws of the particular state.

Medicare

Medicare, as it relates to benefits plans, outlines the order in which plans will pay benefits when Medicare also covers the person.

MEWA (Multiple Employer Welfare Arrangement)

An arrangement between or among two or more unrelated employers, that is not maintained pursuant to a collective bargaining agreement, to provide benefits to their employees. MEWA’s are not considered legal in Wisconsin.

Minimum Aggregate Deductible/Attachment Point

The Minimum Aggregate Deductible or Minimum Attachment Point is the pre-determined level a stop-loss carrier will provide aggregate coverage for groups that have a reduction in enrollment. The greater of the Minimum Aggregate Deductible/Attachment Point or the actual annual aggregate (based on actual monthly counts multiplied by the aggregate factor) must be met before medical claims become payable from the assets of the stop-loss carrier for the remainder of the policy year. The Minimum Annual Aggregate Deductible is based on a pre-determined percentage (generally 90% to 100%) of the Annual Aggregate Deductible, calculated by the greater of the quoted enrollment or the first’s month’ s enrollment multiplied by the monthly aggregate factor(s) and then multiplied by the number of contract months (normally 12 months).

OBRA 93 (Omnibus Budget Reconciliation Act)

OBRA 93 contained provisions that relate to benefit plans coverage of adopted children, handling of qualified medical child support orders (QMCSO’s), and immunization benefits.

Paid Basis

A Stop-loss contract basis in which stop-loss carriers reimburse claims incurred and paid in the period prior to, and during the term of the contract.

Paid Claim

A Paid Claim is a claim that has been submitted and processed, and for which a draft (payment) has been issued by the administrator or insurance carrier.

Paid Contract

This contract covers employees for all eligible claims incurred prior to the effective date and paid during the policy year, regardless of when the claim was incurred. The paid contract gives employees the most protection during the policy year and is recommended for renewal purposes.

Party in Interest

A party to the plan who is not a fiduciary, but has knowledge of and interest in the plan. Your PA is a party in interest.

Plan Administrator

The person or entity named to administer the day-to-day operations of a plan. This is typically a person employed by you.

Plan Document

A comprehensive and detailed description of all provisions of your plan.

Plan Sponsor

You are the plan sponsor — the entity that sets up the plan and is responsible for its funding and operation. An association or union can also be the plan sponsor.

Preemption of State Law

The regulatory portion of ERISA which provides that all state laws as they apply to an ERISA plan are superseded by ERISA and not applicable.

POS (Point of Service) Gatekeeper

A form of insurance which utilizes a primary care provider to control access to medical services but, unlike an HMO or PSO, provides an out-of-network benefit.

PPO (Preferred Provider Organization)

An organization which contracts with providers of medical services (physicians and hospitals) to render services at discounted or pre-set fees to members of the PPO, in exchange for prompt payments and increased patient volume. The PPO then sells access to its network of providers to insurance companies and self-funded plans.

PSO (Provider Service Organization)

An HMO which is owned and operated by the providers rather than an insurance company.

Quote

Also called a Proposal, it includes outlines the proposed plan and associated costs for your review and approval. Quotes can be reworked to reflect additional information you provide.

Reinsurance

A contractual arrangement made with a “reinsurer” who agrees to assume a portion of the risk underwritten by a stop-loss carrier or insurance company. Stop-loss coverage is different than reinsurance in that stop-loss coverage is issued to an employer group and not a stop-loss carrier or insurance company.

Renewal

The continuing of services to a plan who has been with the TPA or insurer during the
past year.

Run-in (15/12, 18/12) Contract

This option is normally used when changing an employee from one carrier to another or when switching TPAs. The 15/12 contract covers eligible claims incurred three months prior to the effective date of the plan and paid during the 12 months following the effective date. Some of our carriers also offer an 18/12 or 24/12 contract to give employees more protection.

Self-Funding

An arrangement under which some or all of the risk associated with a benefit plan is not covered by an insurance contract. You, as the plan sponsor, are responsible for the portion of the risk that is not insured.

Self-funded Plans

Plans 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 deducted from the covered members’ paychecks.

Shock Loss

A large loss that significantly affects the true claims experience of a group. Typically defined as any claim which exceeds the greater of $10,000 or the specific deductible of the stop-loss contract.

Spaggregate

Spaggregate blends traditional specific and aggregate stop-loss and a fully insured program. It is designed to attain the stability and efficiency of the fully insured model, with the flexibility and creativity of an ERISA based plan, along with the claims funding arrangements allowed by the ERISA-based self-funded employer stop-loss model. A much higher proportion of total costs are paid as fixed costs, and the retained self-funded portion is much lower than traditional stop-loss.

Specific (Spec) Limit

The Specific Limit is the threshold at which medical claims become payable from the assets of the stop-loss carrier for the remainder of the policy year for an individual.

Stop-loss

Stop-loss coverage can limit your risk while allowing you to retain control over claims and benefits. Also called Excess Coverage Insurance. You pay an insurance company to assume the risk above the specific and aggregate levels. It is an agreement between a self-funded plan and an insurance company that if claims exceed a specified dollar amount during a set period of time, the insurance company will reimburse the self-funded plan for costs in excess of the Stop Loss point.

Stop-loss Insurance, Aggregate

Stop-loss insurance helps protect you against catastrophic claim costs. 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.

Stop-loss Insurance, Combination

Under this program, both the individual claim and the maximum benefits cost are limited. This may be achieved by buying two policies (one specific and one aggregate excess), or both coverage’s may be written into one contract.

Stop-loss Insurance, Specific Excess

Coverage that may be written on a per claim or per claimant basis (usually per claimant). The stop-loss carrier usually sets the minimum attachment point acceptable to it based on a review of the group’s census, expected claims, and past large losses of the program. The optimal specific level is often based on a percentage of the expected claims, usually 6%
to 10%.

Subrogation

The right of the plan to recover benefits paid to a covered person through legal suit, if the expenses incurred by the covered person and paid by the employer’s plan are the fault of another party or individual. Also the right of the plan to be substituted in legal action against any party the covered person may recover from.

SPD (Summary Plan Description)

A covered member’s comprehensive description of plan benefits, eligibility provisions and all limiting factors.

Terminal Rider (Terminal Liability Option or TLO)

The Terminal Rider allows for an extension of stop-loss insurance upon termination of a self-funded program. It is available on both specific and aggregate stop-loss coverage. Normally, it extends coverage for three months to pay claims incurred during the past policy year. There is an additional charge if you choose the extended coverage for
your employees.

 TPA (Third Party Administrator)

An outside company who provides professional services to the plan and employer such as collection of premiums, payment of claims, maintenance of eligibility records and other clerical services. A TPA operates on a service only basis and does not accept any risk under the plan.

Trend Factor

The percentage of increase used by an insurance company or plans to reflect the projected rise in health care costs. Calculation factors also include inflation, utilization, technology and geographic area.

UR (Utilization Review)

A cost control mechanism, which evaluates health care on the basis of appropriateness, necessity and quality. It may include pre-admission certification, concurrent review during hospital confinement, discharge planning, retrospective review of confinements and large case management.

URAC

Utilization Review Accreditation Commission

USERRA (Uniformed Services Employment and Re-employment Rights Act)

As it relates to benefit plans, USERRA requires a plan up to 18 months of COBRA continuation to an employee who takes a leave of absence from work to serve in the armed forces of the U.S. In addition, upon re-employment after military leave all eligible periods and exclusions will be waived unless such provisions would have applied had the person not gone on military leave.

Underwriting

Underwriting is a review of prospective and renewing cases for appropriate pricing, risk assessment and administrative feasibility.

Welfare Plan

A plan of employee fringe benefits that is declared and operated under the provisions
of ERISA.