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A Glossary for Employers

ADA (Americans with Disabilities Act)
ADA is a broad-based law that prohibits discriminatory practices in employment based on disabilities. In relation to medical plans, ADA prohibits the use of differing benefits, which discriminate based on a disabling condition.

ADEA (Age Discrimination in Employment Act)

ADEA is a broad-based law that prohibits discriminatory practices in employment based on age. In relation to benefit plans, ADEA requires that active employees who are over the age of 65 be treated in the same manner as other active employees under the plan.

Administration
The broad aspect of handling all functions of a group benefit plan once it has been sold. Service and claim functions may or may not be included.

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.

Adverse Selection
Also known as anti-selection, this is the tendency of persons to choose health options that are financially most beneficial to them (and least beneficial to the health plan) in light of their known physical conditions. Those with known health problems elect more insurance and healthy persons elect less or no coverage.

Agent of Record
The agent designated by the group. The agent of record controls the group plan and authorizes group information.

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
Factors used to determine the aggregate stop loss funding level – usually expected claims plus a 25% margin. The factors look like, but are not, premium rates.

Aggregate Limit
Under stop-loss insurance arrangements, the Aggregate 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 when claims for the group as a whole exceed the limits based on the factors outlined under the policy.

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

Aggregating Specific
The aggregating specific lowers the adjusted billable rate by 20 to 40%. This reduction then becomes an additional deductible, shifting fixed costs to the claim’s side. The additional deductible applies to the entire group not each person.

Amendment
A formal document signed by the employer, which changes the provisions of the plan.

Annual Report (Form 5500)
An annual information return that the employer must file with the IRS and DOL regarding the qualification, financial condition and operations of the benefit plan.

ASO (Administrative Services Only)
A contract between an insurer or TPA to provide certain administrative services and no insurance protection to a self-funded employer.

Attachment Point
Specified limit when a stop-loss insurance contract will pay for an individual or claim. The dollar amount above which specific stop-loss protection begins to pay is called the specific attachment point.

Audit
A retrospective review of the provider's 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. Typically performed on large hospital claims.

Benefit Booklet
The summary plan description for self-funded plan or the insurance certificate for a fully insured plan.

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 insurer to a self-funded plan who agrees to underwrite (carry the risk) and provide certain types of coverage and sevice. The stop-loss carrier. Claim A demand to the plan by a covered person for payment of certain benefits provided by the plan.

Claim Adjudication
To properly adjust or adjudicate a claim based on eligibility, fee schedules, usual and customary amounts, and benefit coverage.

Claim Administrator
The firm that performs the administrative functions for a group plan. The relationship with the group is brought about through an administrative services only (ASO) agreement or a claims services only (CSO) agreement. The administrator provides such services 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)
COBRA as it refers to benefits plans requires that coverage under the plan be continued for up to 18 months, at the employee's cost, when coverage under the plan is lost due to certain events. Continuation is also 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
Activities like pre-certification, case management, mandatory second opinions and benefit incentives aimed at holding down the cost of medical care or reducing its rate of increase.

Employee Benefit Plan
A plan established or maintained by an employer or employee organization or both. The purpose is 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 explaining the plan to the eligible employee and assisting them in properly completing their application for coverage.

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 accompanies a claim check and summarizes how reimbursement was determined and among other things, explains 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)
ERISA is a broad set of laws providing uniform regulation of pensions and welfare benefit plans. ERISA is written in very general terms, which has led to much of its interpretation and impact being determined in case law from court verdicts. 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.

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
Insurance coverage that takes effect after the initial liability of a claim (specific) or claims (aggregate) has been paid. Also referred to as Stop-Loss Insurance and Reinsurance.

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

Experience

Refers to the history of actual claims paid during a period or the claims incurred during a period.

Fee for Service
Payment of provided services as 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. A TPA is not a fiduciary.

Fixed Costs
Those costs which are payable on a regular basis (monthly) and are not part of a claim. Examples of Fixed Costs are reinsurance premiums, PPO Access Fees and administrative costs.

Flexible Benefit Plans/Section 125
Offers a choice of pre-tax benefits funded by employee contributions only (premium payment, medical reimbursement account, dependent care reimbursement account).

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.

Form 5500
Annual filing form for ERISA plans.

Fully Insured Plan
A benefit plan, which is purchased by the employer for fixed monthly premiums paid to the insurance company who bears the risk.

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

HIPAA 
Health Insurance Portability and Accountability Act

HMO (Health Maintenance Organization)

A form of insurance, which provides benefits through specified providers who are under contract only. HMO's control costs by paying providers on a capitated 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 represent the estimate of the time between when a claim is incurred and when it is submitted and processed for payment.Lifetime Aggregate or Maximum
The lifetime maximum benefit payment provided under a plan or insurance contract.

Managed Care
An approach to controlling utilization, quality and cost of medical care using a variety of cost containment methods focused on incentives to choose less costly care and disincentives for choosing more costly care.

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 group 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).

Negligence 
The failure, through omission of act, to perform as a reasonable, ordinary and prudent person would perform. Consideration is given to the specific situation, circumstances and knowledge of the parties involved.

Non-Discrimination
The general requirement that plans not provide significantly greater benefits to highly compensated or key employees, and not provide benefits on a case-by-case basis.

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. A TPA is a party in interest.

PDA (Pregnancy Discrimination Act)
PDA prohibits discrimination in employment based on pregnancy. As it relates to benefit plans, PDA requires that if medical benefits are offered to employees, those benefits will treat pregnancy in the same manner and subject to the same provisions as any other sickness.

Plan Administrator
The person or entity named to administer the day-to-day operations of a plan. Typically the employer.

Plan Document
A comprehensive and detailed description of all provisions of the plan. The plan document is generally written in technical language.

Plan Sponsor
The entity that sets up the plan and is responsible for its funding and operation. Typically the employer. However, it may be an association or union in the case of groups that are not single employers.

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, as opposed to 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. The offer to a current or prospective case to underwrite specified risks and provide specified services at a quoted price. Quotes may be firm or subject to recalculation based on additional information.

Reimbursement Plan
A plan that provides reimbursement of expenses that have been paid as distinguished from an indemnity plan, which provides for the payment of expenses.

Reinsurance
A contractual arrangement whereby a reinsurer agrees to assume a portion of the risk underwritten by a stop-loss carrier or insurance company. Insurance for the insurance company. Stop-loss coverage is not reinsurance because 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. The plan sponsor is responsible for that 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 periodically deducted from the participant’s paycheck.

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 might be viewed as a blend of 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 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
Feature of un-funded and self-funded plans in which the employer assumes the risk of health care costs up to a certain limit on individual claims (specific) or up to a certain limit on all claims combined (aggregate). An employer pays an insurance company 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. Also called Excess Coverage Insurance. A contract 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 the excess amount.

Stop-loss Insurance, Aggregate
Coverage under which no payments are made until 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.

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 comprehensive description of plan benefits, eligibility provisions and all limiting factors, which is written in a manner that will be easily understood by the average employee.

Terminal Rider
The Terminal Rider allows for an extension of stop-loss insurance upon termination of a self-funded program. It is available to your employees 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.