Benefits Acronym Lexicon
(a work In progress)

Compiled by B. Janell Grenier, Esquire (with the help of friends)

http://www.benefitscounsel.com/Benefits Acronym Lexicon.htm

Glossary of Terms...

If you're dealing with employee benefits, chances are your first preoccupation is health insurance. So you need to know the language. Following are definitions of more than 100 commonly used terms in the field. If you don't find one you're looking for, please let us know. 

 

A.......................................................................

Acquisition cost

The investment necessary for an insurer to write new business. It includes such charges as underwriting the risk, issuing a new policy, paying commissions and overhead or office expenses.

Actively at work

When an employee is present at work with the intent and ability of working the scheduled hours and doing the normal duties of his or her job that day. An employee is actively at work on each day of regular paid vacation, or on a regular nonworking day on which he or she is not totally disabled, if he or she was actively at work on the last preceding regular working day.

Actuary

A professional who mathematically analyzes and determines the price of the risk associated with providing insurance coverage. An actuary may also determine the anticipated cost of providing future benefits.

Administrative services only (ASO)

A type of contract with an insurance company or a third-party administrator that provides an employer solely with administrative support. It does not provide coverage for risk or insurance protection. The usual expenses covered include claims processing, plan design advice and printing benefit booklets. These services are usually entered into by large employers that can afford the risk of providing insurance protection with their own money.

Administrator

A person who is designated to be responsible for the proper operation and administration of a plan. When the plan sponsor does not designate a person for this duty, then ERISA considers the plan sponsor to be the plan administrator.

Adverse selection

A tendency for a person to make a decision based on his/her diminished health condition or frequency of needed treatment and who is, therefore, considered a poorer claims risk than most others in the group.

Agent

Licensed by the state, performs the functions for sole proprietors and small businesses that human resource departments do for larger businesses, gathers census data, prepares proposals, makes presentations to businesses, explains benefits to employers, does field underwriting when required, delivers policies and certificates, explains benefits to employees, assists in handling claims, services the business in any other related tasks required by the employer or sole proprietor.

Aggregate amount (limit)

Maximum amount a plan sponsor (employer) is liable for any single loss or series of losses.

Assignment of benefits

Authorization by the insured that allows the insurer or claims payer to submit benefit payments directly to the medical care provider.

B.......................................................................

Balance billing

For specific stop-loss insurance, it is the point at which the stop-loss insurance carrier begins to reimburse the employer based upon the individual's total of claims paid within a policy year.

Beneficiary

The person entitled to receive benefits under a plan, including the covered employee and his or her dependents.

Benefit period

A period of time during which benefits are payable under a plan or insurance contract.

C.......................................................................

Cafeteria plan

A plan that offers a choice between two or more qualified benefits or a choice between cash and one or more qualified benefits and which complies with Section 125 of the IRS Code (also known as flexible benefit plan, or flex plan).

Capitation

A form of compensation used primarily by HMOs to pay providers a periodic fee (usually a per-member/ per-month fee) in return for delivering as much necessary health care services as the insured's might need.

Centers of excellence

Providers who are selected to perform certain specialized procedures because of their and willingness to provide discounts.

Claim

An insured's request for reimbursement from an insurance company or plan for covered medical expenses.

Closed panel

Refers to a health care program that requires the insured to use certain providers from a list provided by the plan. The primary care provider is responsible for all health care needs and refers to a specialty physician or hospital only when medically needed.

Coalitions

An association of health care plan sponsors that pools its resources to negotiate with insurers or other health care payers and providers.

COBRA (Consolidated Omnibus Budget Reconciliation Act)

A federal law of 1985 that requires most employers to allow eligible employees and their beneficiaries to continue to self-pay for their health coverage after it normally ends, such as upon termination, for up to an additional 18 and sometimes 36 months.

Coinsurance

An agreement between the insured and the insurance company where payment is shared for all claims covered by the policy. A typical arrangement is 80/ 20 up to $5,000. The insurance company pays 80 percent of the first $5,000 and the insured pays 20 percent. Usually after the $5,000, the insurance company then pays 100 percent of covered expenses during the remainder of the calendar year up to any limits of the policy.

Commission

Part of an insurance premium which is paid by an insurance company to an agent or broker in payment for procuring and servicing the business for the insurance company/client. Depending upon the size of the group being insured, these commissions average between 3 and 10 percent of the premium paid by the employer.

Community rating

A rating method that determines a single average premium based on the characteristics and claims experience of an entire membership such as an HMO or an insurance pool. Age, lifestyle, industry, health factors and gender are not used to determine rates (see adverse selection).

Competing health plan

A health plan that is an insurer, PPO, HMO or other type of managed care arrangement.

Conversion health plans

A contractual provision to prevent an insured from receiving duplicate benefits from two or more group plans and profiting from over insurance.

Cost containment

Efforts or activities designed to reduce or slow down the cost increases of medical care services.

Cost sharing

The sharing of costs between the payment of premium costs and medical expenses by the health care plan and its insured through employee contributions, deductibles, coinsurance and copayments.

Cost shifting

The increased cost of medical care to other patients to make up for losses incurred in providing care to patients who are underinsured or who have no coverage.

Coverage

The different types of options selected and the benefits paid under a plan or insurance contract.

Covered expense
An expense that will be reimbursed by the terms of the plan or insurance contract.

Credible coverage
The period of time.

D.......................................................................

Deductible

The amount that the covered insured must pay before a plan or insurance contract starts to reimburse for eligible expenses.

Defensive medicine

Testing, treatment or other medical procedures that are not medically necessary for the treatment of a patient and are performed solely or primarily for the purpose of limiting a provider's legal liability.

Dual choice

An arrangement where an employer will offer an alternative in addition to its original health plan.

E.......................................................................

Eligible expense

The portion of the medical care provider's services that is covered for payment under the terms of the health plan or insurance contract.

ERISA (Employee Retirement Income Security Act)

A federal law of 1974 which originally set minimum standards for funding, vesting and termination of employer-sponsored pension plans. ERISA also contains provisions to protect the interests of participants and beneficiaries in welfare plans.

Evidence of insurability

A procedure used to review factors concerning a person's physical condition and medical history. From this information, the plan or insurance company evaluates whether the risk of the individual will be accepted and if it will offer coverage.

Exclusive provider organization (EPO)

A type of preferred provider organization (PPO) that requires the insured to use only the listed providers or to otherwise forfeit benefit reimbursement altogether.

Exclusion

Specific conditions or services that are not covered by the terms of the plan or insurance contract.

Expected claims

A dollar amount representing the expected benefit payouts during any plan or contract period.

Experience

Refers to the history of actual claims paid for the contract period (see paid claims) or can refer to the history of claims incurred during a contract period.

Explanation of benefits (EOB)

A document sent to an insured when a claim is handled by the plan or insurance company. The document explains how reimbursement was made, or why the claim was not paid, and if any additional information is needed. The appeals procedure is also outlined.

Extended benefits

Coverage that continues, or becomes payable, after the termination from a plan or insurance contract, such as a hospitalization that continues after coverage would normally cease.

F.......................................................................

Fee-for-service reimbursement

The traditional reimbursement system where the providers of medical care receive a benefit payment calculated on the basis of their billed charge. Under this arrangement, plans or insurers have not established contracted or capitates rates of payment with providers prior to the insured's claim occurrence.

Fiduciary

Under ERISA, any person who exercises discretionary authority or control over a plan or plan assets.

Fixed costs

Expenses that are payable monthly and which do not relate to actual claims paid or incurred, such as premium and administration costs.

Flexible spending accounts

Special accounts typically funded by an employee's salary reduction to help pay for certain expenses not covered by the employer's plan or insurance contract. The advantage of these accounts is that after-tax dollars are converted to before-tax dollars, thereby reducing the actual cost of expenses. A Section 125 cafeteria plan is a flexible spending account.

Fraud

Wrongful practices such as offering free tests or services and billing the insurer or plan or for charging for services not rendered.

Fully insured plan

The employer pays all of the entire premium and, in return, transfers all of the risk and responsibility for claims payment to the insurance company.

G.......................................................................

Gatekeeper (primary care physician)

A health professional within a managed care environment who determines the patient's access to treatment. The primary care physician treats the patient and determines access to further treatment and specialists.

Gatekeeper question

A qualifying question asked by an insurance company at the time of application to help identify risks. Example: "Have you ever been treated for a heart attack or heart condition?"

Grace period

Time lapse that follows the premium due date when the coverage and policy legally remain in force.

Guaranteed issue underwriting

Coverage guaranteed up to an agreed amount or level without evidence of insurability (see evidence of insurability).

Guaranteed renewable

The insured's right to continue an in-force policy by the timely payment of premiums. The insurance company cannot change the coverage or refuse to renew the coverage for other than nonpayment of premiums (includes health conditions and-or marital or employment status).

H.......................................................................

HIPAA (Health Insurance Portability and Accountability Act)

The federal law of 1996 that not only expanded COBRA benefits for workers, but also created medical savings accounts.

Health alliance/health insurance purchasing cooperative (HIPC)

A group or other entity whose primary purpose is to negotiate with health plans to provide coverage at competitive prices to its members.

Health maintenance organization (HMO)

An entity that provides a wide range of health services for a fixed, prepaid premium. The HMO may provide all services or contract with other sources for additional services.

I.......................................................................

IBNR

Stands for "incurred but not reported," meaning claims for which the insured has become liable but has not been submitted to the plan or insurance company for reimbursement (also known as lagged claims).

Incontestability

Provision in a policy that provides an insurance company cannot contest the validity a claim after the policy has been in force for a certain period, usually two or three years.

Insurability

The status of an insurance applicant that makes him or her acceptable to an insurance company, i.e., health, financial condition or occupation.

Individual practice association (IPA)

A type of HMO that contracts with a physician-controlled entity, usually on a capitation or disconnected fee-for-service basis to pay for medical services. IPA's may also serve non-HMO patients.

J

K

L.......................................................................

Lagged claims

The time between when a service is incurred and costs are submitted and processed for payment.

Lapse

Termination of insurance coverage for failure to pay premiums.

Lifetime maximum or aggregate

The benefit payment limit provided under a plan or insurance contract.

Long-term care

The services required over a lengthy period of time due to an insured's chronic illness or disability. It may include skilled nursing care and custodial care, or adult day care or house care servers.

M.......................................................................

Malpractice reform

An initiative for proposed changes in the laws regulating health care malpractice actions, including required arbitration as well as limits to the amount of attorney's fees.

Managed care

A health care system that imposes controls on the utilization of medical services and on the providers who render the care. It is provided through managed indemnity plans, preferred provider organizations (PPO's), exclusive provider organizations (EPO's), health maintenance organizations (HMOs) or any other cost-management environment.

Managed competition

Proposed system in which the government restricts the consumer to purchasing insurance from government-approved carriers.

Mandate

A specific procedure or coverage that a plan or insurance contract must offer, as dictated by state or federal law.

Medicaid

A medical benefits plan available to low-income persons, paid by federal and state government but administered by the state.

Medical savings account (MSA)

A high-deductible individual insurance plan funded by the employer or by pre-tax employee dollars (but not both in the same year) that can be used to pay for routine medical expenses and even pay premiums should the individual become unemployed.

Medicare

A federal program of medical care benefits designed for those permanently disabled or over age 65.

Multiple employer trust (MET)

A plan established by a sponsor that allows small employers in the same or related industries to provide medical insurance under a trust agreement.

N.......................................................................

National Association of Insurance Commissioners (NAIC)

A professional organization that assists state insurance departments and helps draft model laws.

Network

Contracted providers of health care (physicians, hospitals, testing centers, rehabilitation centers, etc.) that have negotiated discounted fees for their services in return for higher patient volume. This can apply to HMO, PPO, POS, and EPO organizations.

O.......................................................................

Out-of-pocket maximum

The maximum amount that an insured is required to pay under a plan or insurance contract.

Open panel

A right included in an HMO plan that allows the covered person to obtain non-emergency services from a specialist without a referral from the primary care physician or gatekeeper.

Outcomes measurement

A documented program that tracks physician treatment patterns for purposes of evaluating efficiency.

P.......................................................................

Paid claims

The total claims payment made by the plan or insurance company. It does not include any employee cost sharing or provider discounts.

Participating provider

A provider who has agreed to contract with a managed care program to provide eligible services to covered persons.

Play or pay

A concept that would require employers to provide health insurance to their employees and dependents (play) or pay a tax or premium toward a publicly provided system that covers people without private insurance (pay).

Point of service (POS) plan

A program whereby each time health care services are needed, the patient can choose from different types of provider systems (indemnity plan, PPO or HMO). Each choice may provide different benefit payments.

Pool(ing)

A practice used by insurance companies to combine premiums, claims and expenses in order to spread the risk of coverage. This process ensures that small employers will not be singled out and unfairly assessed with a large rate increase due to unanticipated catastrophic medical claims of its insured employees.

Portability

The practice of providing access to continuous health coverage so the insured does not lose insurance protection due to any change in health or personal status (such as employment, marriage or divorce).

Pre-existing condition

A health status or diagnosis that existed (or for which treatment was received) before coverage began under a current plan or insurance contract, and for which benefits are not available or are limited.

Pre-existing condition clause

A physical or mental condition, regardless of cause, for which medical advice, diagnosis, care or treatment was recommended or received in the last six-month period prior to an individual's effective date of coverage. (HIPAA precludes a pre-existing condition from exceeding 12 months, or 18 months for late entrants. Also, a pre-existing condition limitation must be reduced by an individual's total credible coverage as of the enrollment date.)

Preferred provider organization (PPO)

An organization of participating providers that have agreed to provide their services at negotiated discount fees in exchange for prompt payment and increased patient volume.

Premium tax

A state tax on insurance premiums.

Prepaid group practice

A type of HMO plan in which participating providers render specific services to the insured in exchange for an advance fixed payment.

Primary care

Routine office medical care, usually provided by a family physician.

Provider

A physician, hospital, skilled nursing facility, intensive care facility or health care professional or other entity providing health care services.

Q

R.......................................................................

Reasonable and customary

The maximum amount a plan or insurance contract will consider eligible for reimbursement, based upon prevailing fees in a geographic area.

Rebating

The practice (illegal in most states) of giving an insurance applicant something of value as an inducement to purchase or renew an insurance policy.

Reinsurance

The transfer of part of an insurance risk to another insurer or insurers. Self-funded plans generally buy coverage to cover losses in excess of certain limits (also known as stop loss).

Reserves

A specific amount of money set aside to assure adequate funds to cover future claims. Both insurance companies and self-insured employers must "reserve" in order to preserve cash-flow and protect solvency.

Retention

The portion of the insurance premium which is allocated for the insurer's expenses, administration, commissions, risk charges and profit.

Rider

Also known as an "Exclusion". An amendment to an insurance contract limiting, or excluding, an existing coverage for certain conditions. For example, a rider to a policy may exclude coverage for treatment to an applicant's knee.

S.......................................................................

Self-funding

An arrangement under which all or some of the risk associated with providing coverage is not covered by an insurance contract.

Service area

A geographic area of operation for a managed care entity.

Staff model HMO

An HMO that employs physicians to provide health care services to its members. Staff models usually operate their own health facilities.

T.......................................................................

Third-party administrator (TPA)

An organization that provides specific administrative duties (including premium accounting, claims review and payment, arranges for utilization review and stop-loss coverage) for a self-funded plan.

Tort reform

An initiative to eliminate unnecessary practices and testing that are performed defensively by a physician with little or no value to the person seeking treatment. It may also include reasonable limits placed on non-economic damages paid to a patient or beneficiary.

Trend factor

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

Triple option plan

A plan that usually offers an insured an opportunity to choose between an indemnity plan, HMO and PPO.

U.......................................................................

Unbundling

The practice of billing each medical procedure under a separate code as a separate item to increase the reimbursement paid by a plan or insurance contract, instead of part of one overall procedure.

Utilization

The number of times a health care service is obtained by an insured during a specific period of time.

Utilization review

A program designed to help reduce unnecessary medical expenses (usually hospital stays) by using preliminary evaluations and patient discharge practices.

V

W.......................................................................

Waiting period

The time between an employee's date of hire and eligibility to receive benefits under a plan or insurance contract.

Waiver of premium

A provision in a plan or insurance contract that relieves the insured of paying the premiums while totally disabled.

Wellness

Programs or benefits introduced to encourage fitness, preventive care and early detection of illness to help reduce the costs of future care (also known as preventive care).

Worker's compensation coverage

Programs mandated by individual states requiring employers to provide insurance to employees for work-related injuries or disabilities.

X

Y

Z