Glossary of terms

GLOSSARY OF TERMS

403(b) Plan

A defined contribution plan established by tax-exempt organizations such as public schools, educational or research organizations, and charities in which contributions are used to purchase annuities by employers for employees. The plan must be non-forfeitable to the employee, and contributions must not exceed a specified limit. The funds in the plan are nontaxable until they are taken as income in retirement. They are also called tax-sheltered annuities or tax-deferred annuities.

Accidental Death and Dismemberment (AD&D)

AD&D provides coverage for death or dismemberment resulting directly from accidental causes. Provides benefits in the event of loss of life, limbs or eyesight as the result of an accident.

Annuity

A contract sold by a life insurance company in which an insured makes contributions into a fund that can then be withdrawn in a lump sum or a series of future payments.

Business Overhead Expense

A disability income policy which indemnifies the business for certain overhead expenses incurred when the business owner is totally disabled.

Cafeteria Plan

An employee benefit plan that allows employers to take out employee contributions on a pre-tax basis. To obtain the benefit of tax-favored treatment, the plan must comply with Internal Revenue Code Section 125. Benefits typically include health, dental and vision insurance, child care, 401(k) contributions, and group term life. See also Flexible Benefit Plan;Section 125 Plan.

Catch-Up Contributions

For years beginning after 2001, eligible employees aged 50 or older can make higher tax-deferred annual contributions in the years prior to retirement in 401(k) plans, IRAs, 403(b) plans and 457 plans. These contributions can help to offset the effect of inflation because past service and contributions based on compensation may be inadequate. Catch-Up Contributions are also allowed for health savings accounts.

Coinsurance

Coinsurance is a provision in your health plan that describes the percentage of a medical bill that you must pay and that which the health plan must pay.

Consolidated Omnibus Budget Reconciliation Act (COBRA)

A federal act which requires each group health plan to allow employees and certain dependents to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. Qualifying events include reduced work hours, death or divorce of a covered employee, and termination of employment. Both New Hampshire and Maine have mini-COBRA (State Continuation of Insurance) plans in place for small employer groups who don't meet the Federal size requirements.

Copayment

This is an arrangement where the covered person pays a specified amount for various services and the health care provider pays the remainder. The covered person usually must pay his or her share when the service is rendered. Similar to coinsurance, except that coinsurance is usually a percentage of certain charges where the co-payment is a dollar amount. Copayments usually apply to services such as office visits, among others.

Deductible

A deductible is the amount of money you or your dependents must pay toward a health claim before your health plan makes any payments for health care services rendered. For example, a plan participant with a $1,500 deductible would be required to pay the first $1,500 of health care claims subject to the deductible before anything else is covered in full, or covered subject to coinsurance limits depending on your plan.

Dental Indemnity

A dental insurance plan that pays benefits in a predetermined amount in the event of a covered loss.

Dependents

Spouse and/or unmarried children (whether natural, adopted or step) of an insured.

Disability Benefits Law

A state law requiring an employer to provide disability benefits to covered employees for non-occupational injuries, in contrast to Workers Compensation, which only pays for occupational related injuries. These laws are currently in effect in New York, New Jersey, Rhode Island, California, and Hawaii.

Disability Buy-Sell

A disability income policy used to fund a disability buy-sell agreement whereby the business interest of a disabled stockholder following the elimination period.

Disability Income Insurance

A form of insurance that provides periodic payments to replace income, when the insured is unable to work as a result of sickness or injury.

Drug Formulary

A schedule of prescription drugs approved for use which will be covered by the plan and dispensed through participating pharmacies.

Elimination Period

A specified number of days at the beginning of each period of disability during which no disability income benefits are paid.

Employee Assistance Plan (EAP)

An employer-sponsored program that is designed to assist employees whose job performance is being adversely affected by such personal stresses such as substance abuse, addictions, marital problems, family troubles, domestic violence, etc.

Employment Retirement Income Security Act (ERISA)

A federal law that governs pension and welfare employee benefit plans. ERISA requires plans to provide participants with plan information including plan features and funding. It also requires that plans provide fiduciary responsibilities for those who manage and control assets. It gives participants the right to sue for benefits and breaches of fiduciary duty.

Explanation of Benefits (EOB)

An EOB is a description your insurance carrier sends to you explaining the health care benefits that you received and the services for which your health care provider has requested payment once a claim has been filed.

Family and Medical Leave Act (FMLA)

This Federal law requires employers with 50 or more employees to offer eligible employees at least 12 weeks of unpaid leave for the birth or adoption of a child, to care for a sick family member or for the employee's own illness.

Family Status Change

An event that affects your need for health care, insurance, or other benefits. Qualifying events are:

• Marriage or divorce
• Birth or adoption of a child
• Death of a spouse or dependent
• Loss of prior coverage
• The taking of an unpaid leave of absence
• Change of employment status, including part-time/ full-time status
• Moving in or out of a service area

Flexible Benefits

A type of plan under Section 125 of the Internal Revenue Code that provides employees a choice between permissible taxable benefits, including cash, and nontaxable benefits such as life and health insurance, vacations, retirement plans, and child care. Although a common core of benefits may be required, the employee can determine how his or her remaining benefit dollars are to be allocated for each type of benefit from the total amount promised by the employer.

Flexible Spending Accounts (FSA)

FSAs allow employees to set aside a portion of their earnings on a pre-tax basis into separate spending accounts to fund allowable health care and/or dependent day care expenses. The funds must be segregated as per IRS regulations. These funds are "use it or lose it," as they expire on an annual basis.

Generic Drug

A drug product that is comparable to brand/reference listed drug product in dosage form, strength, route of administration, quality and performance characteristics, and intended use. Generic drugs are cheaper, and most prescription and health plans reward clients for choosing generics by charging smaller copays.

Health Insurance Portability and Accountability Act (HIPAA)

A federal act that protects people who change jobs, are self-employed, or who have pre-existing medical conditions. The act also contains provisions designed to ensure that prospective or current enrollees in a group health plan are not discriminated against based on health status.

Health Maintenance Organization (HMO)

An organization that has made agreements with doctors and other health care professionals to provide preventive and sick care to members at a negotiated fee.

Health Savings Account (HSA)

An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses. They are only compatible with qualified high-deductible health plans. HSAs are optional when setting up a high-deductible health plan. Any funds placed into an HSA are owned by the person on the account and never expire. Any funds contributed to an HSA are pre-tax dollars (subject to the annual max.) and are in addition to the premium paid out for the high-deductible portion of the health plan.

Home Health Care

Care received at home as skilled nursing care, speech therapy, physical or occupational therapy, part-time services of home health aides or help from homemakers.

Indemnity Plan

Health plan with flexibility to visit any health provider with payment being made under a fee-for-service basis. Typically, this plan includes a deductible, coinsurance and out-of-pocket maximum.

Individual Health Insurance

Health insurance coverage on an individual, not employer group, basis. The premium is usually higher for an individual health insurance plan than for a group policy and you may need to qualify medically during the application process.

In-Network

Providers or health care facilities which are part of a health plan's network of providers with which it has negotiated contracted rates. Insured individuals usually pay less when using an in-network provider, because those networks provide services at lower cost to the insurance companies with which they have the contracts.

Long Term Care (LTC)

Care which is provided for persons with chronic diseases or disabilities. The term includes a wide range of health and social services provided under the supervision of medical professionals.

Long-Term Disability Insurance (LTD)

A group or individual policy which provides coverage for longer than a short term, often until the insured reaches age 65 in the case of illness and for the remainder of his lifetime in the case of accident. See also Short-Term Disability Insurance.

Managed Care

A medical delivery system that attempts to manage the quality and cost of medical services that individuals receive. Most managed care systems offer HMOs and PPOs that individuals are encouraged to use for their health care services. Some managed care plans attempt to improve health quality, by emphasizing prevention of disease.

Medical Information Bureau (MIB)

A data pool service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life and Health insurers subscribe to this bureau to get more complete underwriting information.

Medical Savings Account (MSA)

A savings account that can be used to pay medical expenses not covered by insurance for employees of small businesses or self-employed individuals who are covered under health plans with high deductibles. Employers with small group MSAs may make contributions on behalf of employees, or employees may make the entire contribution.

Medicare

The United States federal government plan for paying certain hospital and medical expenses for persons qualifying under the plan, usually those over 65. The hospital benefits are Part A, and the medical expense portion is Part B. Part A is compulsory social insurance;Part B is voluntary government-subsidized, government-operated insurance. Part C is an optional Medicare Supplemental Insurance plan bought on the private market. Part D is an optional Prescription Drug plan bought on the private market. Part D has lifetime penalty fees if not enrolled in during your initial eligibility period.

Medicare Supplement Insurance

Insurance coverage sold on an individual or group basis which helps to fill the gaps in the protection provided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare, but may pay part or all of Medicare's deductibles and copayments, and may cover some services and expenses not covered by Medicare.

Open Enrollment Period

A period during which members can elect to come under an alternate plan, usually without providing evidence of insurability.

Out-of-Network

This phrase usually refers to physicians, hospitals or other health care providers who are considered non-participants in an insurance plan (usually an HMO or PPO). Depending on an individual's health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual's insurance company.

Out-of-Pocket Maximum (OOP)

The maximum amount (deductible and coinsurance) that an insured will have to pay for covered expenses under a plan. Once the out-of-pocket maximum is reached the plan will cover eligible expenses at 100%. Some plans even attribute copays into the OOP equation.

Outpatient

An individual who receives health care services on an outpatient basis, meaning they do not stay overnight in a hospital or inpatient facility. Many insurance companies have identified a list of tests and procedures (including surgery) that will not be covered unless they are performed on an outpatient basis.

Overhead Expense Insurance

Insurance which covers such things as rent, utilities, and employee salaries when a business owner becomes disabled. The insurance benefit is generally not a fixed amount, but pays the amount of expenses actually incurred.

Over-The-Counter Drugs (OTC)

A drug that can be purchased without a prescription (eg., aspirin).

Permanent and Total Disability

Total disability from which the insured does not recover. When used as a definition in a policy (usually a life insurance policy rider), "permanent" is presumed after a stated period of time, commonly six months.

Point-of-Service Plan

This plan allows a choice of whether to receive services from a participating or nonparticipating provider.

Pre-Existing Condition

A pre-existing condition is a physical or mental condition that existed prior to being covered on a health benefit plan. Some insurance policies and health plans exclude coverage for pre-existing conditions. For example, your health plan may not pay for treatment related to a pre-existing condition for one year. You should check with your insurance carrier to learn how your organization's health plan treats pre-existing conditions. Children under age 18 are no longer subject to pre-existing condition clauses under the new federal health care law (PPACA). Adults will no longer be subject to them as of January 1st, 2014.

Preferred Provider Organization (PPO)

A PPO is a group of hospitals and physicians that contract on a fee-for-service basis with insurance companies to provide comprehensive medical service. If you have a PPO, your out-of-pocket costs may be lower in a PPO than in a non-PPO plan. The premium for these plans is typically higher than that of an HMO or POS plan.

Prescription Medication

A drug which can be dispensed only by prescription and which has been approved by the Food and Drug Administration.

Preventive Care

This type of care is best exemplified by routine physical examinations and immunizations. The emphasis is on preventing illnesses before they occur. Under the new federal health care law (PPACA), most plans will cover these services in full. Click here for a current link to these services: https://www.healthcare.gov/what-are-my-preventive-care-benefits/

Primary Care Provider (PCP)

Basic health care provided by doctors who are in the practice of family care, pediatrics, and internal medicine.

Qualifying Event

A family status change (such as death, termination of employment, divorce, etc.) that triggers an insured's protection under COBRA (or State mini-COBRA laws), which requires continuation of benefits under a group insurance plan.

Reasonable and Customary Charges

The charge for medical services which refers to the amount approved by the insurance carrier for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area.

Referral

Occurs when a physician or other health plan provider receives permission to consult another physician or hospital.

Section 125 Plan

A plan in compliance with Section 125 of the IRC. This means that employee contributions to a Section 125 plan may be made with pretax dollars. See also Cafeteria Plan;Flexible Benefit Plan.

Self-funded Plan

When an employer provides a qualified group health plan, manages the payments to the plan and pays claims from the fund of employer and employee payments.

Short-Term Disability Insurance (STD)

A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon. See Long-Term Disability Insurance.

Short-Term Medical (STM)

Temporary medical insurance coverage for an individual for a short period of time, usually from 30 days to six months. Also referred to as gap coverage.

Third Party Administrator (TPA)

A firm which provides administrative services for employers and other associations having group insurance policies. The TPA in addition to being the liaison between the employer and the insurer is also involved with certifying eligibility, preparing reports required by the state, sometimes processing claims and often administering COBRA benefits.

Utilization Management

Utilization Management is the process of reviewing the appropriateness and the quality of care provided to patients. UM may occur before (pre-certification), during (concurrent) or after (retrospective) medical services are rendered. For example, your health plan may require you to seek prior-authorization (prior-auth) from your utilization management company before admitting you to a hospital for non- emergency care. This would be an example of pre-certification. Your medical care provider and a medical professional at the UM company will discuss what is the best course of treatment for you before care is delivered. UM can reduce unnecessary hospitalizations, treatment and costs.

Voluntary Benefits

Benefits that are paid for by the employee through payroll deductions. The employer pays for administration. Examples of these benefits include life insurance, dental, vision, disability income, auto insurance, long-term care coverage, medical supplement plans and homeowners insurance.

Waiting Period

A specified number of days that the insured must wait before becoming eligible for coverage. In the case of employer sponsored health insurance, in most cases, the maximum number of days to make an employee wait for coverage to begin is now 90 days under the new federal health care law. Of course an employer can make the eligibility window smaller than the 90 day maximum.