 
Click On Letter For Definitions:
A B
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Y Z
A&S:
Accident and Sickness
AAD:
Annual Aggregate Deductible
Accident & Sickness:
Coverage for short term income replacement when the covered person is disabled
because of an accident or illness. Same as weekly indemnity, weekly disability,
and short term disability
Accidental Death and Dismemberment:
Insurance providing a benefit if the insured person dies by accidental means or
accidentally loses certain specified body parts (leg, arm, etc.).
Actively-At-Work:
A contract provision that provides that the coverage will only be available for
employees actively at work on a full time basis, on the effective date of the
coverage. Those not actively at work become eligible upon their return. The
matching provision for dependant is often a non-hospital-confined provision.
AD&D:
Accidental Death & Dismemberment: Insurance providing a benefit if the
injured person dies by accidental means or accidentally loses certain specified
body parts (leg, arm, etc.).
Aggregate Attachment Point:
See Annual Aggregate Deductible.
Aggregate Factor:
The dollar figure that is multiplied by the number of covered persons each
month during the contract period to calculate the ADD. It includes anticipated
claims plus margin.
Aggregate Stop Loss:
The form of excess risk coverage which provides protection for the employer
against the accumulation of claims exceeding a stated level. This is protection
against abnormal frequency of claims in total rather than abnormal severity of a
single claim.
Annual Aggregate Deductible:
This number represents the overall limit of claim liability for the group.
Beyond this point the Stop Loss policy indemnifies the group at the end of the
contract period. Also called the trigger point or attachment point. See also
Loss Fund.
Administrative Services Only:
An arrangement under which an insurance company, for a fee, processes claims
and handles paperwork for a self-funded group. This frequently includes all
insurance company services (actuarial services, underwriting, benefit
description, etc.) except assumption of risk.
Adverse Selection:
The tendency of riskier persons or groups to seek coverage than less risky
persons or groups such as people with poor health applying for individual
coverage while those with excellent health do not.
ASO:
Administrative Services Only
Attachment Point:
See Annual Aggregate Deductible
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Blues:
Nickname for Blue Cross and/or Blue Shield
Benefit Plan Summary:
The description of employee benefits required to be distributed to the
employees by ERISA. A synopsis of the benefits, usually in simple language,
which does not include all the details of the plan.
Broker:
The licensed producer representing the client who negotiates the program with
the insurer and TPA.
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Cafeteria Plans:
Plans allowing employees to choose from a
"menu" of one or more qualified benefits. Under Section 125 of the
Internal Revenue Service Code, benefits from a cafeteria plan are not taxed to
the employee who selects them.
COB:
Coordination of Benefits. If an employee,
retiree, or eligible dependents are covered under more than one insurance
plan, the insurance companies determine which coverage is primary. The
employee's or retiree's primary coverage will pay its benefits first,
without regard to other coverage.
Coordination of Benefits:
The contract provision that prevents a claimant from profiting by collecting
from two different group plans such that the total is greater than actual
expenses. COB provisions provide for primary and secondary status for the
various plans involved and seek to guarantee that the total paid by all will not
exceed 100% of the out-of-pocket expenses of the claimant.
COBRA:
Consolidated Omnibus Budget Reconciliation Act... legislation relative to
mandated benefits for all types of employee benefit plans. The most significant
aspects within this context are the requirements for continued coverage for
employees and/or their dependants who would otherwise lose coverage for 18
months (36 months for dependants in the event of the employee's death).
Conventional Funding:
Good old-fashioned fully insured plans. Typically premiums are paid monthly in
advance and experience refunds may or may not be part of the policy provisions.
Conversion:
An individual health policy issued to an employee or dependant leaving the
group. The conversion policy is issued without regard to pre-existing conditions
at appropriate rates. The benefits are generally very limited.
Cost Plus:
A method of administering claims only, by either an insurer or Blue plan.
Similar in result to ASO, Cost Plus is often used by entities such as health
care contractors that cannot issue ASO agreements.
Cost Containment:
Features in the plan of benefits or in the administration of the plan designed
to reduce or eliminate certain charges to the plan such as unnecessary surgery
or hospital days thus improving the plans loss experience. Items labeled cost
containment features include second surgical opinion, outpatient surgery,
hospital bill audit, hospital pre-admission certification, length of stay
review, discharge planning, and large case management.
A Covered Employee:
A person meeting the definition of eligibility in the employer's plan document.
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Deductible:
The amount of money a covered employee is required to pay
before direct payment or reimbursement is available from the plan.
Dental Plan:
A health plan that partially or fully reimburses
employees and retirees for dental services.
DMO:
Dental Maintenance Organization. A plan
similar to an HMO, but provides dental services. Participants can use only
those designated dental providers approved or employed by the DMO.
Deposit Premium:
The amount required in order to place a Stop Loss policy in force; generally
the first month's premium.
DRG:
Diagnostic Related Groups ... a prospective payment system that pays a set
amount for a given diagnosis. If treatment actually cost less, the provider
keeps the excess; if treatment costs more, the provider loses.
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ERISA:
Employment Retirement Income Security Act of 1974 ... the basis of most
employee benefit legislation. Even new laws and changes are normally designed as
amendments to ERISA. This federal legislation allows for and sets guidelines
regarding a group's ability to self-fund their benefits.
Excess Loss Coverage/Insurance:
See Stop Loss Coverage/Insurance
Excess Risk:
See Stop Loss Coverage/Insurance
Expected Paid Claims:
An estimate of the dollar value of claims to be paid during a contract period.
Experience Period:
An historical period with specific beginning and ending points for which paid
claims and a covered employees are known. To have a complete understanding of
the experience period, it is also necessary to know what the plan design was,
whether it was the first or a subsequent contract period with that carrier,
rates (with effective dates) and paid premiums if insured, and any other bits of
information about who incurred the claims and how they were paid.
Extended Benefits:
Some plans provide for extension of benefits for a set period of time to
disabled persons beyond the termination of coverage under the plan. Benefits are
provided only for the disabling condition and require continuous disability.
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Final Enrollment:
A complete listing of employees covered on the effective date of coverage. They
must be eligible by the definition established in the plan document.
Final Underwriting:
A review of quoted rates and factors upon receipt of requested additional
documents data to firm up a conditional offer.
Form 5500:
The annual filing form for ERISA for all plans with 100 or more participants.
Flexible Spending Account (FSA):
A benefit option that reimburses employees for certain expenses they incur.
Money is deducted from pay checks on a pre-tax basis. It most often covers
reimbursements for medical expenses not covered under other insurance, or child
care expenses.
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Ground Up:
Refers to a claim from the first dollar payable by the claimant as opposed to
the first dollar payable by the self-funded plan or payable by the Stop Loss
plan or payable by the reinsurer of the Stop Loss plan.
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HIIA:
Health Insurance Association of America ... the national association of health
insurance companies.
HMO:
Health Maintenance Organization ... an organization that provides comprehensive
and preventative health care services for a fixed periodic payment from the
covered person (or the covered person's employer) generally through owned (or
contracted) facilities and a salaried medical staff.
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IBNR:
Incurred But Not Reported ... a reserve for claims that have been incurred but
have not yet been submitted for payment. This is the reserve intended to cover
claim run-out upon termination of the program.
Incurred and Paid:
An Expense both incurred during the contract period and paid during the same
contract period.
Incurred Claims:
Refers to the accrual method of accounting for all known and unknown claims.
Includes paid claims plus adjustments for claims reported but not yet paid and
those incurred but not reported.
Incurred Date:
The incurred date is the date the covered service is rendered, the covered
purchase is made, or the covered person earns periodic payment due to total
disability.
For example, an employee breaks his foot on December 31, goes to the doctor on
January 1, and receives physical therapy on February 12. The employee submits
his bills on March 18. No expenses are incurred in December because it doesn't
matter when the event resulting in treatments happens. No expenses are incurred
in March, because it doesn't matter when the expenses are submitted. Expenses
are incurred January 1 and February 12.
In-Network Service:
Service provided by a participating provider, Primary Care Physician, or
provider approved by the plan.
Another example: A dependent is hospitalized on June 28 for five days. The
charges for room and board and ancillary costs run as follows: June 28 $1550 ,
June 29 $800, June 30 $475, July 1 $450, and July 2 $450. Expenses incurred in
June total $2825 ($1550 + $800 + $475) and expenses incurred in July total $900
($450 + $450). It doesn't matter that the dependent goes into the hospital in
June (the expenses are not all considered June expenses), what matters is when
the services are actually provided.
Individual Deductible:
Same as Specific Deductible.
Individual Stop Loss:
Same as Specific Stop Loss. In-Network Service:
Service provided by a participating provider, Primary Care Physician, or
provider approved by the plan.
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Lag:
The usual delay between the actual time a service is rendered or a supply is
supplied and the time it is paid and recorded. Lag includes both claims that
have not yet been submitted and claims that have been submitted but not yet
paid. Lag is the result of administrative efficiency of the provider, the
employer (if employer involvement is required in supplying claim forms or
verifying eligibility), the employee, and the claim administrator; human
procrastination is a major factor.
Lifetime Maximum:
(a) Maximum payable under the employer's plan per person.
(b) Maximum payable under the Specific Stop Loss contract per person.
Please note that B cannot be higher than A but that A may be higher than B, in
which case the employer has an uninsured exposure.
Limited Extension of Coverage:
A Stop Loss optional benefit which provides a 90 day extension upon termination
of the Specific Stop Loss.
Loss Fund:
A term for the funds the group has (or should have) set aside for the payment
of claims based upon the covered persons and the Aggregate factors. The Loss
Fund should cover the expected claims and the margin.
Loss Fund Factor:
Same as Aggregate Factor
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Manual Cost:
A rate or factor based on actuarial estimates rather than on the group's
experience.
Margin:
The difference between expected paid claims and the Aggregate deductible.
Granting that the expected claims will most likely be paid in any circumstance,
the margin is the corridor of risk the employer is accepting in his self-funded
program. It is expressed as a percent of expected paid claims and is customarily
25%.
Minimum Attachment Point:
The lowest AAD to be used for a contract period generally stated as a dollar
amount or as a percent (usually 85% to 95%) of the first month's calculated
Aggregate deductive times the number of months in the contract period.
Medical Plan:
A health plan that partially or fully reimburses employees or retirees for
costs of personal injuries or illness.
Medicare:
A federal health insurance program administered by the Social Security
administration for disabled individuals and those age 65 or older.
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Not Hospital Confined:
A contract provision that provides that the coverage will only be available to
persons (usually applies only to dependents) who are not hospital confined on
the effective date of the coverage. Persons that are hospital confined become
eligible upon their discharge. The matching provision for the employee is
usually an actively-at-work provision.
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Open Enrollment Period:
An period, usually annual, during which
employees are given the option of enrolling in one or more health care
plans.
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Paid Claim:
Payment occurs on the date the payment check is issued (Or the draft is drawn),
provided it is promptly delivered to the payee and is paid upon presentment.
Other definitions of paid focus on the date the payment clears or is recorded as
cleared in the companies records.
Paid Claims:
The total of claims actually paid during a specific time period. A straight
cash accounting basis with no adjustment for anticipated or known liabilities
which have not yet been paid.
Participating Employer:
A company and its subsidiaries electing to take part in a trust sponsoring a
Stop Loss policy.
Participating Agreement:
The application completed by the participating employer when requesting
membership in the Stop Loss trust.
PL:
Public Law ... usually seen as PL 98-133 where the first two numbers represent
the Congress in session which passed the law.
Plan Document:
The master description of benefits under which the employer's health and
welfare plan are administered. This is the document that tells the TPA how to
pay the eligible expenses and tells the Stop Loss insurer how to validate Stop
Loss claims.
Policy:
The contract of coverage issued to the employer for non-trust coverage or to
the trustees of a stop loss trust.
PPO:
Preferred Provider Organization ... a group of providers that have banded
together in hopes of preserving and enlarging their market share by providing
discounted services to groups with which they have contracts. These
organizations can be of two types: (a) one is risk-bearing and provides its
services in exchange for a pre-set monthly payment; (b) the other is
non-risk-bearing and provides discounts off its normal charges.
Premium:
The amount of money a covered employee pays for insurance
coverage. A premium does not include additional co-payments or deductibles
incurred for treatment.
Primary Care Physician (PCP):
The health care professional who
belongs to an HMO or POS network and provides primary care for covered
members.
PRO:
Peer Review Organization ... a watchdog group formed by members of the same
profession to guard against improper treatment or charges. Sometimes used to
review questionable claims.
Providers:
A Generic term for doctors, hospitals, nurses, dentists, therapists, and other
who provide health care services.
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Qualifying Event:
An event such as marriage, divorce, or the birth of a
child, that allows a change in health care coverage outside of the Open
Enrollment period.
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Retention:
The portion of the premium retained by an insurance company as their cost of
doing business including premium taxes, commissions, profit, claims, and other
administrative expenses.
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Schedule of Benefits:
An outline of the benefits described in the plan document. Often supplies the
exact values of items referred to in the body of items referred to in the body
of the plan document such as the deductible.
Self-Funding:
The method of providing employee benefits in which the group does not purchase
conventional insurance but rather elects to pay for the the claims directly
(generally through the services of a TPA) with Stop Loss insurance in place to
cover abnormal risks.
Self-Insurance:
The method of providing employee bnefits in which the group purchases no
insurance at all (conventional or Stop Loss), thereby assuming full
responsibility for the claims.
Shock Loss:
A large loss that significantly affects the experience of a group. Generally
claims on a single claimant during a single contract period totalling more 50%
of the Specific Stop Loss deductible.
Short Term Disalbility:
See A&S.
SIIA:
Self Insurance Institute of America ... the national association specializing
in self-insurance. Members are TPA's, insurers, reinsurers, and self-funded
groups as well as support product vendors.
Specific Stop Loss:
The form of excess risk coverage which provides protection for the employer
against a high claim on any one individual. This is protection against abnormal
severity of a single claim rather than abnormal frequency of claims in total.
Specific Stop Loss is also known as Individual Stop Loss.
Specific Deductible:
The dollar amount to be paid by the employer's plan before the Stop Loss policy
will reimburse additional expenses.
Stop Loss Coverage / Insurance:
A general term referring to that category of coverage which provides insurance
protection to an employer for his or her self-funded plan. Also known as excess
Loss or Excess Risk.
Summary Plan Description:
Same as Benefit Plan Summary.
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Term Life Insurance:
Insurance that provides death benefit coverage for a specified period, without
permanent policy benefits such as cash or loan value.
TPA:
Third Party Administrator ... a non-risk-bearing company that provides claims
and administrative services for a self-funded client, Insurance Company, or
Provide Organization.
Trigger Point:
See Annual Aggregate Deductable.
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Underlying Plan:
The employer's plan of benefits as described in the plan document.
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Weekly Disability:
See A&S.
Weekly Indemnity:
See A&S.
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Insurance Administrator of
America, Inc.
1934 Olney Avenue, Suite 200
Cherry Hill, NJ 08003
Phone: (856) 470-1200 - Fax: (800) 238-0519
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Ballooning Unpredictable Costs
