Aggregate limit: Under stop-loss insurance arrangements, the threshold at which medical claims become payable from the assets of the stop-loss carrier for the remainder of the policy year (without regard to whether claims for a particular individual exceed the specific limits for that injury or illness under the policy).

Benefit caps: Limitations- specified on the amount a plan will cover per participant, such as a monetary life limit or the extent of treatment that will be reimbursed.

Co-insurance: An arrangement that apportions expenses between health plan participants and an insurer (such as 80 percent paid by the insurer and 20 percent by the participant).

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA): Federal law that, among many other provisions, requires most employers with 20 or more employees to offer continuation of health coverage to certain former employees and their covered spouses and dependents.

Contributions: Specified amounts that employees may be required to pay in order to obtain health coverage for themselves or their families.

Coordination of benefits: Methods of integration benefits payable under more than one health plan so that the insider's benefits from all sources do not exceed 100 percent of allowable medical expenses.

Copayment: Percentage of the costs of medical or other treatment that is not paid by the insurer, and therefore must be paid by the insured party (usually after the insured party pays the deductible amount).

Deductibles: Initial portion of annual medical expenses that plan participants may be required to pay before they become entitled to be reimbursed by the plan.

Dependent: As defined under the tax code, an individual who is younger that age 13, requires full-time care because of physical or mental incapacity, or if the spouse of the taxpayer and is physically or mentally incapable or caring for himself or herself.

Employee Retirement Income Security Act of 1974 (ERISA): Federal law primarily enacted to enforce pension equality. ERISA subjects individuals or employers who administer, supervise or manage pension and welfare benefit plans- including self-funded health plans- to numerous responsibilities.

Family and Medical Leave Act of 1993 (FMLA): Requires covered employers to allow eligible employees to take up to 12 weeks of unpaid leave in a 12-month period for the birth or adoption of a child, or for a serious health condition of the employee or family member. FMLA applies to private employers with 50 or more employees for each working day of 20 or more weeks, and applies to all public employers and to private elementary and secondary schools.

Family member: A spouse of the employee, a lineal ascendant or descendant of the employee or a spouse of such a lineal ascendant or descendent.

Fiduciary: Under ERISA, an individual who exercises discretion authority of control over a plan or assets.

Flexible spending accounts (FSAs): Variation of flexible benefits under which employees may set aside money on a pretax basis via salary reduction to pay for certain and dependent care. Two types of spending accounts are permitted under the tax code: health care and dependent care. The employer sets a maximum contribution amount at the beginning of each plan year, and participants may elect to contribute an amount each plan year up to that maximum.

Fully insured health care plan: Health care program in which all the benefits are paid through one or more health insurance policies issued by an insurance company licensed to do business in one or more states. A fully insured plan does not exempt participants from paying deductibles, copayments, utilization charges or coverage limitations. In a fully insured plan, the "insurer" is the health insurance carrier that issued the policy, and the "insured" are the employees or members covered by the plan.

Health benefits: Generally includes health insurance or coverage, paid sick days, medical leave, workers compensation, health-related test and services, fitness and wellness programs, and employee assistance programs.

Health insurance: Coverage provided through individual policies, group coverage or a health maintenance organization. Generally covers major medical, hospitalization, dental, life, accident, disability and medical insurance or continuation of coverage.

Incurred basis: Stop-loss coverage in which the stop loss provider is required to reimburse clams paid not only during a specified period but also calculate 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-paid basis: Stop-loss coverage for claims incurred in the plan year and paid in the plan year.

Insured: Person who is indemnified against loss, damage or liability arising from an event that is contingent or unknown.

Insurer: Person who undertakes to indemnify another person against loss, damage or liability arising from an event that is contingent or unknown.

Major medical insurance: Health insurance to finance the expense of long-term, chronic or catastrophic illness. Covers inpatient and outpatient care, including the cost or xray treatment, test, medicine, home and in-office medical care, psychiatric care and private nursing services.

Managed care: Approach to controlling utilization, quality and cost of medical care using a variety of cost-containment methods, with an emphasis on creating incentives for employees to choose less expensive treatments and disincentives for employees to choose more expensive ones.

Medical necessity: Health plans may exclude coverage for those conditions that are not medically necessary.

Medicare: Program sponsored by the federal government to pay for various medical expenses for qualified individuals- specifically those age 65 or older, those with endstage renal disease or with disabilities. Medicare includes two separate but coordinated programs: Hospitals insurance (Part A) and supplementary medical insurance (Part B).

Medicare secondary plans: Under Medicare secondary payer rules, employer-provided and other health plans generally are primary to Medicare. Although Medicare is secondary basis if a retiree or the retiree's spouse works.

Occurrence: Random claims event that is incurred when an individual covered by a health plan first visits an emergency room, doctor or clinic.

Plan document: This document, adopted by the plan sponsor, identifies various documents incorporated by reference into the plan. These documents generally address three subjects: (1) the rights and duties of the plan sponsor to participants, fiduciaries and third parties with respect to the funding, amendment or termination of the plan. (2) the third parties with respect to the funding, amendment or termination of the plan; and (3) the rights and duties of participants with respect to contributions, benefit claims and subrogation under the plan.

Plan year: The calendar, policy or fiscal year on which the records of a plan are kept.

Pre-existing condition: Physical or mental condition that existed before the plan participant became covered by the health plan. Most group health plans have clauses that exclude certain pre-existing conditions from coverage for a certain period of time.

Preferred provider organization: Group of hospitals or physicians that contract on a fee-for-service basis with employers, insurance plans or third-party administrators to provide health care.

Pregnancy Discrimination Act (PDA): Under the act, women affected by pregnancy must be treated the same as other disabled individuals- who are similar in the ability or inability to work- in employment and benefits.

Premium: Predetermined amount paid by the plan participant to the insurance company to indemnify the plan participant against loss. Premiums may be made in a single payment or a series of payments.

"Prudent man" rule: Under ERISA, fiduciaries are required to carry out their duties with the care, skill, and prudence that a prudent person would use in a similar situation.

Reasonable and customary (R&C) charges: Term used in many health plans. Defined as the price at or below which the majority of health care professionals of similar expertise charge for similar procedures within a specific geographic area.

Run- in period: Period during which a stop-loss contract period to cover claims incurred in a period immediately proceeding the effective date.

Run-out period: Period during which a stop-loss carrier remains responsible for claims that are incurred but not reported. The run-out period is subject to negotiation between the plan sponsor and the carrier, and also may be subject to state regulation.

Self-employed person: Generally refers to sole proprietors and to equity partners in a partnership. A health program that covers on the self-employed is not an ERISA welfare benefit plan because it does not cover any common-law employees.

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 form the participant's paycheck.

Self-insured plans: See self-funded plans.

Single coverage: Insurance coverage that covers only the person named in the policy.

Stop loss: Feature of unfunded and self-funded plans in which the employer assumes the risk of health care cost 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.

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.

Subrogation: Provision that gives an employer or plans the right to recover benefits paid to a participant who later recovers the same expensed for a third party.

Summary plan description (SPD): A brief, understandable description of the provisions in an employee benefit plan that is provided to plan participants (regardless of employer size) and the Labor Department.

Third-party administrator (TPA): Individual or company that accepts responsibility for administering some or all of an employer's benefits programs.

Trust: Legal agreement between a plan sponsor and a trustee that fixes the rights and liabilities with respect to managing and controlling the fund for the purposes of the plan.

Wellness program: Program designed to promote a healthy lifestyle among employees through on-site exercise facilities and classes on seminars and nutrition, exercise and health education.

Workers compensation: Benefit in which an employer provides cash payments or medical care to employees who is injured on the job. These benefits are mandated by state law and include partial wage replacement benefits and rehabilitation benefits.

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