GLOSSARY OF SELF-FUNDED TERMS

Self–Funded plans are governed by The Employee Retirement Income Security Act of 1974, ERISA is a federal law which sets the minimum standards for retirement and health benefit plans in private industry.  ERISA does not require any employer to establish a plan; it only requires that minimum standards are set for those who do.  ERISA has also been expanded to include previous health law changes such as, the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA), The Health Insurance Portability and Accountability Act of 1996 (HIPAA), and The Patient Protection and Affordability Act of 2010 (PPACA).

 

This glossary contains many commonly used terms and definitions, but is not a full list.  These terms and definitions are intended to be educational and they may be different from the terms and definitions in your plan.  Please see your Summary of Benefits and Coverage for information on how to get a copy of your policy or plan document.

 

Bold blue text indicates a term defined in this Glossary.  

 

Aggregate Attachment Point – See Aggregate Deductible.

 

Aggregate Deductible – The amount of claims which must be paid before the Aggregate Excess Loss Policy reimburses the Plan for losses, also referred to as the Aggregate Attachment Point.  

 

Aggregate Excess Loss – Insured coverage for a Self-Funded Plan which indemnifies the Plan if total claims paid exceed the Aggregate Attachment Point for the policy year.  Normally, such coverage only reimburses for claims which were “incurred and paid” during the first 12 months and for claims “paid” during each year thereafter.

 

Generally, Aggregate Excess Loss coverage will indemnify a Plan for Medical claims; however, optional coverage for Dental, Vision, Prescription Drug and Disability claims is also available.

 

Aggregate Factor – A dollar figure, usually expressed on a “Per Employee” or “Per Family” basis, that the Excess Loss Carrier uses to determine the Monthly and Annual Aggregate Attachment Point.  

 

The Aggregate Factor is set by the Excess Loss Carrier after having determined the expected paid claims per employee/family which will be paid by the Self-Funded Plan during the policy year.  Normally, the Aggregate Factor is set at 125% of the expected paid claims per employee/family.

 

Aggregate Reinsurance – When an employer elects to self-fund his employee benefit plan, there is generally a limit to the risk the employer agrees to assume for funding payment of employee claims. To limit this risk, the employer purchases aggregate reinsurance.

 

– For aggregate stop-loss insurance, it is the point at which the stop-loss insurance carrier begins to reimburse the employer based upon the cumulative total of claims paid within a policy year.  For specific stop-loss insurance it is that point at which the total of claims paid on behalf of each covered individual during a policy year exceeds the amount at which the stop-loss insurance company will reimburse the employer.

 

Aggregate Stop-Loss – Aggregate stop-loss insurance limits the overall annual claims liability by reimbursing the company when the claims paid for the self-funded plan, as a whole, exceed a certain preset level.

 

Claim Lag – The time between a claim’s incurred date and its paid date.

 

Co-insurance – The Employee’s share of the costs of covered health care service, calculated as an allowance or a percent of the allowed amount for the service.  

 

Contract Period – The time covered under a contract designating when a claim is incurred and when the claims must be paid to qualify for reimbursement.

 

     12/12 contracts - Claims incurred within the 12 month contract period must be adjudicated and paid in the same 12

                                   month contract period.

 

     12/15 contracts - Claims incurred within the 12 month contract period must be adjudicated and paid within 15 months

                                   of the start of the contract period.

 

     15/12 contracts - Claims incurred within the 12 month contract period or up to three months prior to the effective date

                                   and adjudicated and paid within the 12 month contract period.

 

     Paid contracts – Covers all claims incurred during and prior to the contract period and paid during the contract period.

 

 

Deductible – The amount the Employee owes for specific benefits before your health insurance or plan begins to pay.

 

Fixed Costs – Consists of Administration Fee, Commissions, Individual Stop Loss Premium and Aggregate Stop Loss Premium.  Paid Monthly based on enrollment, PPO Fees, UR Fees, and Large Case Management Fees.

 

IBNR Incurred, But Not Reported Claims – An IBNR 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 Claims – Claims incurred during the contract year but not yet paid.

 

Large Case Management - A collaborative process between the insured and the large case management company of assessment, planning, facilitation, care coordination, evaluation, and advocacy for options and services to meet an individual's and family's comprehensive health needs through communication and available resources to promote quality cost effective outcomes.

 

Maximum Claims – The maximum liability for the Plan based upon enrollment, expected claims and pre-determined risk margin.

 

Minimum Attachment Point – The lower Aggregate Attachment Point to be used for a contract period generally stated as a dollar amount or calculated aggregate deductible times the number of months in the contract period.

 

Paid Claims – Claims that have been adjudicated according to the sponsor’s Plan document and paid by the Plan.

 

Plan Year – The 12-month period in which deductible and co-insurance accumulate amounts toward a plan participant’s out-of-pocket maximum.

 

PPO – Preferred Provider Organization – A PPO is a managed care organization of medical doctors, hospitals, and other health care providers who have agreed with an insurer or a third-party administrator to provide health care at reduced rates to the insurer's or administrator's clients.

 

Reinsurance – Another term for stop-loss coverage.

 

Reinsurance Carrier - An insurance carrier providing stop loss coverage to the employer's self-funded plans.

 

Reserve – Refers to funds accumulated to pay unexpected claims.

 

Run-in – Claims incurred prior to the plan year but reported after the end date of the plan year.

 

Run-Out – Claims incurred during a plan year but reported after the end date of the plan year.  

 

Specific Deductible – The amount of claims for which the Plan is responsible for on any one individual in a contract period.  

 

Specific Stop-Loss – Specific stop-loss insurance provides reimbursement in the event an individual plan participant has claims that exceed the specific deductible during a contract period.

 

Stop-Loss Coverage – A form of insurance that reimburses self-funded insurance plans for losses in excess of a predetermined amount.

 

TPA - Refers to the third party administering the Plan.  

 

 

 

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