Benefits Terminology

The Affordable Care Act (ACA): health care legislation passed by Congress and then signed into law on March 23, 2010, by President Obama. The law mandates changes to both the American healthcare system as well as key elements of health insurance coverage with specific requirements of employers based on their company size. The health care law, also known as the Patient Protection and Affordable Care Act, requires that all Americans have healthcare coverage by 2014. Some of the most notable developments of the ACA include the launch of a health insurance marketplace or exchange by the federal government and the requirement that no one be denied health insurance coverage due to pre-existing conditions.

Annual Dollar Limit: a dollar limitation on the total amount of benefits that may be paid with respect to such benefits in a 12-month period under the plan or health insurance coverage, with respect to an individual or other coverage unit.

Beneficiary: a person designated by a participant, or by the terms of an employee benefit plan, who is or may become entitled to a benefit there under.

Brokers: are employers' connection into the insurance industry. They analyze employer needs, determine the appropriate plan, and work with the insurance carriers to build the right benefit program. Employers pay brokers' fees, typically through insurance policy commissions.

Carrier: provide the insurance for the benefit plan. They are accountable to both the employer and the broker. Both are treated as customers, because the insurer relies on the broker community to bring it new business; employers also pay the insurers through insurance premiums

Certificate of Creditable Coverage: a written certificate issued by a group health plan or health insurance issuer (including an HMO) that shows your prior health coverage (creditable coverage). A certificate must be issued automatically and free of charge when you lose coverage under a plan, when you are entitled to elect COBRA continuation coverage or when you lose COBRA continuation coverage. A certificate must also be provided free of charge upon request while you have health coverage or within 24 months after your coverage ends. The Department has developed a model certificate that can be used by a group health plan or a health insurance issuer. Correct use of the model will generally assure compliance with the regulatory requirements.

Coinsurance: the percent of total costs that a member may have to pay after the deductible is satisfied. For example, coinsurance may be 10% after deductible. This means the member will need to cover 10% of the total cost of services after they have met the deductible. The insurance will cover the other 90%.

Commuter Benefits: employer-provided benefits that allow employees to reduce their monthly commuting expenses for transit, biking, vanpooling and parking.

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA): COBRA is a federal law that provides rights to temporary continuation of group health plan coverage for certain employees, retirees, and family members at group rates when coverage is lost due to certain qualifying events.

Contribution: an employee's share of the premium, paid to their employer out of paycheck deductions, to help offset the cost of insurance.

Copay: a flat dollar amount that a member may have to pay for certain services, regardless of the full cost of the visit. For example, insurance may require a $20 copay for a doctor's visit, regardless of whether the doctor charges $160, $200, or any other amount for the visit.

Covered Employee: an individual who is (or was) provided coverage under a group health plan that is subject to COBRA because that individual was employed by one or more persons maintaining the group health plan.

Deductible: on a health insurance plan, the amount that a member must pay toward major covered services before the insurance starts paying for care.

Dependent: a person who relies on another, especially a family member, for financial support.

Dependent Care Flexible Spending Account (FSA): contribute up to $5,000 in pre-tax dollars into DC FSA. You can use this money for qualified dependent care expenses (day care for children, dependent parents). You can use only the amount that has been contributed so far.

Dental HMO (DMO): similar to a medical HMO, it is a plan offering only in-network benefits and typically containing flat copays for all or most services. Also typically lower-cost than DPPO.

DPPO (Dental Preferred Provider Organization): similar to Medical PPO in offering In-network and out-of-network benefits. Typically includes small deductible and annual benefit maximum.

Drug Formulary: a list of all the medicines that will be covered by your group health plan.

Elect: when referring to health coverage, this means to choose, generally in writing, to participate in a group health plan.

Employee Retirement Income Security Act of 1974 (ERISA): ERISA is a federal law that regulates employee benefit plans, such as group health plans, that private sector employers, employee organizations (such as unions), or both, offer to employees and their families

Enrollment Date: the first day of coverage or, if there is a waiting period, the first day of the waiting period. If you enroll when first eligible for coverage, your enrollment date is generally the first day of employment. If you enroll as a late enrollee, your enrollment date is the first day of coverage.

Evidence of Insurability (EOI): also known as Proof of Good Health, EOI is an application process in which you provide information on the condition of your health or your dependent's health to get certain types or levels of insurance coverage.

Exclusive Provider Organization (EPO): health plan that is similar to HMO in that you cannot go out of network, but does not require a PCP or referral to a specialist

Flexible Spending Account (FSA): you can contribute up to the IRS maximum ($2,750 in 2020) per individual in pre-tax dollars into a FSA. You can use this money for qualified health care expenses (medical, dental, vision). You have the ability to use entire amount on day one of the plan year, and you will "catch up" on contributions through level payroll deductions throughout the year.

Group Health Plan: an employee benefit plan established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care to employees and their dependents directly or through insurance, reimbursement or otherwise.

Guaranteed Issue: a situation where a policy is offered to any eligible applicant without regard to health status. May also refer to a guaranteed insurance amount on a Life or AD&D plan; a higher amount may be obtained with evidence of insurability (EOI).

Health Insurance Coverage: benefits consisting of medical care (provided directly, through insurance or reimbursement, or otherwise) under any hospital or medical service policy or certificate, hospital or medical service plan contract, or HMO contract offered by a health insurance issuer. Health insurance coverage includes group health insurance coverage, individual health insurance coverage, and short-term, limited-duration insurance.

High Deductible Health Plan (HDHP): a plan with a very high deductible up-front, and with most benefits paid on a deductible & coinsurance schedule; typically the lowest-cost plan option. Allows for enrollment in an HSA.

Health Savings Account (HSA): pre-tax medical savings account available to employees enrolled in a high deductible health plan.

Late Enrollee: an individual who enrolls in a group health plan on a date other than either the earliest date on which coverage can begin under the plan terms or on a special enrollment date. Under HIPAA, a late enrollee may be subject to a maximum pre-existing condition exclusion of up to 18 months.

Life Insurance: provides lump-sum, tax-free payment to beneficiary in the event of employee death; it is most commonly offered as multiple of salary (benefit is 1x earnings) or flat $50K amount. It is important for the employer to gather & maintain employee beneficiary records to ensure payment goes to correct individual.

Lifetime Dollar Limit: with respect to benefits under a group health plan or health insurance coverage, a dollar limitation on the total amount that may be paid with respect to such benefits under the plan or health insurance coverage with respect to an individual or other coverage unit.

Long-Term Disability (LTD): provides income replacement in the event a disability lasts over 3 or 6 months, and typically continues until age 65 or SSNRA (Social Security Normal Retirement Age). Also expressed as a percentage of salary up to a certain maximum. Can be paid for by the employer, or the employee.

Medical/Surgical Benefits: benefits to cover medical or surgical services which are defined under the plan's coverage terms. These do not include Mental Health benefits.

Mental Health Benefits: benefits to cover mental health services which are defined under the plan's coverage terms. These do not include treatment of substance abuse or chemical dependency.

Multiemployer Plan: a retirement or pension plan established through collective bargaining agreements where more than one employer maintain the plan and are required to contribute.

Network: a set of healthcare providers who have agreed to charge lower prices for their services, usually in return for an insurer's promise to steer members toward those providers

Out-of-Pocket costs: your expenses for medical care that aren't reimbursed by insurance. Out-of-pocket costs include deductibles, coinsurance, and copayments for covered services plus all costs for services that aren't covered.

Out-of-Pocket Maximum: the most a member will ever have to pay in a given plan year.

Participant: a participant is a member of an employer-sponsored benefit plan. The participant could be an active employee, former employee and/or dependents or beneficiaries of such employees, based on the eligibility circumstances of the participant.

Pre-existing Condition: an illness or condition that was present before an individual's first day of coverage under a group health plan.

Pre-existing Condition Exclusion: a limitation or exclusion of benefits for a condition based on the fact that you had the condition before your enrollment date in the group health plan. A pre-existing condition exclusion may be applied to your condition only if the condition is one for which medical advice, diagnosis, care or treatment was recommended or received within the 6 months before your enrollment date in the plan. A pre-existing condition exclusion cannot be applied to pregnancy (regardless of whether the woman had previous coverage), or to genetic information in the absence of a diagnosis. A pre-existing condition exclusion also cannot be applied to a newborn or a child who is adopted or placed for adoption if the child has health coverage within 30 days of birth, adoption or placement for adoption and does not later have a significant break in coverage. If a plan provides coverage to you through an HMO that has an affiliation period, the plan cannot apply a pre-existing condition exclusion. A pre-existing condition exclusion cannot be longer than 12 months from your enrollment date (18 months for a late enrollee). A pre-existing condition exclusion that is applied to you must be reduced by the prior creditable coverage you have that was not interrupted by a significant break in coverage. You may show creditable coverage through a certificate of creditable coverage given to you by your prior plan or insurer (including an HMO) or by other proof. The plan can apply a pre-existing condition exclusion to you only if it has first given you written notice. If your plan has both a waiting period and a pre-existing condition exclusion, the exclusion begins when the waiting period begins. In some states, if plan coverage is provided through an insurance policy or HMO, you may have more protections with respect to pre-existing condition exclusions. The Department has developed a model general notice of pre-existing condition exclusion and a model individual notice of pre-existing condition exclusion that can be used by a group health plan or a health insurance issuer. Correct use of the model notices will generally assure compliance with regulatory requirements.

Preferred Provider Organization (PPO): health plan that allows for in- and out-of-network coverage. In-network coverage is at preferred pricing. Out-of-network coverage is at a higher rate.

Premium: the amount an employer must pay to the insurance company in order to access the insurance provided. Must be paid to the insurer regardless of the claims experience.

Qualifying Event: certain events that would ordinarily cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries for the qualifying event are and the length of time COBRA continuation coverage is available.

Short-Term Disability (STD): provides temporary income replacement in the event of a short-term injury or illness that renders the employee incapable of working. Benefit usually calculated as a percentage of salary (If disabled, STD will pay 60% of regular earnings) up to a certain maximum. NY, NJ, RI, CA, HI, PR all require certain minimum STD benefits. Benefit payment period is typically 3 or 6 months. Can be paid for by the employer, or the employee.

Summary Plan Description (SPD): an important document that the plan administrator must automatically provide to participants which explains what coverage the plan offers, how the plan operates and the rights and responsibilities of participants and beneficiaries. A SPD also must be given to participants and beneficiaries upon request. Each plan's SPD is different. If you need a copy of the SPD, contact your plan administrator.

Vision Plans: most vision plans include one eye exam per year with a low copay and also include new contact lenses or frames 1x/year or 2x/year

Waiting Period: the period that must pass before an employee or dependent is eligible to enroll (becomes covered) under the terms of the group health plan. If the employee or dependent enrolls as a late enrollee or on a special enrollment date, any period before the late or special enrollment is not a waiting period. If a plan has a waiting period and a pre-existing condition exclusion, the pre-existing condition exclusion period begins when the waiting period begins. Days in a waiting period are not counted toward creditable coverage unless there is other creditable coverage during that time. You should try to maintain creditable coverage during a waiting period to reduce any pre-existing condition exclusion that may apply. Days in a waiting period are also not counted when determining a significant break in coverage.