Glossary of Terms
Administrative Costs: These are fixed costs associated with running the partially self-funded plan and must be paid regardless of the claims volume. They include: claims administrations, PPO Network coordination, Utilizations Review, Customer Service,
Advanced Funding Option (AFO) or Accommodation Rate: This extra insurance protects your company against running into the aggregate before the end of the year. If you reach your aggregate before the end of the year, the re-insurer advances the money ahead of time. (used for larger groups-for small groups, see Monthly Aggregate)
Aggregate: This is the insurance level that protects the cumulative group, reimbursing the plan when annual eligible claims for all members exceed the Aggregate Attachment Point (AAP) in the calendar year. The AAP is the maximum claim cost exposure for the entire group.
Case Management: A system embraced by employers and insurance companies to ensure individuals receive appropriate, reasonable health care services.
Claim Funding: (varies from employer to employer) Some employers simply fund claims as they emerge, while others establish a trust and deposit funds into the trust on a monthly basis at a pre-determined level (i.e. their maximum claim liability) and then withdraw funds as needed for claims. Funds deposited can not revert to the employer. Excess trust reserves usually can be used to offset future contributions of to pre-fund plan improvements.
COBRA: Consolidated Omnibus Budget Reconciliation Act of 1985 which regulates continuation coverage requirements applicable to group health plans.
Deductible: The mount an individual must pay for health care expenses before insurance (or a self-funded company) covers the cost. Often based on yearly deductible amounts.
ERISA: Employee Retirement Income Securities Act: Employee benefits plans are covered by provisions set up by ERISA, by federal and state laws dealing with employment discrimination. These regulations are the matrix of all benefit plans
HIPAA: Health Insurance Portability and Accountability Act of 1996. The law was designed to ease what was then a growing problem known as "job lock"-the reluctance to move from one company to another for fear of losing health benefits. HIPAA regulates Electronic health care transactions, Medical privacy, Security requirements, Unique identifiers, and Enforcement procedures.
IBNR: Claims which are "incurred but not reported." A reserve of claims that have been incurred but not yet been submitted for payment. This is the reserve intended to cover the claim run-out upon termination of the program.
Lag: The usual delay between the actual time a service is rendered or an item is supplied and the time it is paid for 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.
Monthly Aggregate: This (Partial Self-Funded) insurance protects maximum costs on a monthly basis. If the cost of claims exceed the monthly aggregate, the reinsurer will reimburse until the year end aggregate is justified. This option is usually offered to small groups and is much like the Advanced Funding Option for larger groups.
Partial Self-Funding: The Employer group is protected on two levels: The Employer pays for expected claims up to a Specific Deductible Amount for each member of the plan. If that level is exceeded, the Stop-Loss Company pays the remainder of the catastrophic claims for that member. The Employer is also protected on a group level, which protects up to an Aggregate maximum for the group. This is done on an accumulative basis throughout the year. After the Aggregate is met, which is the maximum exposure for the company, for the remainder of the year, the employer is reimbursed for that amount which exceeds the Aggregate.
Run-in: Claims incurred prior to the effective date of a new plan year and presented for payment after the prior plan year has expired.
Run-out: Claims incurred during a plan year but reported after the end date of the plan year and presented for payment after the plan year.
Specific Stop-Loss: Individual or specific stop-loss insurance is a key to self-funding and the control of large claims. This coverage provides that should a covered employee or dependent have benefits paid that exceed your selected deductible during the policy term, all amounts above that level are insured to the plan maximum.
UCR (Usual, Customary and Reasonable) Fees: The average fee charged by a particular type of health care practitioner within a geographic area. The term is often used by medical plans as the amount of money they will approve for a specific test of procedure. If the fees charged are higher than the approved amount, the individual receiving the service is responsible for paying the difference. Sometimes, however, if an individual questions a physician about their fee, the provider will reduce the charge to the amount the insurance company has defined as reasonable and customary.
TPA-Third Party Administrator: This is the claims administrator that acts on your behalf, paying claims, verifying membership and eligibility, and authorizes benefits. In a Self-Funded plan, it replaces the insurance carrier's customer service.