Employee Benefits GlOSSARY

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Allowance ( Vision)  – The maximum amount the insurance company will pay for a service or material. For example, if a member chooses a frame exceeding the plan allowance, they will be responsible for paying the overage in addition to any applicable copays.

Annual limit – Many health insurance plans place dollar limits upon the claims the insurer will pay over the course of a plan year. PPACA prohibits annual limits for essential benefits for plan years beginning after Sept. 23, 2010.



Balance billing – When you receive services from a health care provider that does not participate in your insurer’s network, the health care provider is not obligated to accept the insurer’s payment as payment in full and may bill you for unpaid amount. This is known as “balance billing.”


Calendar year – The 12-month period beginning January 1 and ending December 31.

CHIP – The Children’s Health Insurance Program (CHIP) provides coverage to low- and moderate-income children. Like Medicaid, it is jointly funded and administered by the states and the federal government. It was originally called the State Children’s Health Insurance Program (SCHIP).

COBRA coverage – Congress passed the Consolidated Omnibus Budget Reconciliation Act (COBRA) health benefit provisions in 1986. COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. The law generally covers health plans maintained by private-sector employers with 20 or more employees, employee organizations, or state or local governments. Many states have “mini-COBRA” laws that apply to the employees of employers with less than 20 employees.

Coinsurance – A percentage of a health care provider’s charge for which the patient is financially responsible under the terms of the policy.

Community rating – A way of pricing insurance, where every policyholder pays the same premium, regardless of health status, age or other factors.

Copay – A copayment or “copay” is a fixed payment that an insurance plan member pays at the time a medical service is provided by a network care provider. The copay is separate from the coinsurance payment (typically invoiced after the service is provided), which also may be required, depending on the terms of the insurance policy.



Deductible – A dollar amount that a patient must pay for health care services each year before the insurer will begin paying claims under a policy.


Elimination Period – Also referred to as the qualifying period, the elimination period is the time during which an employee must be disabled before benefits will begin.

ERISA – The Employee Retirement Income Security Act of 1974 (ERISA) is a comprehensive and complex statute that federalizes the law of employee benefits. ERISA applies to most kinds of employee benefit plans, including plans covering health care benefits, which are called employee welfare benefit plans.

Essential Benefits – PPACA requires all health insurance plans sold after 2014 to include a basic package of benefits including hospitalization, outpatient services, maternity care, prescription drugs, emergency care and preventive services among other benefits. It also places restrictions on the amount of cost-sharing that patients must pay for these services.


First Day Hospital  (NYSDBL) – If an insured employee is hospitalized during the benefit waiting period, the benefit waiting period will be satisfied. STD benefits will become payable on the date of hospitalization. The maximum benefit period will also begin on that date.

Formulary – The list of drugs covered fully or in part by a health plan.

Frequency  (Vision  – The benefit period as outlined in a member’s policy. For example, an insurance company may allow one eye exam per frequency. The frequency is typically 12 months.


Grandfathered plan – A health plan that an individual was enrolled in prior to March 23, 2010. Grandfathered plans are exempted from most changes required by PPACA. New employees may be added to group plans that are grandfathered, and new family members may be added to all grandfathered plans.

Group health plan – An employee welfare benefit plan that is established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement or otherwise.

Guaranteed renewability – A requirement that health insurers renew coverage under a health plan except for failure to pay premium or fraud. HIPAA requires that all health insurance be guaranteed renewable.


Health Maintenance Organization (HMO) – A type of managed care organization (health plan) that provides health care coverage through a network of hospitals, doctors and other health care providers. Typically, the HMO only pays for care that is provided from an in-network provider. Depending on the type of coverage you have, state and federal rules govern disputes between enrolled individuals and the plan.


In-Network provider – A health care provider (such as a hospital or doctor) that is contracted to be part of the network for a managed care organization (such as an HMO or PPO). The provider agrees to the managed care organization’s rules and fee schedules in order to be part of the network and agrees not to balance bill patients for amounts beyond the agreed upon fee.

Indemnity insurance plan – An insurance plan in which you pay for services (such as eye care) out-of-pocket at the time service is provided, then submit a claim for reimbursement for some or all of the cost to the insurance company. Most indemnity plans allow you to choose any eye doctor you wish .

Individual mandate – A requirement that everyone maintain health insurance coverage.





Material Duties – The set of tasks or skills required in your specific occupation. These are duties that cannot be reasonably omitted or changed without hindering your ability to perform your occupation. Material duties are used to help the insurance company determine whether you are disabled under the contract. Small differences, such as “a,” “the,” “some,” and “all” material duties, can greatly impact whether you qualify for disability benefits.

Medical loss ratio – The percentage of health insurance premiums that are spent by the insurance company on health care services. PPACA requires that large group plans spend 85% of premiums on clinical services and other activities for the quality of care for enrollees. Small group and individual market plans must devote 80% of premiums to these purposes.


Network – A group of doctors, hospitals and other health care providers (including eye care practitioners) that have agreed to provide services to health plan members for less than their usual fees.


Offsets – A reduction in the amount of your benefit based on the amount of another benefit that you are receiving or that you may be eligible to receive from certain other sources. Offsets can include income benefit sources payable to the employee, employee’s spouse, children and/or dependents due to the employee’s disability or retirement.

Open enrollment period – A specified period during which individuals may enroll in a health insurance plan each year. In certain situations, such as if one has had a birth, death or divorce in their family, individuals may be allowed to enroll in a plan outside of the open enrollment period.

Out-of-network provider – A health care provider (such as a hospital or doctor) that is not contracted to be part of a managed care organization’s network (such as an HMO or PPO). Depending on the managed care organization’s rules, an individual may not be covered at all or may be required to pay a higher portion of the total costs when he/she seeks care from an out-of-network provider.

Out-of-pocket limit – An annual limitation on all cost-sharing for which patients are responsible under a health insurance plan. This limit does not apply to premiums, balance-billed charges from out of network health care providers or services that are not covered by the plan.


Partial Disability – Similar to residual disability coverage as both types of coverage pay benefits if you’re able to perform some of the duties of your occupation. However, loss of income is not considered in partial disability. You’re instead paid an amount equal to 50 percent (or sometimes less) of the benefit that you would earn if you were totally disabled. Partial disability is based on your loss of time on the job.

PPO (preferred provider organization) – A network of health care providers organized by an insurance company to provide health care services to policyholders at discounted rates. Policyholders may choose to obtain health care from out-of-network providers, but at higher costs.

Pre-Existing Conditions – Any mental or physical condition (whether or not diagnosed or misdiagnosed) which (1) – was discovered or suspected as a result of any routine or other medical examination at any time during the pre-existing condition period or (2) – for which the employee has (or a reasonably prudent person would have) consulted a physician or other licensed medical professional, received medical treatment, services or advice, undergone diagnostic procedures, including self administered procedures, or taken prescribed drugs or medications at any time during the pre-existing condition period.

Preventive benefits – Covered services that are intended to prevent disease or to identify disease while it is more easily treatable. PPACA requires insurers to provide coverage for preventive benefits without deductibles, co-payments or coinsurance.



Rate review – Review by insurance regulators of proposed premiums and premium increases. During the rate review process, regulators will examine proposed premiums to ensure that they are sufficient to pay all claims, that they are not unreasonably high in relation to the benefits being provided, and that they are not unfairly discriminatory to any individual or group of individuals.

Recurrent Disability – Disability resulting from the same or a related cause as a prior disability. If an insured suffers a disability that is related to a prior disability and if this disability occurs within the policy specified return to work timeframe, then the second disability is considered a continuation of the initial disability. The elimination period does not have to be satisfied a second time.

Regular Job – Refers to the occupation you are routinely performing for a specific employer or at a specific location when your disability begins.

Regular Occupation – Refers to the occupation you are routinely performing when your disability begins, as it is normally performed in the national economy, instead of how the work tasks are performed for a specific employer or at a specific location.

Residual Disability – Benefits are paid according to the amount of income you have lost because of your disability. These policies pay benefits even if you can work part-time and are not totally disabled. The benefit is based on the percentage of income you earn working part-time in relation to what you used to earn when working full-time. Residual disability is based on your loss of earning power.

Risk adjustment – A process through which insurance plans that enroll a disproportionate number of sick individuals are reimbursed for that risk by other plans who enroll a disproportionate number of healthy individuals. PPACA requires states to conduct risk adjustment for all non-grandfathered health insurance plans.


Self-insured – Group health plans may be self-insured or fully insured. A plan is self-insured (or self-funded), when the employer assumes the financial risk for providing health care benefits to its employees. A plan is fully insured when all benefits are guaranteed under a contract of insurance that transfers that risk to an insurer.

Small group market – The market for health insurance coverage offered to small businesses – those with between 2 and 50 employees in most states.


Total Disability – Occurs in the event you’re unable to work at all, whether temporarily or for a long period of time. However, it’s important to note that insurance policies can define “total disability” in different ways. Most insurance companies presume certain conditions to be totally disabling, such as loss of sight in both eyes, loss of hearing in both ears, loss of speech, etc.


Usual, Customary and Reasonable charge (UCR) – The cost associated with a health care service that is consistent with the going rate for identical or similar services within a particular geographic area. Reimbursement for out-of-network providers is often set at a percentage of the usual, customary and reasonable charge, which may differ from what the provider actually charges for a service.




Waiting period – A period of time that an individual must wait either after becoming employed or submitting an application for a health insurance plan before coverage becomes effective and claims may be paid. Premiums are not collected during this period.






Zero Day Residual – Provides coverage for partial disabilities in the qualifying period of a claim. This means that a claimant can use partial days of work to satisfy the qualifying period. Without zero day residual, you have to be totally disabled in order for your qualifying period to start.