Any discussion of these new disclosure requirements or information delivered from a broker or consultant to their clients will most likely include a variety of terms and phrases, some of which may be unfamiliar or not fully understood by all persons:



Terminology in Reference to Types of Group Healths

A type of medical plan that reimburses the patient and/or provider’s expenses are incurred.

An indemnity that allows the participant the choice of any provider without effect on reimbursement. These plans reimburse the patient and/or provider as expenses are incurred.

A health insurance plan that offers greater freedom of choice than HMO (health maintenance organization) plans. Customers with PPOs are free to receive care from both in-network or out-of-network (non-preferred) providers, but will receive the highest level of benefits when they use providers inside the network.

A POS plan is an "HMO/PPO" hybrid; sometimes referred to as an "open-ended" HMO when offered by an HMO. POS plans resemble HMOs for in-network services. Services received outside of the network are usually reimbursed in a manner similar to conventional indemnity plans (e.g., provider reimbursement based on a fee schedule or usual, customary and reasonable charges).

A more restrictive type of preferred provider organization plan under which employees must use providers from the specified network of physicians and hospitals to receive coverage. There is no coverage for care received from a non-network provider except in an emergency situation.

A health care system that provides comprehensive medical services and the responsibility for health care delivery in a particular geographic area to HMO members, usually in return for a fixed, prepaid fee. HMOs require the use of specific, in-network plan providers.

An HMO that contracts with a single multi-specialty medical group to provide care to the HMO’s membership. The group practice may work exclusively with the HMO, or it may provide services to non-HMO patients as well. The HMO pays the medical group a negotiated, per capita rate, which the group distributes among its physicians, usually on a salaried basis.

A type of closed-panel HMO (where patients can receive services only through a limited number of providers) in which physicians are employees of the HMO. The physicians see patients in the HMO’s own facilities.

An HMO model that contracts with multiple physician groups to provide services to HMO members; may involve large single and multispecialty groups. The physician groups may provide services to both HMO and non-HMO plan participants.

A type of health care provider organization composed of a group of independent practicing physicians who maintain their own offices and band together for the purpose of contracting their services to HMOs. An IPA may contract with and provide services to both HMO and non-HMO plan participants.

Alliances between physicians and hospitals to help providers attain market share, improve bargaining power and reduce administrative costs. These entities sell their services to managed care organizations or directly to employers.

Advantage plans are another way to obtain Medicare Part A and Part B coverage. Sometimes called “Part C”, these plans are offered by Medicare approved private companies that must follow rules set by Medicare. Most Medicare Advantage Plans include drug coverage (Part D) and set a limit on the out-of-pocket expenses you’ll have each year for covered services.

Medicare works with private insurance companies to offer various ways to obtain health care coverage. One such way is through a consumer-directed Medicare Advantage Plan, called a Medicare MSA Plan. These plans are similar to Health Savings Account Plans typically found outside Medicare. The enrollee can choose their health services provider (MSA plans usually don’t have a network of providers).

A policy offered by private insurance companies that pays the Medicare deductibles, copayments, and other expenses that beneficiaries are typically required to pay as a means of spreading the cost burden and controlling unnecessary use of services.

A personal savings account that allows participants to pay for medical expenses with pre-tax dollars. HSAs are designed to complement a special type of health insurance called an HSA-qualified High-Deductible Health Plan (HDHP). HDHPs typically offer lower monthly premiums than traditional health plans. With an HSA-qualified HDHP, customers can take the money they save on premiums and invest it in the HSA to pay for future qualified medical expenses.

An HRA is an IRS approved, employer-funded health benefit used to reimburse employees for out-of-pocket medical expenses and health insurance premiums.

An FSA is an employer sponsored healthcare benefit that allows employees to set aside funds annually to cover the cost of qualified medical expenses. FSAs work on an annual plan year basis and are funded through payroll deduction on a pre-tax basis. These funds are subject to a use-it or lose-it rule.



Terminology in Reference to Benefits and Claims

Also known as the "allowed amount," "maximum allowable," and "usual, customary, and reasonable (UCR)" charge, this is the dollar amount considered by a health insurance company to be a reasonable charge for medical services or supplies based on the rates in the participant’s area.

The amount payable by the insurance company to a plan member for medical costs.

The maximum amount that a health insurance company has agreed to pay for a covered benefit.

The 12-month period for which health insurance benefits are calculated, not necessarily coinciding with the calendar year. Health insurance companies may update plan benefits and rates at the beginning of the benefit year.

A request by a plan customer, or a plan customer's health care provider, for the insurance company to pay for medical services.

The amount a person pays to share the cost of covered services after their deductible has been paid. The coinsurance rate is usually a percentage. For example, if the insurance company pays 80% of the claim, an enrollee pays 20%.

A system used in health plans to eliminate duplication of benefits when a person is covered under more than one plan. Benefits under the two plans usually are limited to no more than 100% of the claim.

One of the ways a person shares in their medical costs. A flat fee is paid for certain medical expenses (e.g., $10 for every visit to the doctor), while the insurance company pays the rest.

The amount of money a person must pay each year to cover eligible medical expenses before their insurance policy starts paying.

Any individual, either spouse or child, that is covered by the primary insured customer’s plan.

The date on which a policyholder's coverage begins.

Any specific situation, condition, or treatment that a health insurance plan does not cover.

The health insurance company's written explanation of how a medical claim was paid. It contains detailed information about what the company paid and what portion of the costs the enrollee is responsible for.

A coverage plan offered by an employer or other organization that covers the individuals in that group and their dependents under a single policy.

A health care professional, hospital, or pharmacy that is part of a health plan’s network of preferred providers. The enrollee will generally pay less for services received from in-network providers because they have negotiated a discount for their services in exchange for the insurance company sending more patients their way.

Health insurance plans purchased by individuals to cover themselves and their families. Different from group plans, which are offered by employers to cover all of their employees.

A health insurance program created in 1965 that provides health benefits to low-income individuals who cannot afford Medicare or other commercial plans. Medicaid is funded by the federal and state governments and managed by the states.

The federal health insurance program that provides health benefits to Americans age 65 and older. Signed into law on July 30, 1965, the program was first available to beneficiaries on July 1, 1966 and later expanded to include disabled people under 65 and people with certain medical conditions. Medicare has two parts; Part A, which covers hospital services, and Part B, which covers doctor services.

The group of doctors, hospitals, and other health care providers that insurance companies contract with to provide services at discounted rates. An enrollee will generally pay less for services received from providers in their network

A health care professional, hospital, or pharmacy that is not part of a health plan's network of providers. The enrolee will generally pay more for services received from out-of-network providers.

The maximum amount of money that someone will pay during a year for coverage. It includes deductibles, copayments, and coinsurance, but is in addition to regular premiums. Beyond this amount, the insurance company will pay all expenses for the remainder of the year.

The health insurance company whose plan pays to help cover the cost of care. Also known as a carrier.

A health problem that has been diagnosed, or for which someone has been treated, before buying a health insurance plan.

The amount an employee or employer pays each month in exchange for insurance coverage.

Any person (i.e., doctor, nurse, dentist) or institution (i.e., hospital or clinic) that provides medical care.

Coverage options that enable a person to expand their basic insurance plan for an additional premium. A common example is a maternity rider.

The process by which health insurance companies determine whether to extend coverage to an applicant and/or set the policy's premium.

The period of time that an employer makes a new employee wait before he or she becomes eligible for coverage under the company's health plan. Also, the period of time beginning with a policy's effective date during which a health plan may not pay benefits for certain pre-existing conditions.

This stands for Consolidated Omnibus Budget Reconciliation Act of 1985. This federal act requires group health plans to allow employees and covered dependents to continue their group coverage for a stated period of time following a qualifying event that causes the loss of group health coverage. Qualifying events include reduced work hours, job loss, a child becoming an over-aged dependent, Medicare eligibility, death or divorce of a covered employee, among others.

Some benefits that are included in every health plan, meant to make sure basic health concerns are covered. For example, preventive care screenings and annual wellness exams are covered with any plan that is purchased.

The income level of an individual or household, issued annually, used by the Department of Health and Human Services to determine eligibility for certain programs and benefits. FPL will be used to determine the amount of tax credit a person qualifies for to offset the cost of buying health insurance.

A health plan that was in place when the Affordable Care Act was passed into law in 2010. A grandfathered plan is exempt from some requirements of the law. The grandfather rule allows businesses and families to keep the plan they have, if they wish to.

A group of people covered under the same health plan and identified by their relation to the same employer or organization.

A requirement under the Affordable Care Act that health insurers must permit a person to enroll in some form of insurance coverage regardless of health status, age, gender or other factors.

The Health Insurance Marketplace, or Health Insurance Exchange, is a federal government website where you can shop, compare and buy plans offered by participating health insurance companies in your area.

A federal law that outlines the rules and requirements plans must follow to provide health care insurance coverage for individuals and groups.

The most money someone has to pay for covered services in a plan year other than their monthly premium. After a person spends this amount on deductibles, copays and coinsurance, the health plan pays 100 percent of the costs of covered benefits. For plans that cover more than 1 person, each individual's out-of-pocket maximum counts toward the family out-of-pocket maximum. Once the family out-of-pocket maximum is reached, the plan pays 100 percent of the cost of covered benefits for everyone on the plan.

Starting January 1, 2020, employers can offer their employees an individual coverage Health Reimbursement Arrangement (HRA) instead of a traditional group health plan. This type of account may help reimburse qualifying health care expenses. As examples, these expenses could be monthly premiums and out-of-pocket costs, such as copays and deductibles.

A group of doctors and other health professionals that have a shared medical practice and contract with a health plan to deliver health care services to plan members.

The type of health coverage an individual needs to maintain throughout the year in order to meet the individual responsibility requirement under the Affordable Care Act. Health plans that are considered MEC include individual and family plans bought through the Health Insurance Marketplace, qualified health plans bought directly through an insurance company such as Blue Cross and Blue Shield of Illinois, job-based coverage, Medicare, Medicaid, and certain other coverage.

The period of time set up to allow individuals to enroll in a health plan, usually once a year.

The ongoing amount that must be paid for a health plan. Premiums for group health insurance are usually paid monthly, but individual coverage may be paid monthly, quarterly or yearly. The premium may not be the only amount paid with insurance coverage however, since most plans also have a copay or deductible amount.

Based on family size and income, a person may qualify for a tax credit. Unlike tax credits that are claimed when taxes are filed, these tax credits can be used right away to lower monthly premium costs.

A health plan that is certified by the Health Insurance Marketplace, provides essential health benefits, follows established limits on cost-sharing (deductibles, copays, and out-of-pocket amounts) and meets other requirements.

Small companies may offer their employees a Qualified Small Employer Health Reimbursement Arrangement (QSEHRA) if they don’t offer group health coverage. This kind of account may help pay for things like monthly premiums or other qualifying health care costs.

For an HMO or point-of-service (POS) coverage, a written authorization from a member's primary care physician (PCP) to receive care from a different contracted doctor, specialist or facility.

A health care professional whose practice is limited to a certain branch of medicine, including specific procedures, age categories of patients, specific body systems or certain types of diseases.

A time outside the open enrollment period during which individuals can sign up for health insurance. A person generally qualifies for a special enrollment period of 60 days following certain life events that change their family status (for example, marriage or birth of a child) or loss of other health coverage.

This health care coverage continuation program is offered by certain states. It's not the same as COBRA and usually focuses on smaller companies, for example with less than 20 workers. If your employment ended (not due to cause), and you were on your job’s health plan for at least 3 months in a row, you and your family may choose to stay covered under a state health plan for an extra period of time.

Based on family size and income, an individual may qualify for a subsidy, also known as a premium tax credit. Unlike tax credits claimed when someone files their taxes, these tax credits can be used right away to lower monthly premium bills.

The way an insurance company reviews the type and amount of care a patient is getting. This involves looking at the setting for care and its medical necessity. Examples may use prior authorization, case management, accompanying reviews or proper discharge planning.



Terminology in Reference to Pharmaceutical Benefits

Prescription drugs must be ordered by a doctor and obtained at a pharmacy. They are reviewed and approved through a formal process set by the U.S. Food and Drug Administration (FDA).

A list of commonly prescribed drugs (also known as a drug formulary). Not all drugs listed in a plan's prescription drug list are automatically covered under that plan.

A prescription drug list has different levels of payment coverage, called “tiers." These tiers determine how much you will pay out of pocket for your prescription drug, based on the terms of your pharmacy benefit and whether the drug is covered on the drug list. Drugs in a lower tier will often cost less than drugs in a higher tier.

A list of prescription medications covered by a plan.

A prescription drug that is the generic equivalent of a brand name drug listed on a health plan's formulary and costs less than the brand name drug.

A separate, or third-party, company that handles a health plan’s pharmacy benefit. A PBM processes and pays for prescription drug claims based on the terms of the pharmacy benefit.

A prescription drug used to treat complex health conditions. These drugs are usually given as a shot but may be added to the skin or taken by mouth. Also, they may:

  • Require following a specific treatment plan
  • Have special handling or storage needs
  • Not be sold in retail pharmacies

Conditions like hepatitis C, hemophilia, multiple sclerosis and rheumatoid arthritis are treated with specialty drugs.

Infusion drug treatments are often used for chronic "maintenance" conditions like asthma, immune deficiencies or rheumatoid arthritis. The drugs are often covered under your health plan's medical benefit, not the drug benefit. Where this care is obtained could have an impact on out-of-pocket costs.



Terminology in Reference to Broker Compensation

Compensation refers to any monies or incentives paid to brokers to sell new business for an insurance company or third-party vendor or retain existing business. This compensation might be monetary or non-monetary in nature. Typically, brokers may be compensated at a higher rate for enrolling employees in new policies and at a lower rate for renewing policies.

Some brokers are compensated for the business they produce from carriers and vendors in the form of trips, gifts, sporting event or concert tickets, etc. These would be examples of non-monetary compensation.

Once designated as a client’s “broker of record,” the broker will typically receive monthly commissions paid in one of two ways:

  • Percentage of the premium…this is where commissions are paid as a percentage (3-5% as an example) of the premium paid by the client.
  • Flat Fee Schedule…in this situation, the broker receives a stated dollar value ($10, as an example) for each employee enrolled in the plan

In either of these two scenarios, although typically only utilized for larger groups, carriers may elect to present commissions on a graded scale. This means the insurance carrier pays a larger percentage on the first dollars and scales back as the premium increases. This method allows brokers to receive reasonable compensation, even on smaller accounts. It also encourages them to provide the same quality of service to small businesses as they would to a larger company.

This is the compensation, including commission, paid to a broker directly by the insurance carrier or third-party vendor.

This type of compensation generally comes from an entity other than the group health plan itself.

The method by which insurance companies pool the claims experience within a given geographic area and charge rates without regard to age, gender, health status or claims history. Community rating is the predominant method of rating groups in the 2-99 eligible employee marketplace.

The Affordable Care Act requires that insurance companies spend at least 80% of payments received from premiums on actual health care costs. The remaining 20% is permitted to go toward administrative expenses, including overhead and marketing costs, including broker commissions. As a result, the commissions are said to be “embedded” into the rate and cannot be removed or modified by a broker or client.

A carrier may elect to pay this bonus not on any single group but based on the overall performance of the broker. This typically means basing it on the total enrolled contracts and related fees across a broker’s entire block of business with that carrier. It is usually paid as a percentage of paid premium for placed insurance with groups of a certain number of eligible employees).

Fees, on the other hand, may be charged for certain extra services. You’ll need to make sure you know what, if any, fees will be charged when working with a broker. Extra fees are generally paid directly to the broker.