A glossary of insurance and employee benefits terms to help understand the language of health plans, HR, and benefits.
This list is not all-inclusive. Every industry has its unique language, and insurance is no exception. Here are some terms you might come across when talking, reading, or watching about insurance/employee benefits.
Click on a letter in the table below to jump to that part of the Employee Benefits & Insurance Terms Glossary.
| Numbers | A | B | C | D | E | F | G | H |
| I | J | K | L | M | N | O | P | Q |
| R | S | T | U | V | W | X | Y | Z |
Numbers
401(k)
Company-sponsored retirement savings plan that employees can contribute income to. Employers may match contributions. There are two basic types: traditional and Roth. Traditional 401(k) plans are pre-taxed, while Roth plans' contributions are made with after-tax income.
A
Accountable Care Organization (ACO)
A network of doctors and hospitals that provide coordinated patient care.
Aggregate stop-loss
A form of reinsurance used in self-funded groups (see self-funded). Provides a ceiling (limit) for overall claims liability and protects against higher than predicted usage or frequency of claims from the entire group.
Affordable Care Act (ACA)
Signed into law in March 2010, the ACA was designed to extend health coverage to millions of uninsured Americans. It expanded Medicaid eligibility, created a Health Insurance Marketplace, prevented insurance companies from denying coverage due to pre-existing conditions, and required plans to cover a list of essential health benefits.
Americans with Disabilities Act (ADA)
Signed into law in 1990, the ADA is a civil rights law that prohibits discrimination against individuals with disabilities in all areas of public life, including jobs, schools, transportation, and all public and private places that are open to the general public.
Ambulatory care
Medical care that is provided on an outpatient basis--for example, same-day surgeries.
Ancillary benefits
A secondary type of health insurance coverage that covers miscellaneous medical expenses that are incurred during a stay at the hospital. The definition of ancillary benefits means it can cover expenses such as ambulance transportation, blood transfusions, drugs, and medical supplies like bandages.
Authorization
The process of getting a medical procedure or medication approved by the healthcare reimbursement source.
B
Balance billing
When a provider charges the difference between what the patient's health insurance chooses to reimburse and what the provider chooses to charge.
Bereavement leave
Time off granted to an employee in the event that a loved one passes away. This allows for employees to grieve, attend funeral services or a memorial, or deal with financial and legal matters that may come up after death.
Bring Your Own Device (BYOD)
A policy that allows employees in an organization to use their personally owned devices for work-related activities.
C
Cafeteria plan
A corporate benefits plan which allows employees to select among two or more benefits that consist of cash and certain qualified benefits. This reimbursement plan is governed by IRS Section 125.
Catastrophic coverage
A type of health plan under the Affordable Care Act. This is a high deductible plan for individuals under 30 years old or for those who qualify for a “hardship exemption.”
Certificate of Insurance (COI)
The document received from the insurance company that verifies insurance coverage for a business.
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
Insurance program that allows employees to continue the medical coverage that they received from the employer for a certain period of time under specific circumstances such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, and other life events.
In order for the individual to continue coverage, they must pay the entire premium. COBRA applies to groups of 20 or more individuals.
Compensation
Refers to the benefits (salary, retirement plans, health insurance, etc.) that an employee receives in exchange for services provided to their employer.
Compensatory Time Off (Comp Time)
An optional way of paying employees who work overtime. A compensatory time off policy pays employees in the form of Paid Time Off (PTO) rather than paying time and a half in overtime pay.
Competency-based pay
A pay structure that compensates employees based on their skill set, knowledge, and experience rather than their job title or position.
Coinsurance
A health care cost-sharing between a person and their insurance company. For example, if coinsurance is 80/20, the plan pays 80% while the person pays 20%. Cost-sharing between the person and the plan stops when they hit the out-of-pocket maximum.
Copayment (co-pay)
Fixed amount for a covered service, paid by a patient to the provider of service before receiving the service. The copay may vary for in-network vs out-of-network care.
Coordination of Benefits (COB)
A process that takes place if an individual has more than one health plan. The process determines which of two or more insurance policies will have the primary responsibility of processing/paying a claim and the extent to which the other policies will contribute.
Current Procedural Terminology (CPT) code
The language used by healthcare professionals to describe the task and/or service given to a patient including medical, surgical, and diagnostic services. These codes are then used by insurers to determine the amount of reimbursement that a practitioner will receive from an insurer for that service. The same codes are used by everyone to create consistency.
D
Deductible
The amount of money paid each calendar year before the plan begins to pay coinsurance.
Deferred compensation
A portion of an employee's compensation set aside to be paid at a later date. Taxes on this income are deferred until it is paid out. Forms of deferred compensation include retirement plans, pension plans, and stock-option plans.
Dental insurance
Covers expenses associated with dental care, such as preventative care, fillings, crowns, and root canals.
Dependent care assistance plan (DCAP)
Helps employees pay for the costs of caring for a dependent (relative or child). It comes in the form of setting aside pre-tax income from every paycheck.
Disability insurance
Replaces a portion of an employee’s income when they are too sick or injured to perform their job duties.
Disease management
Coordination of care for individuals with chronic conditions in an effort to better manage their chronic disease and to maintain and improve quality of life.
E
Effective date
The date on which an employee’s coverage is officially active. The date is dependent on the provisions defined in the Certificate of Insurance.
Eligibility date
The date that the individual and the dependents are able to begin receiving benefits.
Employer mandate
As directed by the healthcare reform law, starting in 2015 employers with 50 or more full-time employees must offer healthcare benefits or pay a penalty. As defined by this law, full-time employees are defined as working 30 hours per week, averaged over the course of a month, rather than the traditional definition of 40 hours per week.
Employee Retirement Income Security Act of 1974 (ERISA)
A federal law that sets minimum standards for most voluntarily established retirement and health plans to provide protection for individuals in these plans. ERISA requires plans to provide participants with plan information including:
- Important information about plan features and funding
- Minimum standards for participation, vesting, benefit accrual, and funding
- Fiduciary responsibilities for those who manage and control plan assets
- The grievance and appeals process for participants to get benefits from their plans
- The right to sue for benefits and breaches of fiduciary duty
- If a defined benefit plan is terminated, guaranteed payment of certain benefits through a federally chartered corporation known as the Pension Benefit Guaranty Corporation (PBGC).
Enrollee
A person who is enrolled in a benefit plan. They may also be referred to as members.
Essential health benefits
The 10 essential benefits that must be included in a Qualified Health Plan (QHP). These 10 benefits are preventative and wellness visits, maternity and newborn care, mental and behavioral health treatment, rehabilitative and habilitative services, emergency room services, hospitalization, lab tests, prescription drugs, pediatric care, and outpatient care. This ACA mandate applied to all plans created after March 23, 2010.
Evidence of Coverage (EOC)
A document that describes a subscriber’s coverage under a health plan.
Evidence of Insurability (EOI)
An application process in which a person provides information on the condition of their health or their dependents' health in order to be considered for certain types of insurance coverage. This process is most common for life insurance.
Excluded services
Services that the health insurance does not pay for or cover.
Exclusive Provider Organization (EPO)
Health insurance plan that combines aspects of an HMO and PPO plan. It does not require a PCP (like a PPO), however, there is no out-of-network coverage (like an HMO).
Explanation of Benefits (EB)
A statement sent to the insured by the insurance company providing an explanation of what services were performed by a healthcare provider and that they are requesting payment for.
F
Family Medical Leave Act (FMLA)
Provides certain employees with up to 12 weeks of unpaid, job-protected leave per year. Group health benefits are required to be maintained during the leave.
FMLA is designed to help employees balance work and family responsibilities by allowing them to take unpaid leave for certain family and medical reasons. It applies to all public agencies, public and private elementary/secondary schools, and companies with 50 or more employees. These employers must provide an eligible employee with up to 12 weeks of unpaid leave each year for the following reasons:
- For an employee to birth/care for a newborn child
- For an employee to deal with the placement of a child for adoption or foster care
- To care for an immediate family member with a serious health condition
- To take medical leave when an employee is unable to work because of a serious health condition
Fee-for-Service
A payment model that is based on charges for each individual service or treatment rendered.
Flexible Spending Account (FSA)
A tax-advantageous account that allows employees to put money aside for out-of-pocket health care costs. Money that is contributed to the FSA is not subject to payroll taxes.
Flexible workplace
A workplace where the needs of the employee are met. For example, flexible employees can work outside of office hours or in different locations. The most basic form of a flexible workplace is allowing employees to choose their own start and finish times.
Formulary
A regularly updated list of medications associated with a person's health plan. Drugs covered on formulary are cheaper than those excluded from the formulary.
Fringe benefits
Perks that employers give to their employees above and beyond any financial compensation. Fringe benefits can vary from one employer to another and can include things like:
- Tuition reimbursement and education assistance
- Retirement benefits
- Fitness center discounts
- Employee meals
- Cafeteria plans
- Dependent care assistance
- Retirement plan contributions
Fully insured
The company pays a premium to the health insurer. In this type of insurance, the insurance company assumes the financial risk for medical expenses incurred, and the employer or individual bears no risk.
G
Grandfathered plan
A health plan that was in place before March 23, 2010, when health reform began. These plans are allowed to continue to offer the coverage that they did in the past as long as the plan does not make certain changes.
Group health plan
Health insurance offered by a group, commonly an employer or association.
Guaranteed issue
A law that states any eligible applicant shall be granted coverage and cannot be denied because of pre-existing conditions or past medical history.
H
Health Insurance Portability and Accountability Act of 1996 (HIPAA)
The law that provides data privacy and security provisions for protecting medical information.
Health Maintenance Organization (HMO)
A type of health insurance plan that has its own network of doctors, hospitals, and other healthcare providers who have agreed to accept payment at a certain level for any services they provide.
Health Reimbursement Arrangement or Accounts (HRA)
Employer-funded group health plans from which employees are reimbursed tax-free for qualified medical expenses (it is a fixed dollar amount per year). Any unused funds can be rolled over to subsequent years.
Health Savings Account (HSA)
Tax-advantageous medical savings account available to taxpayers in the United States who are enrolled in a High-Deductible Health Plan (HDHP). Funds contributed to these accounts are not subject to federal income tax at the time of deposit.
High-Deductible Health Plan (HDHP)
A health plan with a higher deductible and lower premium payments. These plans are usually combined with a health savings account or health reimbursement account.
Hybrid work
Flexible working model where employees work some days from home and other days in the office.
I
Individual mandate
Requirement under the ACA that all citizens must carry health insurance that meets minimum essential coverage standards or be subject to a tax penalty.
In-network provider
A provider that has a contract with a carrier to provide its members services at set rates.
J
K
L
Leave of Absence (LoA)
A way for employees who are experiencing out-of-the-ordinary circumstances to take time off work. Common reasons are:
- Childbirth
- Adoption
- Caring for an ill family member
- Serious health conditions
- Military leave
In some cases, employees may be entitled to leave by federal or state law.
Level funded plan
A bridge between fully insured and self-funded plans where an employer pays a health carrier a set monthly amount to cover the estimated cost for expected claims, the premium for stop-loss insurance that covers health care costs over a set dollar amount, and plan administration costs.
Life insurance
A policy that provides financial benefits to designated dependents upon death.
Limited Purpose FSA
A type of Flexible Spending Account (FSA) compatible with a Health Savings Account (HSA). If someone is enrolled in a qualified high-deductible health plan and has an HSA, they can maximize their savings by pairing their HSA with a Limited Purpose Flexible Spending Account (FSA). A Limited Purpose FSA is referred to like this because it is used to pay for eligible dental and vision care expenses only.
M
Mandate benefit
Benefits legally required by federal or state law under an insurance plan. Can include services, providers, or coverage.
Medical Leave of Absence
A type of leave for employees who face medical conditions that reduce their physical and/or mental health to the point that they can no longer perform their job responsibilities.
Medical Loss Ratio
The ratio of premium dollars that was used for claims and to improve the quality of care, vs. other costs such as administration. ACA requires 80% for small groups, 85% for large.
Menstrual leave
Gives people who experience painful periods or menopause symptoms a set number of paid or unpaid sick days per year, along with options to work from home.
Medically necessary
Minimum treatment, services, or supplies required for diagnosis or treatment of a medical condition.
Military leave
A type of leave for employees in the military, National Guard, or reserve forces. Employees who leave a job for voluntary or involuntary military service are legally guaranteed the right to be reinstated in their former position upon returning from duty with a comparable position, compensation, and benefits. This leave is cumulative and cannot exceed five years in total.
N
O
Obamacare
The comprehensive health care reform law enacted on March 23, 2010, with the goal to provide more access to affordable healthcare for most Americans. (sometimes known as ACA or the PPACA).
Onboarding
A process where new hires are integrated into an organization. It can involve many activities, but learning about company culture, processes, work roles, and ongoing professional development is the most common.
Open enrollment
Annual period to enroll, change or cancel coverage.
Out-of-network provider
A provider that is not contracted with a carrier to provide services at a set rate.
Out-of-pocket costs
Deductible, co-pay, coinsurance, out-of-network fees, and any other charges not paid by the carrier for covered services.
Out-of-pocket maximum
The maximum amount of money someone will pay for covered medical services in a calendar year. Once a person hits this amount, the plan pays 100% of eligible network services and supplies for the rest of the year. The out-of-pocket limit may or may not include a deductible depending on insurers’ definition of the term. The maximum amount of money someone may spend for health care services also may vary whether they receive it in or out-of-network.
Outpatient care
Care that does not require an overnight stay at a facility.
P
Paid Time Off (PTO)
Compensated time away from work, provided by an employer to employees for them to use as they see fit.
Patient Protection and Affordable Care Act (PPACA)
The comprehensive health care reform law enacted on March 23, 2010, with the goal to provide more access to affordable healthcare for most Americans. (sometimes known as ACA or “Obamacare”).
Participating provider
An in-network provider who has a contract to provide services for a carrier at set rates.
Patient-Centered Outcomes Research Institute (PCORI) fees
PCORI fees are calculated on the average number of lives covered under a specified health insurance plan. The insurance company is responsible for filing IRS Form 720 and paying the PCORI fee for any insured group health plan sponsored by a company.
Per diem cost
Daily allowance for services or treatment.
Pet insurance
Pet insurance pays, partly or in total, for veterinary treatment of the insured person's ill or injured pet. Some policies pay out when the pet dies, or if the pet is lost or stolen.
Pharmacy Benefit Manager (PBM)
The administrator of prescription drug programs for commercial health plans, self-insured employer groups plans, Medicare Part D plans, labor groups, and state employee health plans.
Prescription drug out-of-pocket maximum
The maximum amount of money paid out of pocket for covered prescription drugs in a calendar year.
Point of Service (POS) plan
An HMO healthcare plan that offers lower costs to use in-network providers and requires a referral from a primary provider to see a specialist. A member can choose to see a doctor out of the network at any time if they are willing to pay higher copayments, deductibles, and possibly higher monthly premiums. This combines the elements of an HMO and PPO in the opposite way that an EPO does (see Exclusive Provider Organization).
Pre-authorization
Authorization required by a carrier that a service, treatment, drug, or equipment is medically necessary or covered. Also called pre-certification.
Pre-existing condition
A health condition (except pregnancy) that existed before current coverage began.
Preferred Provider Organization (PPO)
A group of providers that gives preferred rates (lower deductibles, co-pays, etc.) for members for using their organization.
Premium
The amount of money paid for health insurance each month.
Primary Care Physician (PCP)
Physician who provides first point of contact for a health concern and monitors ongoing care or refers to another provider.
Q
Qualified Health Plan (QHP)
A health care plan that meets all mandatory requirements of the Affordable Care Act.
Qualifying life event
An event that allows addition, cancellation, or change of coverage, within a limited time frame, outside of open enrollment. Examples include divorce, marriage, birth, adoption, or loss of other coverage.
R
Remote work
Also called distance working, telework, teleworking, working from home, mobile work, remote job, and work from anywhere. An employment arrangement in which employees do not commute to a central place of work.
Reinsurance (stop-loss insurance)
Insurance for insurance companies, to limit the risk of financial loss. Also referred to as stop-loss insurance. The coverage may apply to an individual claim (specific stop-loss) or to all the claims during a specific period for an individual enrollee (aggregate stop-loss).
Retirement benefits
Allows people to receive a fixed monthly income after they leave the workforce.
Retirement plan contributions
A certain amount of money employees contribute to their retirement plan, whether it’s on a monthly or quarterly basis.
Risk
The possibility that costs associated with insurance for an individual group may be higher than expected, resulting in losses for an insurance carrier or self-insurer.
Risk pool
Risk management system in which insurance companies form a pool of insureds to provide increased protection against catastrophic loss.
Rollover
Deductibles paid under a previous plan applied to the deductible of the current plan in place.
S
Self-funded
Insurance plan where the employer assumes the risk and pays the claims for employees, instead of paying premiums to a fully-insured carrier.
Service area
The geographic area that an insurance company uses to determine membership and provider networks.
Sick leave pay
A benefit that allows employees to take time off for short-term health needs and to be compensated for this time. Depending on the company and state laws, employees may use sick leave pay to care for themselves or an immediate family member.
Specific stop loss
Protects against high claims from any one individual and protects against the severity of a single catastrophic claim.
Statutory (required) benefits
Benefits employers are required by law to provide to their employees. Examples include workers' compensation insurance, unemployment insurance, and, under some state and local laws, paid sick leave.
Summary Plan Description (SPD)
An important document that tells plan participants what the plan provides and how it operates.
T
Time management
Planning and dividing up the time spent on specific activities. Doing this helps increase task productivity.
Third-Party Administrator (TPA)
A separate organization that handles certain administrative insurance processes such as processing claims, underwriting, and managing provider networks.
Tuition reimbursement
When a company covers some or all the costs of an employee’s education.
U
Usual, customary, and reasonable charges
The amount charged for a service in a geographical area based on the usual cost for the same or similar service, in the same geographical area.
V
Vacation pay
A type of Paid Time Off (PTO), where employees accrue vacation time based on the number of hours worked and then paid for that time when they go on vacation.
Value-Based Insurance Design (VBID)
Vision insurance
Voluntary benefits
Things such as life, disability, critical illness, accident insurance, pet coverage, ID theft protection, legal services, and financial services offered through an employer but paid for by workers (partially or fully) through payroll deferral.
W
Work/life balance
Involves the minimization of work-related stress, and the establishing of a stable and sustainable way to work while maintaining health and general wellbeing.
X
Y
Z