Sure, you may have done your research and looked at a few different carriers, plans, and options available; and you may have bought personal health insurance for you and your family. However, when the agent starts to get into the weeds of group health insurance and its differences from buying a personal health insurance plan, the variety of options, their customization, or even just the price tag, its a lot to keep up with.
This list of 28 health insurance terms and definitions are the most important and most commonly used terms around the topic of employer health insurance. These cover the basic terminology, so you can focus on the most important aspects of the plan to you and your organization.
Health Insurance Marketplace (Exchange)
A portal established and run by the Federal government as part of the Affordable Care Act (ACA) health care reforms in 2010, so individuals and small businesses can access standardized Health Insurance plans. Small businesses in particular, can access and offer insurance to their employees through the Small Business Health Options (SHOP) area on the HealthCare.Gov website.
The amount of money an individual, organization, or entity, pays for its health insurance coverage each month.
The amount of money that an individual, organization, or entity wishes to have covered by insurance under the terms of their health insurance plan. Typically, an employee files this with the health insurance company.
The amount of money that an individual, organization, or entity must pay out of pocket before insurance will cover any cost associated with a claim.
An agreed upon percentage of a bill, or a fixed amount (per different kind of health care service/product), that an individual, organization, or entity agrees to pay after surpassing their deductible for health insurance services or products. Health insurance companies which offer the plan then pays the rest of the bill.
Where the employer offers the opportunity of a particular benefit, but the employee bears 100% of the cost of receiving that benefit. Usually employees receive these benefits by agreeing to receive a deduction on their paycheck.
A quote based on medical information that employees of the organization offering the benefit provide. An underwritten quote can be the final quote if nothing changes at open enrollment.
A preliminary quote based on demographic information provided about the organization.
Fully Insured Plan
Where an employer pays a set premium to an insurance carrier over the course of a year. These premiums are determined by how many employees are on the plan, and adjust based on the insurance carrier’s assessment of how the plan worked out for the carrier in the end. If they did not make any money, lost money, or did not make “enough” money, the rates increase.
A type of Health Care plan that the employer organization pays for claims filed by its own employees.
Stand Alone Self-Funding Plan
This type of self-funding program is where a single employer/legal entity is providing a self-funded plan on its own, without any help from other self-funded groups on the same plan.
A “captive” is a legal entity formed and capitalized by different organizations that agree to share risk together. “Self-Funding” means the employers/captive will cover expected claims from their own funds. The plans are typically coupled with a reinsurance policy that kicks in if claims exceed the expected amount of claims by a specific percentage.
Self-Funding through a Consortium
A collection of employers who band together to buy stop loss insurance (insurance for the really bad claims). They share in the buying power, but not in each other’s risk. Each employer has separate insurance effective dates, separate plan designs, and separate contracts.
A plan that typically includes a higher deductible accompanied by lower premiums. The assumption is that a higher deductible will motivate the purchaser to be more of a wise consumer of health care since they assume the risk/reward of their claims experience. Various types of Consumerism Plans include HRAs, HSAs, and FSAs.
HRA (Health Reimbursement Account/Arrangement)
Allows an employer to pay lower premium to the carrier while assuming additional risk. An HRA effectively lowers the deducible for employees with the employer assuming the risk/reward of covering the gap between the employee deductible and the policy deductible. An HRA is typically coupled with a high deductible health plan.
HSA (Health Savings Account/Arrangement)
An HSA allows employees to utilize pre-tax dollars to cover health care expenses. These accounts are typically coupled with a High Deductible Health Plan (HDHP). The HDHP allows employees to pay a lower premium while assuming the risk/reward of their claims experience.
FSA (Flexible Savings Account/Arrangement)
This employer sponsored account allows employees to use pre-tax money to pay for IRS-approved medical expenses. These funds deduct from the employee’s paycheck by payroll cycle, but the money in the FSA does roll over year to year. In some circumstances though, there is a determined amount that employees are allowed to roll over into the next year.
Hybrid/Limited or Level-Funded Plan
This is a self-funded plan that is built on the chassis of a fully-insured platform. It provides some of the benefits of a self-funded plan in a limited fashion (i.e. partial reward for good claims experience, access to partial claims data) but remains fully-controlled by the carrier.
Third Party Administrator (TPA)
The individual, organization, or entity which administers the health insurance plan. They process claims, premiums, and field questions and concerns from employers that provide the plans, as well as the end users of the insurance plans.
The individual, organization, or entity which collects and analyzes Health Care and Insurance usage data. Utilizing that data, they calculate the risk for the insurance carrier and the premiums for both the end users of the insurance and the employer organization which that user’s plan is provided by.
A grouping of health care providers that are willing to accept your insurance policy and provide you with products or services. Typically, the health care facility/provider enable you to receive these products or services at a discount, because you have the insurance their network accepts.
The company which underwrites the insurance policies, pays your claims, and ultimately receives the premium which you pay. For example: Anthem, Blue Cross Blue Shield, etc.
Health Care Provider
The individual, organization, or entity which provides health care products or services to the end user of those products and services. For example, your family doctor or dentist.
Health Insurance Broker
An insurance agent that works directly with a variety of insurance carriers through which someone can purchase health insurance.
Health Insurance Agent
An insurance agent through which someone, or an organization, can purchase health insurance.
Health Insurance Consultant
An individual that is knowledgeable in various health insurance options. They assist the purchaser in finding the health plan solution that best fits their needs.
Health Insurance Continuum
A continuum is the linear representation of the various employer health insurance options on the market. Placed on a line, these reflect the trade off in the health insurance marketplace between risk retention/control and price. At the one end is a fully insured product in which the carrier assumes all risk accompanied by the highest premium. At the other end, is stand alone self-funding in which the organization assumes a greater level of risk and control, accompanied by lower premiums.