A plan established by an employer under which employees can elect to defer income by making pretax contributions. The plan may also allow for employer matching contributions. Taxes on contributions to the account are not taxable until the money is withdrawn. A 401(k) plan is a defined contribution plan.
A defined contribution plan established by tax-exempt organizations such as public schools, educational or research organizations, and charities in which contributions are used to purchase annuities or mutual fund shares by employers for employees. The plan must be non-forfeitable to the employee, and contributions must not exceed a specified limit. The funds in the plan are nontaxable until they are taken as income in retirement. Similar to 401(k) plans, these plans are also called tax-sheltered annuities or tax-deferred annuities.
An elective tax-deferred retirement plan for government employees that allows employees to make tax-deferred contributions from their salaries to the plan. Similar to 401(k) plans and 403(b) plans.
AD&D provides coverage for death or dismemberment resulting directly from accidental causes. Provides benefits in the event of loss of life, limbs or eyesight as the result of an accident.
A contract sold by a life insurance company in which an insured makes contributions into a fund that can then be withdrawn in a lump sum or a series of future payments.
A disability income policy which indemnifies the business for certain overhead expenses incurred when the business owner is totally disabled.
An employee benefit plan that offers participants a choice between cash and one or more qualified, or tax-favored, benefits. To obtain the benefit of tax-favored treatment, the plan must comply with Internal Revenue Code Section 125. Typical benefits include health insurance, child care, 401(k) contributions, group term life and dental benefits. See also Flexible Benefit Plan;Section 125 Plan.
For years beginning after 2001, eligible employees aged 50 or older can make higher tax-deferred annual contributions in the years prior to retirement in 401(k) plans, IRAs, 403(b) plans and 457 plans. These contributions can help to offset the effect of inflation because past service and contributions based on compensation may be inadequate.
Coinsurance is a provision in your health plan that describes the percentage of a medical bill that you must pay and that which the health plan must pay.
A federal act which requires each group health plan to allow employees and certain 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, death or divorce of a covered employee, and termination of employment.
This is an arrangement where the covered person pays a specified amount for various services and the health care provider pays the remainder. The covered person usually must pay his or her share when the service is rendered. Similar to coinsurance, except that coinsurance is usually a percentage of certain charges where the co-payment is a dollar amount.
A deductible is the amount of money you or your dependents must pay toward a health claim before your organization's health plan makes any payments for health care services rendered. For example, a plan participant with a $100 deductible would be required to pay the first $100, in total, of any claims during a plan year.
A retirement plan that uses a specific predetermined formula to calculate the amount of an employee's future benefit. The most common type of formula is based on the employee's terminal earnings. Under this formula, benefits are based on a percentage of average earnings during a specified number of years at the end of a worker's career multiplied by the maximum number of years of credited service under the plan. In recent years, a new type of defined benefit plan, a cash balance plan, has become more prevalent. Under this type of plan, benefits are computed as a percentage of each employee's account balance. Employers specify a contribution and a rate of interest on that contribution that will provide a predetermined amount at retirement, usually in the form of a lump sum.
A retirement plan in which the amount of the employer's annual contribution is specified. Individual accounts are set up for participants and benefits are based on the amounts credited to these accounts (through employer contributions and, if applicable, employee contributions) plus any investment earnings on the money in the account. The most common type of defined contribution plan is a savings and thrift plan. Under this type of plan, the employee contributes a predetermined portion of his or her earnings (usually pretax) to an individual account, all or part of which is matched by the employer.
A dental insurance plan that pays benefits in a predetermined amount in the event of a covered loss.
Spouse and/or unmarried children (whether natural, adopted or step) of an insured.
A state law requiring an employer to provide disability benefits to covered employees for non-occupational injuries, in contrast to Workers Compensation, which pays for occupational injuries. These laws are currently in effect in New York, New Jersey, Rhode Island, California, and Hawaii.
A disability income policy used to fund a disability buy-sell agreement whereby the business interest of a disabled stockholder following the elimination period. The policy's benefits may be paid in a lump sum or in installments.
A form of health insurance that provides periodic payments to replace income, actually or presumptively lost, when the insured is unable to work as a result of sickness or injury.
A schedule of prescription drugs approved for use which will be covered by the plan and dispensed through participating pharmacies.
A specified number of days at the beginning of each period of disability during which no disability income benefits are paid.
An employer-sponsored program that is designed to assist employees whose job performance is being adversely affected by such personal stresses as substance abuse, addictions, marital problems, family troubles, and domestic violence.
A federal law that governs pension and welfare employee benefit plans. ERISA requires plans to provide participants with plan information including plan features and funding. It also requires that plans provide fiduciary responsibilities for those who manage and control assets. It gives participants the right to sue for benefits and breaches of fiduciary duty.
An EOB is a description your insurance carrier sends to you explaining the health care benefits that you received and the services for which your health care provider has requested payment.
The Family and Medical Leave Act of 1993 (FMLA) went into effect on August 5, 1993. The law requires employers with 50 or more employees to offer eligible employees at least 12 weeks of unpaid leave for the birth or adoption of a child, to care for a sick family member or for the employee's own illness.
An event that affects your need for health care, insurance, or other benefits. Generally, qualifying events are:
- Marriage or divorce
- Birth or adoption of a child
- Death of a spouse or dependent
- Significant change in the health care coverage of the employee or the employee's spouse attributable to the spouse's employment
- The taking of an unpaid leave of absence by you or your spouse
- Change from part-time employment to full-time employment or the reverse by you or your spouse
A type of plan under Section 125 of the Internal Revenue Code that provides employees a choice between permissible taxable benefits, including cash, and nontaxable benefits such as life and health insurance, vacations, retirement plans, and child care. Although a common core of benefits may be required, the employee can determine how his or her remaining benefit dollars are to be allocated for each type of benefit from the total amount promised by the employer.
FSAs allow employees to set aside a portion of their earnings on a pre-tax basis into separate spending accounts to fund allowable health care and/or dependent day care expenses. The funds must be segregated as per IRS regulations.
A "twin" to a "brand name drug" once the brand name company's patent has run out and other drug companies are allowed to sell a duplicate of the original. Generic drugs are cheaper, and most prescription and health plans reward clients for choosing generics.
A federal act that protects people who change jobs, are self-employed, or who have pre-existing medical conditions. The act also contains provisions designed to ensure that prospective or current enrollees in a group health plan are not discriminated against based on health status.
An organization that has made agreements with doctors and other health care professionals to provide preventive and sick care to members at a negotiated fee.
An HSA is a tax-exempt trust or custodial account established exclusively for the purpose of paying qualified medical expenses. HSAs are much like Archer Medical Savings Accounts (MSAs), but the rules applicable to HSAs are less restrictive.
Care received at home as part-time skilled nursing care, speech therapy, physical or occupational therapy, part-time services of home health aides or help from homemakers or choreworkers.
Health plan with flexibility to visit any health provider with payment being made under a fee-for-service basis. Typically;this plan includes a deductible;coinsurance and out of pocket maximum.
Health insurance coverage on an individual, not group, basis. The premium is usually higher for an individual health insurance plan than for a group policy and you may need to qualify medically.
Providers or health care facilities which are part of a health plan's network of providers with which it has negotiated a discount. Insured individuals usually pay less when using an in-network provider, because those networks provide services at lower cost to the insurance companies with which they have contracts.
Care which is provided for persons with chronic diseases or disabilities. The term includes a wide range of health and social services provided under the supervision of medical professionals.
A group or individual policy which provides coverage for longer than a short term, often until the insured reaches age 65 in the case of illness and for the remainder of his lifetime in the case of accident. See also Short-Term Disability Insurance.
A medical delivery system that attempts to manage the quality and cost of medical services that individuals receive. Most managed care systems offer HMOs and PPOs that individuals are encouraged to use for their health care services. Some managed care plans attempt to improve health quality, by emphasizing prevention of disease.
A data pool service that stores coded information on the health histories of persons who have applied for insurance from subscribing companies in the past. Most Life and Health insurers subscribe to this bureau to get more complete underwriting information.
A savings account that can be used to pay medical expenses not covered by insurance for employees of small businesses or self-employed individuals who are covered under health plans with high deductibles. Employers with small group MSAs may make contributions on behalf of employees, or employees may make the entire contribution.
The United States federal government plan for paying certain hospital and medical expenses for persons qualifying under the plan, usually those over 65. The hospital benefits are Part A, and the medical expense portion is Part B. Part A is compulsory social insurance;Part B is voluntary government-subsidized, government-operated insurance.
Insurance coverage sold on an individual or group basis which helps to fill the gaps in the protection provided by the Medicare program. Medicare supplements cannot duplicate any benefits provided by Medicare, but may pay part or all of Medicare's deductibles and copayments, and may cover some services and expenses not covered by Medicare.
A period during which members can elect to come under an alternate plan, usually without providing evidence of insurability.
This phrase usually refers to physicians, hospitals or other health care providers who are considered non-participants in an insurance plan (usually an HMO or PPO). Depending on an individual's health insurance plan, expenses incurred by services provided by out-of-plan health professionals may not be covered, or covered only in part by an individual's insurance company.
The maximum amount (deductible and coinsurance) that an insured will have to pay for covered expenses under a plan. Once the out of pocket maximum is reached the plan will cover eligible expenses at 100%.
An individual (patient) who receives health care services (such as surgery) on an outpatient basis, meaning they do not stay overnight in a hospital or inpatient facility. Many insurance companies have identified a list of tests and procedures (including surgery) that will not be covered (paid for) unless they are performed on an outpatient basis. The term outpatient is also used synonymously with ambulatory to describe health care facilities where procedures are performed.
Insurance which covers such things as rent, utilities, and employee salaries when a business owner becomes disabled. The insurance benefit is generally not a fixed amount, but pays the amount of expenses actually incurred.
A drug that can be purchased without a prescription.
Total disability from which the insured does not recover. When used as a definition in a policy (usually a life insurance policy rider), "permanent" is presumed after a stated period of time, commonly six months.
This plan allows a choice of whether to receive services from a participating or nonparticipating provider.
A provision of voluntary coverage that allows a terminating employee (other than for reason of retirement or disability) to continue coverage at the same or reduced benefit amount to a stipulated age, depending on the coverage.
A pre-existing condition is a physical or mental condition that existed prior to being covered on a health benefit plan. Some insurance policies and health plans exclude coverage for pre-existing conditions. For example, your health plan may not pay for treatment related to a pre-existing condition for one year. You should check with your insurance carrier to learn how your organization's health plan treats pre-existing conditions
A PPO is a group of hospitals and physicians that contract on a fee-for-service basis with insurance companies to provide comprehensive medical service. If you have a PPO, your out-of-pocket costs may be lower in a PPO than in a non-PPO plan.
A drug which can be dispensed only by prescription and which has been approved by the Food and Drug Administration.
This type of care is best exemplified by routine physical examinations and immunizations. The emphasis is on preventing illnesses before they occur.
Basic health care provided by doctors who are in the practice of family care, pediatrics, and internal medicine.
A family status change (such as death, termination of employment, divorce, etc.) that triggers an insured's protection under COBRA, which requires continuation of benefits under a group insurance.
The charge for medical services which refers to the amount approved by the insurance carrier for payment. Customary charges are those which are most often made by a provider for services rendered in that particular area.
Occurs when a physician or other health plan provider receives permission to consult another physician or hospital.
A plan in compliance with Section 125 of the IRC, which protects an employee from constructive receipt of the cash he or she has as a choice of benefits under a cafeteria plan. This means that employee contributions to a Section 125 plan may be made with pretax dollars. Also called Flexible Benefit Plan. See also Cafeteria Plan;Flexible Benefit Plan.
When an employer provides a qualified group health plan, manages the payments to the plan and pays claims from the fund of employer and employee payments.
A group or individual policy usually written to cover disabilities of 13 or 26 weeks duration, though coverage for as long as two years is not uncommon. See Long-Term Disability Insurance.
Temporary medical insurance coverage for an individual for a short period of time, usually from 30 days to six months.
A firm which provides administrative services for employers and other associations having group insurance policies. The TPA in addition to being the liaison between the employer and the insurer is also involved with certifying eligibility, preparing reports required by the state and processing claims.
Utilization Management is the process of reviewing the appropriateness and the quality of care provided to patients. UM may occur before (pre-certification), during (concurrent) or after (retrospective) medical services are rendered. For example, your health plan may require you to seek prior authorization from your utilization management company before admitting you to a hospital for non- emergency care. This would be an example of pre-certification. Your medical care provider and a medical professional at the UM company will discuss what is the best course of treatment for you before care is delivered. UM can reduce unnecessary hospitalizations, treatment and costs.
Benefits that are paid for by the employee through payroll deductions. The employer pays for administration. Examples of these benefits include life insurance, dental, vision, disability income, auto insurance, long-term care coverage, medical supplement plans and homeowners insurance.
A specified number of days that the insured must wait before becoming eligible for coverage. It could also apply to the time an insured is required to wait before becoming eligible for a certain type of benefits. For example, a new insured may have to be continuously insured for 12 months before becoming eligible for benefits for major services under voluntary dental insurance.
