LIFE INSURANCE

PENSION

GROUP INSURANCE

GROUP INSURANCE TERMS

Accident and Sickness: Used interchangeably with weekly indemnity and weekly disability to mean short-term income replacement because of disability due to accident or illness.

Actively at Work: A phrase used to define when coverage begins for an individual employee. Some contracts "tighten" the definition by requiring a period of being actively on the job and on the premises before coverage commences.

Activities of Daily Living (ADL) Standards: * These are used to assess the ability of an individual to live independently, measured by the ability to perform such activities - unaided - as eating, bathing, personal grooming, dressing, and walking. ADL standards are sometimes discussed as a possible way to measure or define eligibility/need for long-term care.

Addition: A person who becomes insured subsequent to the effective date of the group policy.

Administrative Manual: The manual of instructions provided by the insurer for the policyholder that outlines and explains those duties required of the plan administrator.

Administrative Service Only (ASO): Services provided by an insurer or its subsidiary on a contract basis. Services may include actuarial, helvetica, plan design, claim handling, benefit communications, financial advice, preparation of data for government reports, stop loss coverage, etc. The Insurer provides these services for self funded plans.

Adverse Selection: The tendency of persons with poorer-than-average health expectations to apply for or continue insurance coverage to a greater extent than persons with average or better than-average health expectations.

Allocated Benefits: Benefits for which the maximum amount payable for specific services is itemized on the group contract.

Alternative Delivery System: An organized system of financing and delivering health care services from participating providers on a prepaid basis to a voluntarily enrolled population.

Ancillary Benefits: Means benefits not normally present in a base plan, but often available. This includes Employee Assistance Programs, Critical Illness riders, availability of mortgage financing or discounts for auto and home insurance.

Anniversary: Used to refer to the date one year (or more) following the effective date of the master contract; is the target for renewal action such as rate increases, dividends, and rate credits.

Assignment: Pertains to the transfer of an insured's rights. In life insurance, it means conveying the benefits to a third party. Each carrier has its own rules for this. In the context of medical care, assignment means signing over reimbursement rights to a hospital or another supplier of care.

Association Group Insurance: Group insurance provided to a professional or trade association by which eligible members are protected under one master policy.

Automatic Restoration Provision: Generally included in a plan with maximum lifetime benefits. This provision reinstates all or a portion of used benefits each year.

Base Plan (Core benefit): Pertains to the general list of benefits which include some life insurance, accidental death, health benefits, including semi-private hospital and dental benefits. These benefits tend to have limitations as to the total pay out in order to contain the cost of the plan. As base plan is often installed by a company when it is purchasing group insurance for the first time. A series of deductibles or co-insurance percentage may be used to help contain layout and thereby control future cost.

Basic Compensation: The base salary' or wages paid to an employee on which benefits and/or contributions are based. Overtime, bonuses, and other unusual compensation is excluded.

Beneficiary: Person or persons designated by the insured to receive the benefits of insurance at death. In group health insurance, the beneficiary is the person designated to receive any accidental death benefit.

Benefit Period: In reference to health insurance, the maximum length of time benefits will be paid for any one accident, disability illness, or hospital stay.

Booklet: A pamphlet distributed to the insured that describes, in layman's language, the provisions of the group plan.

Booklet-Certificate: A booklet that serves as both an explanations of the group plan and as the certificate of insurance.

Broker: Because not all companies offer their group plans to all group sizes, much group is written by life insurance agents. The bulk of group insurance, particularly of large size cases, is written by insurance brokers who obtain quotations from a series of carriers, analyze them, and present the plan that best meets the needs and finances of the buyer.

Cafeteria Plan: See Flexible Benefit Program.

Calendar Year Maximum (CYM): Used in major medical to describe the operation of deductibles and/or benefits limits. In other words, a deductible may apply once within a calendar period, and the maximum benefit payable may be described in terms of a given sum within a particular calendar year. This is specific to paramedical and dental limits.

Carrier: The insuring insurance company.

Census Data: Because each group is underwritten and rated on the basis of the people who make up the group, a rather complete census must be made. Most insurance companies have specific "census forms" with pertinent information concerning all employees to be enrolled in the group plan.

Certificate of Insurance: A document delivered to the insured that summarizes the benefits and provisions of the group plan.

Certificate Rider: A document that amends and/or supplements the certificate of insurance

Claim: A demand by an insured person for the benefits provided by the group contract.

Classes: Refers to classes of coverage. Generally amounts of life insurance and disability are offered on a class basis, with larger benefits for highly paid workers and lesser benefits for other employees.

Coinsurance: There is some coinsurance in all reimbursement coverage, to the extent that not all room and board or all miscellaneous hospital charges and surgical fees are necessarily reimbursed. The term is used specifically in major medical, however, where it refers to the practice of reimbursing on a 25/75 or a 20/80 basis.

Common Disaster: As group life insurance limits grow, more individual life insurance factors come into play. One of these is the provision for common disaster, which stipulates that the insured is deemed to have survived the spouse beneficiary if the spouse beneficiary does not survive a specified time period.

Community Rating: Refers to the practice or grouping all insured groups in a given area for experience purposes, thus basing the costs on the general experience and level of costs in the area. It is rarely used in group insurance and is generally associated with prepayment plans. Insurance carriers rate by individual case experience or, where small risks are involved, by pools that are not geographical in nature.

Composite Rates: When different rates are combined to arrive at an average, the result is termed a "composite rate." A good example is the "dependent rate," which makes no distinction between workers who have one child or a dozen.

Comprehensive Major Medical: A form of major medical expense insurance written with a low initial deductible providing basic hospital, surgical, and medical benefits. May also be written with a higher deductible as a way to reduce cost.

Consultant: A person or firm hired by an employer, usually on a fee basis, to design. install and/or service employee benefit plans.

Contributory: Group plans use "contributory" to designate situations in which the insured pays part of the premium. The alternative is "noncontributory," meaning employer-pay-all.

Convalescent Care: This refers to care in an extended care facility, as opposed to care in a hospital.

Conversion: Group life laws generally require that benefits lost on termination of employment be "converted" into individual life insurance, without evidence of good health. Some medical care coverage's have conversion features, and certain states have statutory requirements in flits arm.

Coordination: Where both a worker and spouse are covered by different plans, coordination language permits full recovery between the two carriers involved, but eliminates full reimbursement by either carrier. The disabled person's own plan pays first, under coordination of benefits.

Cost Plus: The ability that companies have to pay claims for key executives outside of their group insurance plan. The company pays the cost of the claim, plus an additional amount for administrative handling and application taxes.

Covered Medical Expense: Not all expenses incurred in connection with a sickness or an accident are reimbursable under major medical. Excluded items are carefully outlined in each medical expense contract - eyeglasses, dentistry, and treatment for alcoholism - might be excluded expenses.

Credibility: Is the expectation of future claims based on past performance. Although different companies use different factors, in general terms, the larger a group is the more predictable future claims will be.

Creditor: Creditor group life is a form of group life insurance used primarily to insure the unpaid balance of installment purchases, such as mortgages, appliances, automobiles, etc. Variations might include accumulation plans such as mutual funds. Some carriers offer disability income creditor group insurance, as well.

Critical Illness Rider: Is an ancillary benefit added to a group insurance plan which provides for lump sum cash benefit in the event that an employee contracts a life threatening illness, e.g. cancer, heart attack.

Cutbacks: A cutback is a reduction in the life insurance benefit. This device is used to keep life insurance rates from zooming out of sight. especially when there is substantial coverage on older and retired workers. recognizing that for most people aged 65 and 70, the critical life insurance needs no longer exists.

Deductible: The amount that must be paid by the insured before benefits are paid by the insurer.

Defensive Medicine: Medical procedures that may not be necessary but are performed to protect against malpractice suits.

Defined Benefit Program: A plan in which specified benefits are offered at a stated cost to employees who have no choice other than whether or not to participate in the plan.

Defined Contribution Program: A plan in which the employer pays a set premium for selected benefits that may change as the group's needs change.

Dental Care: Group coverage for dental care is usually found only in large group plans. Because dental treatment is usually elective, there are a number of considerations that make it different from other reimbursement medical care plans. The agent should determine company rules from the manual.

Dependent Life: This is life insurance issued in fractional amounts on the spouse and children of an Insured employee. In the states where specific statutes exist, this coverage is severely limited and benefit amounts are fixed by law.

Dispensing Fee: The cost of the purchase of drugs is made up of two specific parts: ingredient cost and dispensing fee. A maximum mark-up on the ingredient cost is governed by law, but the cost of dispensing the drug charged by the pharmacy is driven by competitive pressure. These fees vary dramatically from chain to chain, usually between $5.00 and $12.00 per prescription.

Drill and Fill: is a very basic dental plan covering only the essentials.

Drug Utilization Review (DUR): Is a report which details the amount of drugs, by type, that are used by members of a specific group. This information is useful in encouraging employees to purchase less expensive or generic drugs used for the same purpose.

Earned Premium: That portion of a premium for which the protection of the policy has dearly been given.

Earnings Schedule: A type of insurance schedule in which coverage is determined by the insured's earnings.

Electronic Data Interface (EDI): Is the electronic submission of dental claims on a “real time” basis which speeds us the processing of claims and reimbursement and allows for “on-line” adjudication.

Employee Assistance Program (EAP): Is an ancillary benefit added to a group insurance plan which provides confidential counseling to an employee and his family e.g. substance abuse, marital discord.

Employee Benefit Program: A program of benefits that are provided to employees by the employer. All benefits - aside from salary or wages - are included, such as group life and health plans, retirement plans, vacation days, etc. Sometimes called "fringe benefits."

Employee Pay All: A group plan under which the insured pays the entire premium.

Enrollment: The process of explaining a proposed group plan to eligible persons and helping them complete their applications for coverage under the plan.

Evidence of Insurability: Proof of a person's physical condition and/or factual information about a person's health that might affect insurance acceptability.

Excess Coverage: Is the amount of life and disability benefit which exceeds the non evidence maximum for which an individual must supply medical information and be underwritten and approved.

Exclusions: A standard feature of contracts issued by every company is the list of items that are not covered by the contract. These should be pointed out to the buyer in the delivery interview. Typical exclusions include eyeglasses, dental care, and cosmetic surgery.

Experience: Refers to the premium/claim history of a given risk. The larger the risk, the more valid the ratio of claims to premiums. Generally, to arrive at rates that are commensurate with expected losses, small risks are pooled and evaluated as a group to determine the "experience."'

Extended Care: Medical care reimbursement may or may not be offered for care that extends beyond hospital confinement. The modern tendency is to arrange for such care, which is far less expensive than customary hospital care.

Facility of Payment: This term is primarily a claim clause that enables the early settlement or partial settlement of proceeds in the event the insured is incapable of complying with the usual claim requirements.

Flexible Benefit Program: A plan that allows employees to choose from a selection (or "menu') of benefits that best suit their individual needs. Also known as a "cafeteria" or "flex" plan.

Grand fathering: The practice of granting an employee the amount of life insurance and disability benefit currently enjoyed on the existing plan even though the new, or takeover company, may have a lower non evidence maximum limit.

Group: A number of people classed together by some common factor, such as place of employment, occupation, membership in an organization, etc.

Group Contract: A contract of insurance made with an employer or other entity that covers individuals in the group by reference to their relationship to that employer or entity.

Group Ordinary: Level premium ordinary life insurance issued on a group basis.

Group Permanent: Describes a variation from the standard group life plan, which is yearly renewable term life insurance. In group permanent. the insured worker has permanent, portable, cash value life insurance for a contribution; the employer pays for additional term to reach the face amount of the certificate.

Group Representative: An employee of the insurer whose principal tasks are to assist agents and brokers in developing and soliciting prospects for group insurance and to install and service group contracts.

Group Universal Life (GUL): A group plan that combines group term with a cash value accumulation feature. It includes only plans that involve a master contract between the insurer and the employer. Most companies issue the master contract to a trust rather than to the employer; participating Employees receive certificates as evidence of coverage. The employee pays all premiums, and participation is voluntary.

Handicapped Child: Many contracts now carry specific provision for the continuing coverage of child dependents, regardless of age, if a handicap arose while the child was covered under the group plan.

Heath Maintenance Organization (HMO): A hearth care center that stresses preventive care, early, diagnosis, and treatment on an outpatient basis. It is an organized system of health care delivery and financing that provides a broad range of services to voluntary enrolled group of people for a fixed periodic payment.

Heroic Medicine: A term describing a hospital's life sustaining efforts.

Home Health Care: The concept of administering health care services in patients' homes using nurses or health aids.

Hospice: A multidisciplinary approach to treating patients with a life expectancy of six months or less. Refers to a physical facility or hospital ward, also known as palliative core.

Hospital Miscellaneous: This is a blanket coverage for the many charges billed by the hospital in addition to room-and-board charges. Included are operating room fees, medications, dressing and anesthesia (where billed by the hospital). Such items as telephone and TV, though billed in this manner, are considered non reimbursable.

ID Card: The practice of distributing ID (identification) cards is not as widespread as it once was. Some companies issue these cards routinely,. others, only when requested. The ID card advises a medical care facility that a patient is covered by insurance, and usually describes the plan, or refer the hospital to a telephone number to call for information.

Incurred: Group people speak of two sorts of claims: paid and incurred. Paid claims afford specific known data, since cashed checks or drafts have to come back to the carrier to match reimbursement payments. However, there are always some claims or which the carrier has no record because they have not been reported or because certain papers are missing. This is often the case under major medical, where an underlying base plan and a deductible intervene between the onset of the disability
and the receipt of all bills and proof of loss.

Indemnity: A contract that pays a specific amount when certain condition are met, rather than reimbursing for actual costs. Thus, life insurance, accidental death and dismemberment, and weekly indemnity are "indemnity" rather than reimbursement benefits. There are certain hospital plans that indemnity, that is, pay a specified amount per day, for each day a room-and-board charge is made.

Inspection Reports: In underwriting small risks, it is customary to have an outside reporting agency check the finances, tile apparent health and stability of the operation, and its key personnel. This is a standard procedure, so both agent and client should anticipate that such a report will be sought.

Insurance Year or Birth: As in individual life insurance an insured person's age changes six months following his or her last birthday. For this reason date of birth rather than year of birth is required on group enrollment documents.

Integrated Deductible: This major medical term refers to situations where either or both a cash deductible and another plan's benefits are exhausted before plan benefits commence. Such deductible may be expressed as "the greater of $500 or basic plan benefits." Thus, in this case, if the basic plan paid $455, there would be a cash deductible remaining of $45 before major medical benefits begin.

Intensive Care: This refers to care furnished in the specialized intensive care unit of a general hospital.

Late Entrant: Describes an employee who defers enrollment beyond the contractual enrollment period and then decides to become insured. Because of the change of heart, evidence of insurability is usually required to make certain that the applicant is not selecting against the plan, that is, buying insurance '"when the roof is afire."

Level Plan: This flat schedule contrasts with a graded schedule where different benefits are offered to different classes of people. In a level plan, everyone receives the same benefits, regardless of salary or position.

Limitations: As is true of exclusions, limitations or restrictions are part of most contracts and help to define the limits of coverage. As they tend to prevent abuses, limitations serve to keep premiums from escalating. Limitations should be understood by all of the parties involved.

List Bill: To ease the administration of small groups, many carriers use a premium statement that lists all of the participants and their premiums. This affords the plan administrator an instant check list of which employees are covered, the benefits for these participants, and the amount to be withheld.

Long-Term Care Policy: A plan that covers expenses of employees, their spouses, parents, or parents-in-law, when they are retired and in need of constant. long-term care.

Long-Term Disability (LTD): Except in multiple employer trusts, LTD is generally not offered to small employer units. It affords disability income protection, generally after a six-month hiatus, (or several years in the case of illness, and to age 65 for an accident incurred disability'. Each carrier has special considerations that must be understood. Long-term disability often produces higher severity claims than does death.

Margin: Is the amount of profit expectation an insurance company will input into its rate structure. This profit expectation is usually 2% - 3%.

Master Policy: Issued to the employer or other sponsor of a group insurance plan, the master policy contains all of the insuring clauses necessary to define the benefits to be paid.

Medicare Supplements: With the advent of medical care coverage for most people overage 65, it has become necessary to provide supplemental insurance to offset the deductibles, coinsurance and non reimbursable expenses incurred by such employees and retirees. In some instances, additional reimbursement is provided: in others, indemnity on a per diem basis is the solution.

Multiple Employer Trust (MET): As defined earlier, these trusts enable employer units that cannot meet statutory definitions for group coverage to combine and purchase equivalent plans.

Negotiated Plan: Applies to the fringe benefits for members of a labor union, benefits that were determined under a bargaining agreement.

No Refund Accounting: This is the opposite to retention accounting which is normally only used in very large groups. In no refunding accounting, the insurance company accepts the risk of overpayment of claims based on the premiums paid. If there is a profit, the insurance company keeps it, if there is a loss, it belongs to the insurance company.

Package: To market group insurance to small firms, many carriers use the "package" approach. In other words, there are certain fixed combinations of benefits for which the firm and its employee can apply. This eases the preparation of contracts, eliminates some enrollment materials, and facilitates billing and claim settlement. Each carrier has its own set of packages, so an agent should become familiar with what the carrier offers.

Per Cause: Another major medical term that usually refers to the basis on which a deductible it accumulated or how the benefit maximum is applied. As contrasted with the calendar approach each separate cause could require a separate deductible or could run to a separate maximum benefit, regardless of the period in which the cause is incurred. (See Calendar Plan.)

Pharmacard (PAY-DIRECT): This is the practice of providing a form of “credit card” to the employees of a group for the purchase of eligible drugs at a pharmacy. The card is presented which contains an imprint of the eligible benefits. The individual will then pay his portion, usually a dollar value per prescription and not to have to wait weeks to be reimbursed by the insurance company.

Plan Administrator: Person appointed by an employer to administer a group plan. Pooling: One way to establish a viable relationship between premiums and claims - when covering small units - is to put such units into a common pool and to evaluate the entire pool. This means that units with fewer or small claims subsidize the units with many or big claims. Pooling is the basic principle of all insurance, and it should be communicated as such.

Preferred Provider Organization (PPO): An arrangement by which an insurer or other third party payer contracts with health care providers and consents to a special reimbursement agreement.

Province of Residence: Group insurance health rates are established based on an individuals specific province of residence where each province sets its schedule of payment for its benefits under The Canada Health Act. The group insurance plan will make up the difference in cost, if one exists. This benefit is beneficial for employees of a group who require emergency treatment while away from home on either business or on vacation.

Rehabilitation: This term comes into play largely in connection with long-term disability (See Long-Term Disability [LTD].) Many, if not most LTD contracts recognize that for social, moral, and economic reasons, the disabled should be encouraged to get back into the mainstream of life by learning to cope with disability, to develop a different occupation, etc. The rehabilitation clause enables the claimant to receive some benefits, even while seeking re-employment and retraining.

Reimbursement: Most medical care insurance is on a reimbursement basis; that is, benefits are based on actual charges made, and no more. In many instances., this rules out treatment in govern- mental facilities that do not require that the patient pay for care.

Reinstatement: Many major medical contracts provide that when portions of the maximum benefit have been exhausted in prior claims, they will be reinstated following a specified period during which no benefits are paid out.

Reinsurance: To achieve certain limits of coverage. a carrier will frequently award part of the coverage to another insurer. In some instances, this could impose additional requirements for you, but you will be advised on a per case basis of these needs.

Reserves: You will probably hear this term in connection with the year-end analysis of the experience Of the pool or of the risk itself, The carrier must maintain certain legal reserves (plus amounts for incurred but unknown claims), in addition to reserves for certain coverage's such as maternity and major medical.

Retention: Ordinarily the term "retention" will not come up within the context of small group plans. In large group cases, retention is the amount after claims that the carrier feels Is needed to run the plan, pay taxes, etc. Some carriers include commissions as retention items.

Retention Costs: Refers to the percentage of premium required by the insurance provider to pay its expenses. Cost are comprised of taxes, fees, marketing, administration costs including commissions and margin.

Retrospective Underwriting: In experience rated groups at renewal, rates are established based on the prior year's level of claims. Are amount for inflation and trend are also added at the time to create the unit rates required to support anticipated claims for the next accounting year.

Reverse Mortgage: * This is one of several ways to fund individual long-term care insurance. People use the equity in their homes to pay for the care itself or for the insurance premiums.

Risk Charge: Some carriers apply a risk charge in computing renewal rates, thereby assessing each account with a proportionate share of the overall experience of a class of business.

Sales Representative: The most commonly used title to describe the salaried people who assist agents in promoting, presenting, and installing group plans. Generally, such a representative is responsible for a given area, is compensated on the basis of results in that area, and should be freely called on by the agent, employees, or employer for assistance.

Self-insurance: Probably the best definition of self-insurance is "having no formal plan with a particular carrier."

Self Administration: Insurance carriers can provide a software program which allows individual clients to control the administration of their group. This permits a client to make immediate additions/deletions to the plan as well as create its own billing. This information is then communicated to the insurance carrier by disc or the internet.

Semiprivate: Medical care insurance generally gears reimbursement to semiprivate hospital accommodations. Private room charges in excess of prevailing semiprivate charges are not reimbursable and may not be a covered expense under major medical.

Service Schedule: You may encounter service schedules on older group plans, where the benefits are graded on the basis of employees' years of service, with the highest benefit for the most senior employee. Service schedules are generally frowned on by most underwriters.

Shock Loss: Refers to a large catastrophic claim which is non occurring in nature. An example would be hospital charges following an accident, or drugs changes preceding a debilitating illness ending in death.

Sniffle Claims: An "inside" term used to describe ailments that should be paid for out of the insured's own resources. By eliminating high frequency, low-cost claims, insurance can be made much less expensive for the buyer.

Specification Letters: You will encounter these only on large group cases. They are drawn up by a broker or consultant to determine detailed handling of various aspects of a group. The questions asked may rule out certain bids.

Statement of Health: The form used to establish the insurability of an applicant who did not enroll when first eligible or who re-enrolls. The statement asks specific questions about recent medical treatment, and requests the insured's authorization to check this information with hospital and attending physicians.

Stop-Loss Provisions: Provisions that minimize fluctuations in claims experience as an insurance company's charge for carrying the risk.

Target Loss Ratio: Is a number expressed in the percentage of premium paid that an individual group is expected to claim during the group's accounting year.

Third Party Administration (TPA): The party to an employee benefit plan that may collect premium, pay claims, and/or provide administrative services. Usually the TPA is an off site professional firm.

Transferred Business: Underwriters use this term to refer to group insurance that has been in force with another carrier. The home office is vitally interested in knowing why such business did not renew with the prior carrier.

Trust Agreement: When group insurance is contracted through a third party such as an association, a trust instrument establishes the basis for dealing with the carrier and with the component units.

Vision Care: Like dental care, vision care is largely elective and is not universally offered to all size risks. As more Taft-Hartley plans include vision care as a fringe benefit, it will become more common as an employer sponsored coverage.

Waiting Period: There are two kinds of waiting periods. One concerns the eligibility of new employees for insurance coverage benefits. In certain types of businesses, it is practical to enroll only those employees who have remained in the job a specified number of months. For example, after two months on the job, the employee becomes eligible. The other type of waiting period is the hiatus between the onset of a disability and the date that the disability benefits commence. In a typical weekly indemnity plan, for example, the first eight days of an illness might satisfy period.

Waiver Card: This important enrollment document affords the employer positive proof that the plan was communicated to the employee, and that the employee opted against enrolling in the plan. Psychologically, it has the effect of making the reluctant employee reconsider before signing away important benefits.

Wellness: A health care concept that focuses on staying healthy through a planned 'life style, rather than treating illnesses after they have been allowed to develop.

Yearly Renewable Term (YRT): Most group life insurance in force today is YRT. Although ft is assumed that the coverage will renew each year, there is a year-end calculation based on the present ages of the participants. If there has been no employee turnover during the year, the rate should increase because all employees will be a year older. In practice, when older retire, they are replaced by younger workers, so that life rate might actually go down.

* Asterisk indicates terms that are included courtesy of Commentary from EQUICOR (CFE), a publication of EQUICOR. Inc.