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Glossary: Employee Health Insurance

Glossary: Employee Health Insurance

When your employer offers group health insurance, it often comes with a long list of limitations, options, and restrictions. Some of these terms can be confusing, especially those defining who has coverage. This glossary helps explain some common terms found in typical health insurance plans.

Affiliation Period

The time before health insurance coverage provided by an HMO becomes effective. The affiliation period runs concurrently with any waiting period for coverage under the plan. The affiliation period can't be longer than two months from your enrollment date.

Affordable Care Act (ACA)

Also called Obamacare, the Patient Protection and Affordable Care Act (ACA) requires insurers to offer multiple levels of insurance for all applicants. It also requires insurance companies to cover pre-existing conditions.

COBRA

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) is a federal law allowing qualified employees to continue their group health insurance when they leave work. COBRA continuation coverage generally lasts for a limited period of time, 18 to 36 months, depending on the type of coverage.

Covered Employee

An individual with a group health plan subject to COBRA is a covered employee. Covered employees must have lost their jobs due to a qualifying event.

Creditable Coverage

Health coverage you had in the past. Any other health insurance not interrupted by a significant break in coverage applies to your new coverage. Your prior insurer must issue a certificate of creditable coverage upon request as proof of your insurance.

Deductible

The amount you must pay out-of-pocket for your medical treatment. A high annual deductible often means lower monthly or annual premiums, but the patient pays more for routine medical care.

Disability Insurance

Workplace insurance provided by employers to provide partial wage replacement for workers who can't work due to a non-work-related illness or injury. Five states (California, Hawaii, New Jersey, New York, and Rhode Island) require employers to provide short-term disability insurance.

Drug Formulary

A list of all the medications your group health insurance provides. Most formularies cover generics and common brand names.

Employee Assistance Programs (EAP)

Employee assistance programs help workers with work-life balance issues. These can include housing, mental health, childcare, and other matters. EAPs can help reduce healthcare costs and improve employee retention.

Employee Benefits Package

An employee benefits package is one way that small business owners attract top talent. Benefits packages include health insurance, pensions, and other perks like paid time off.

Employee Organization

Any organization in which employees participate. Employee organizations exist for collective bargaining agreements and to improve employee benefit plans and group health care plans.

Employer Contributions

The amount that the employer pays towards your healthcare coverage. The employer usually pays a portion of the premium and takes the rest out of the employee's paycheck.

Enrollment Date

The date on which the employee entered or submitted the policy. This differs from the effective date when the coverage becomes active.

ERISA

The Employee Retirement Income Security Act of 1974 (ERISA) regulates employee benefit plans. Group health plans, pensions, and other plans fall under ERISA.

Flexible Spending Account (FSA)

An employee benefit offered as an insurance option. The employer withholds money from the employee's pay up to a preset limit. Employees can use these funds for out-of-pocket medical expenses, such as copayments and deductibles.

Genetic Information

Data collected from your genetic material. Genetic information can be taken from genetic testing, or from medical exams and family histories.

Genetic Information Nondiscrimination Act (GINA)

Federal legislation prohibiting discriminating against individuals in the workplace based on known or perceived genetic characteristics.

Group Health Insurance Plan

An employee benefit plan offered by an employer or a union. The plan provides medical care to employees and their dependents directly or through insurance, such as an HMO or PPO, reimbursement, or otherwise.

Health Insurance Premiums

The monthly or annual payments paid to the insurance carrier to maintain the insurance policy. Premiums vary depending on how much the insured must pay out-of-pocket for medical care. A high-deductible policy has lower premiums than a low-deductible policy.

Health Savings Account (HSA)

Health savings accounts let employees with high-deductible policies set aside money on a pre-tax basis to cover medical expenses. Unused funds roll over to the following year. Employees can transfer HSA funds if they transfer to a new job.

Health Reimbursement Arrangement (HRA)

Some employers that offer health insurance may opt to reimburse their employees for out-of-pocket expenses each year. This allows the employer to select a plan with lower premiums and higher deductibles.

HIPAA

The Health Insurance Portability and Accountability Act (HIPAA) ensures employees' health coverage follows them when they change jobs. It also prevents new insurance companies from denying coverage based on pre-existing conditions. HIPAA also safeguards medical record privacy.

HMO

A Health Maintenance Organization (HMO) is a legal entity consisting of participating medical providers. HMOs provide medical care to a given population group for a fixed fee per person. HMOs are alternatives to traditional indemnity plans.

Late Enrollee

An employee who enrolls in a group health plan on a date outside the open enrollment period. Late enrollees may be subject to pre-existing exclusion conditions.

Life Insurance

An employee benefit that provides the employee's beneficiaries with a lump-sum payout upon the employee's death.

Mental Health Parity Act (MHPA)

The Mental Health Parity Act (MHPA) provides that large-group healthcare plans can't place lifetime or annual limits on mental health benefits that are more restrictive than limits imposed on other medical benefits.

Newborns' and Mothers' Health Protection Act

The Newborns Act protects the time mothers and newborn infants have in the hospital following childbirth. In general, insurers may not limit benefits to less than 48 hours after a vaginal delivery or 96 hours after cesarean delivery. The time runs from the delivery, not admission.

Open Enrollment

The designated period when eligible employees may add, change, or drop their employer-provided health insurance. Open enrollment typically lasts one month and often coincides with federal Medicare/Medicaid enrollment.

Professional Employer Organization (PEO)

A PEO is like a management company for small business owners. These agencies provide human resource management for businesses needing health insurance, payroll, workers' compensation, and other assistance, but that are not big enough for their own full-time HR department.

Plan Administrator

The person who manages the health insurance plan. The employer can designate an administrator, or the sponsor can be the administrator.

Plan Sponsor

The employer or other organizer of the benefit plan is the "sponsor" of the plan, including group health plans.

Preferred Provider Organization (PPO)

A PPO is a health insurance network that contracts with participating doctors, labs, and hospitals to provide medical care.

Pre-existing Condition

An illness or condition that existed before an individual's first day of coverage under a group health plan. Under the ACA and HIPAA, insurance companies can't refuse coverage due to pre-existing conditions and may only limit coverage for up to 12 months.

Qualified Beneficiary

Qualified health insurance beneficiaries include covered employees, spouses, and dependent children. Some plans may include retired employees and their spouses and dependent children.

Qualifying Event

A "qualifying event" may mean an incident that causes an employee to be eligible for special enrollment, such as the birth of a child. A "qualifying event" may also be an incident that causes an employee to lose health coverage, such as termination.

Retirement Plans

Another benefit offered to full-time employees is retirement plans, which may include pensions, profit-sharing, stock options, and 401(k) plans.

Significant Break in Coverage

Any extended period during which you had no health insurance. The standard period for a "significant break" is 63 days, excluding any waiting periods between enrollment and the effective date.

Small Business Health Insurance

Health insurance intended for businesses with fewer than 50 employees. This coverage has variable pricing and offers pooling options or other ways to keep premiums low for small business employees and owners.

Summary Plan Description (SPD)

A document that the plan administrator provides to participants and beneficiaries. The SPD explains the plan coverage and the rights and responsibilities of participants and beneficiaries.

Special Enrollment

The opportunity to enroll in a group health plan when certain work or life events occur, regardless of the plan's regular enrollment dates.

Tax Credit

An incentive given to employers by the IRS for offering employee benefits. When purchasing insurance, employers should discuss any tax credits and other benefits with their insurance agent.

Waiting Period

The time between the day the employee becomes eligible for coverage, and the day the health insurance becomes effective. The ACA requires coverage to begin within 90 calendar days after the employee becomes eligible. For instance, if you must work 30 days to become eligible, the waiting period begins on the 31st day after your hire date, and your coverage must be effective within the next three months. Employers may not delay for their own convenience. For example, if the next billing date after your effective date is five days later, they cannot withhold your coverage until that date.

Wellness Programs

An employee perk encouraged by insurance companies as a way to improve employee health and well-being and lower insurance costs. Wellness programs include in-house fitness programs, nutrition plans, stress management, mental health awareness, and related programs.

Workers' Compensation

All states, except Texas, require employers with more than one employee to carry workers' compensation insurance. Workers' compensation is separate from health insurance. It protects workers and employers by covering medical care and lost wages for job-related injuries and illnesses.

Get Legal Advice

If you have any questions or concerns about your employee health insurance, be sure to consult an employment law attorney. They can answer any questions you have about your insurance rights.

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