When it comes to your group insurance plan there are lots of terms that are part of the employee benefits world that you may not hear in other circumstances. More often than not these terms rear their heads around renewal time and understanding what they mean will give you a leg up when it comes to figuring out what the reasoning for the insurance company’s decisions are regarding rates. There are also terms that will come up when you are looking at designing a plan that you will need to understand. Here’s a starters list of terms you will hear and definitions to help you decode them.
Plan Design Terms:
Coinsurance – this refers to the portion of the cost that the plan will pay. An 80% coinsurance on drugs means that the plan pays 80% of the cost and the plan member is responsible for the remaining 20%.
Deductible – This is an amount that plan members need to pay out of pocket before the plan begins to cover expenses. This can be either per claim or on an annual basis and can vary based on if a plan member has single or family coverage.
Evidence of Insurability – Some benefit options may require a plan member to submit medical information for themselves and/or family members prior to being offered coverage by the plan.
Non-evidence Maximum – If your plan includes life insurance or long term disability coverage there will be a benefit amount that the plan members are entitled to regardless of their health status. For example, someone may be eligible for a disability income amount of $3500 a month, but the plan offers a non-evidence maximum of $3000. To get coverage you are eligible for that extends beyond the non-evidence maximum evidence of insurability is typically required.
Late Applicants – Benefit plans have a waiting period for new hires to become eligible to join the plan. When this waiting period is satisfied the plan member has 30 days to complete the application process. After that they may be considered a late applicant and need to submit evidence of insurability prior to being accepted into the plan.
Health Care Spending Account (HSAs) – these are non-taxable plans where an employer allocates an amount of money to each plan member that can be used to pay for health care items from a list of eligible expenses. Refunds are paid to the plan members tax-free and costs to the employer are tax deductible business expenses.
Plan Use Terms:
Paramedical Practitioners – These are medical professionals aside from a medical doctor. The list often includes physiotherapists, chiropractors, massage therapists, etc. and typically expenses associated with these practitioners aren’t covered by provincial health insurance plans.
Reasonable and Customary Charges – This is an amount that the plan will cover for a particular service. Typically this applies to paramedical coverage, and is an amount that is determined by what is the generally accepted cost of the service in your geographic area.
Scaling Units – This is a dental related term. It applies to a unit of time (typically 15 minutes) spent for plaque removal at a dentist office.
Target Loss Ratio – This applies to the amount of the premium collected by the insurance company for a particular benefit and compares it to how much they expect to pay out in claims. For example, a target loss ratio of 75% means that the insurer expects to pay $75 in claims for every $100 in premiums that they collect.
Demographics – refers to the age and gender distribution of plan members. This is used to determine rates for life and disability coverages.
Credibility – This is the amount of the renewal that is impacted by your actual use numbers. The longer your coverage remains with a single carrier the higher this number gets, typically large groups also see this as a higher number than smaller groups.
This is just a starters list. They are terms that you may hear more frequently, but there are many others that you may hear when discussing things with your group benefits broker. If there is a term you don’t recognize make sure that you get a clear explanation of what it means and how it affects your premiums. Clear communication from your broker is essential to you understanding how your plan works.